Friday, March 27, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Who owns the US Treasury?

sievers column sig

By
From page B7 | November 11, 2012 |

Now that the election is past, we can turn from the froth of campaign rhetoric to more interesting and substantive topics.

Though much of the financial discussion concerns changes to tax rates, the really interesting question centers on how to handle our national debt. This is a crucial issue because a poor solution can lead to economic problems like Greece faces with an anemic economy and 25 percent unemployment.

As the authorized debt ceiling approaches $16 trillion, once again Congress will debate whether to increase it, and by what amount. The comments will likely focus on spending patterns and the risks associated both with raising or not raising the ceiling. But another aspect may be just as important, national security.

Simply put, the U.S. needs to borrow money to maintain all the government programs. If the U.S. wants to borrow money, someone must lend it at a reasonable interest rate. More borrowing means we are in a position more vulnerable to those who lend to us. Recall the old adage, “If you owe the bank $100,000, the bank owns you but if you owe the bank $1 million, you own the bank.”

So who lends the money to the government? Some comes from intra-government channels like Social Security. Some comes from U.S. citizens and some from those around the world who want to make a high-quality, low-risk loan. The controversial part is the nature of the countries holding the debt.

China’s massive stake in U.S. Treasuries gets a lot of attention. But it is Japan, not China, whose stake in U.S. debt has soared over the past year. Japan could soon pass China as the largest foreign holder of Treasuries. China held about $1.15 trillion in U.S. bonds through August, which is actually less than 12 months ago.

Meanwhile, Japan has been steadily adding to its Treasury holdings, which now owns $1.12 trillion, up 24 percent from a year ago.

Despite this trend, Chinese ownership of U.S. debt has become an issue with implications for the economy and national security. China had been buying Treasuries as a way to keep its currency, the yuan, pegged to the U.S. dollar. That helped lower the value of the yuan and made China’s exports more competitive in markets such as the United States.

Over the past two years, however, partly due to U.S. pressure and partly as an effort to curb its own inflation, China has allowed the yuan to rise in value. Part of the reason is that China simply doesn’t need to buy as much U.S. debt as it did in the past. The fact that the administration is taking credit for the rise in value of the yuan stretches credulity as it is primarily a function of the Chinese government decision and not the U.S. government.

In comparison, while China’s Treasury holdings are down, Japan had little choice but to buy that U.S. debt. The Japanese decision is driven by worries about the European sovereign debt crisis and the desire to own dollar-denominated assets like U.S. bonds.

All this activity has benefited the U.S. Treasury, but for how long? Perhaps more importantly, will any country that holds a large amount of Treasury debt try to use it to force certain policies or behaviors on the U.S. government? Could what is happening in Europe happen to the U.S.? And could it be used to force compliance with otherwise unacceptable political policies?

Is it a national security concern? Japan is an ally but also an economic competitor.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from UC Berkeley. Contact him at [email protected]

LEAVE A COMMENT

Discussion | 1 comment

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Basically this is saying........November 11, 2012 - 11:45 am

    Basic Assignment Reform (or eliminate) the Federal Reserve = BARF on the Fed. [The Federal Reserve, (which is owned by the major multinational banks and international bankers, such as the Rockefellers and the Rothschilds)] WAKE UP PEOPLE ---- Read some books like Creature from Jekyll Island, The Secrets of the Federal Reserve, No More National Debt, Web of Debt, Vile Acts of Evil, None Dare Call it a Conspiracy. Please Please Please

    Reply | Report abusive comment
.

Solano News

Everyday life inspires model’s music

By Amy Maginnis-Honey | From Page: B1

 
Hosting gig for comic, birthday party on weekend schedule

By Amy Maginnis-Honey | From Page: B1

 
Brasher new president, CEO of Jelly Belly

By Ryan McCarthy | From Page: A1, 2 Comments | Gallery

Rio Vista singer ready for Rancho Cordova show

By Amy Maginnis-Honey | From Page: B1

 
 
 
Spring Fling set to return to Rancho Solano

By Susan Hiland | From Page: A3

 
Kids fishing day events return

By Susan Hiland | From Page: A3 | Gallery

 
Fairfield police log: March 25, 2015

By Susan Hiland | From Page: A12

 
Suisun police log: March 25, 2015

By Susan Hiland | From Page: A12

.

US / World

Co-pilot believed to have purposefully crashed plane

By The Associated Press | From Page: A1

 
Lawyers dispute hoax claim, boyfriend says he was drugged

By The Associated Press | From Page: A1

 
L.A. river revamp to cost double previous projections

By The Associated Press | From Page: A4

 
State to alter ban on where sex offenders can live

By The Associated Press | From Page: A5

Governor awaits $1B drought relief bill

By The Associated Press | From Page: A5

 
US drops graphic leaflet to possible Islamic State recruits

By The Associated Press | From Page: A5

AP Exclusive: Special ops troops using flawed intel software

By The Associated Press | From Page: A5

 
Talent agency wants Matt McConaughey speaking fee secret

By The Associated Press | From Page: A7

 
Grateful Oklahomans salvage belongings after killer storm

By The Associated Press | From Page: A7

Fact Check: Myths in the political roar over Common Core

By The Associated Press | From Page: A7

 
US: Chicago-area cousins planned US terrorist attack

By The Associated Press | From Page: A7

Report: Teen says mom killed her siblings found in freezer

By The Associated Press | From Page: A7

 
House OKs bipartisan Medicare doctor bill; fate up to Senate

By The Associated Press | From Page: A7

Tunisians assure Star Wars sets safe from Islamic State

By The Associated Press | From Page: A10

 
US Thunderbolt II attack planes on training in Poland

By The Associated Press | From Page: A10

Syrian government shells kill 18 in south, activists say

By The Associated Press | From Page: A10

 
Turmoil in Yemen escalates as Saudi Arabia bombs rebels

By The Associated Press | From Page: A10

Russian, American ready for a year in space

By The Associated Press | From Page: A10

 
.

Living

Today in History: March 27, 2015

By The Associated Press | From Page: A2

 
Community Calendar: March 27, 2015

By Susan Hiland | From Page: A2

Horoscopes: March 27, 2015

By Holiday Mathis | From Page: A9

 
Parents may be enabling son’s drinking and hurting his employment chances

By Kathy Mitchell and Marcy Sugar | From Page: A9

.

Entertainment

Week in preview March 27 to April 3, 2015

By Amy Maginnis-Honey | From Page: B1

 
‘Downton Abbey’ to end after upcoming 6th season

By The Associated Press | From Page: B2

With ‘Downton Abbey’s coming demise, here are 5 past deaths

By The Associated Press | From Page: B2

 
Ken Burns unravels the mysteries of cancer in PBS film

By The Associated Press | From Page: B2

 
Review: Animated alien adventure ‘Home’ lands with a thud

By The Associated Press | From Page: B3 | Gallery

 
Entertainment Calendar: March 27, 2015

By Susan Hiland | From Page: B4

 
TVGrid

By Daily Republic | From Page: B6

 
.

Sports

Marleau, Niemi lead Sharks past Red Wings 6-4

By The Associated Press | From Page: B7 | Gallery

 
Warriors can match franchise record for wins at Memphis

By The Associated Press | From Page: B7

Prep swimming preview: City teams look to make big splash

By Paul Farmer | From Page: B7 | Gallery

 
Notre Dame races by Wichita State 81-70 for Elite Eight spot

By The Associated Press | From Page: B8

Kentucky overwhelms West Virginia 78-39 in NCAA Sweet 16

By The Associated Press | From Page: B8

 
San Diego city, county join forces on bid to keep NFL

By The Associated Press | From Page: B8

Labor, developers reach deal on proposed Inglewood stadium

By The Associated Press | From Page: B8

 
Italians will pull out of America’s Cup if boats downsized

By The Associated Press | From Page: B8

Fiancee of Aaron Hernandez to be called to testify Friday

By The Associated Press | From Page: B8

 
Stanford’s VanDerveer, Notre Dame’s McGraw to face off

By The Associated Press | From Page: B8

Signups for Friday, March 27, 2015

By Paul Farmer | From Page: B8

 
Former Germany coach Berti Vogts joins Klinsmann’s US staff

By The Associated Press | From Page: B8

Officials OK demolishing Irwindale Speedway for outlet mall

By The Associated Press | From Page: B8

 
Sharks sign 2 college players

By The Associated Press | From Page: B8

Top-seeded Wisconsin hangs to beat North Carolina 79-72

By The Associated Press | From Page: B8

 
49ers waive OL Jonathan Martin after 1 season with team

By The Associated Press | From Page: B8

This date in sports history for March 27, 2015

By The Associated Press | From Page: B9

 
Mirim Lee leads LPGA Tour’s Kia Classic

By The Associated Press | From Page: B10

 
Charley Hoffman takes PGA lead in wind-swept Texas Open

By The Associated Press | From Page: B10

.

Business

Range Rover offers an exclusivity that’s rich with irony

By The Washington Post | From Page: C1

 
Google’s new CFO gets $70M for defecting from Morgan Stanley

By The Associated Press | From Page: B11

Bankruptcy hearing could decide fate of RadioShack

By The Associated Press | From Page: B11

 
Microsoft wants US suppliers to give employees paid time off

By The Associated Press | From Page: B11

Lawmakers unhappy with new fracking rules

By The Associated Press | From Page: B11 | Gallery

 
Authorities go after crooked car deals in national crackdown

By The Associated Press | From Page: B11

Oil prices jump almost 5 percent as tensions mount in Yemen

By The Associated Press | From Page: B11

 
New Samsung, HTC phones coming April 10 in US

By The Associated Press | From Page: B11

.

Obituaries

Helen Kalis

By Nancy Green | From Page: A4

 
Carol A. Vose

By Nancy Green | From Page: A4

.

Comics

Blondie

By Daily Republic Syndicated Content | From Page: A8

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

Pickles

By Daily Republic Syndicated Content | From Page: A8

 
Dilbert

By Daily Republic Syndicated Content | From Page: A8

Baldo

By Daily Republic Syndicated Content | From Page: A8

 
B.C.

By Daily Republic Syndicated Content | From Page: A8

Peanuts

By Daily Republic Syndicated Content | From Page: A8

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

Garfield

By Daily Republic Syndicated Content | From Page: A8

 
Zits

By Daily Republic Syndicated Content | From Page: A8

Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

 
Sally Forth

By Daily Republic Syndicated Content | From Page: A8

Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

 
Baby Blues

By Daily Republic Syndicated Content | From Page: A8

Bridge

By Daily Republic Syndicated Content | From Page: A9

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: A9

Crossword

By Daily Republic Syndicated Content | From Page: A9

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: A9

Sudoku

By Daily Republic Syndicated Content | From Page: A9