Sunday, March 4, 2007

"Just Two Days' Worth"

As we well know, 50% of all US Treasuries are now held by foreigners, with Japan and China being #1 and #2 holders respectively. Does that concern anyone?

Apparently not Mr. Paulson, formerly of Goldman Sachs and current Secretary of the Treasury, because, as he just said, the $1 trillion of U.S. debt held by China and Japan amounts to just two days of trading in Treasuries. If the Secretary was, say, the ex-CEO of Ballwax Corporation of Podunk I could perhaps excuse him. But his past guarantees that he does know better than to say things like that.

Even a junior bond or currency trader is aware that if he/she sees a central bank on the other side of a trade, particularly a big one like BOJ or PBOC, the red lights go off. And if the bank is a consistent seller, it's battle stations for all concerned. If it ever came to actually selling those "two days worth" of Treasurys the market would go to the toilet, period.

So why did Mr. Paulson say such a thing? His dismissive, tranquilizing comment came in an interview with ABC News, obviously as a palliative for consumption by a broadly clueless audience. Had he made the same remark to a more challenging crowd I dare say he would have been met with astonishment - or worse. Being Treasurer of a Blanche DuBois economy is very demanding, that's for sure.

Aptly, in A Streetcar Named Desire the DuBois' ancestral home, Belle Reve (Beautiful Dream) was lost on mortgages to pay for a series of family deaths and, as Blanche so aptly puts it, their ancestors' "epic fornications." I wonder, does Vladimir Putin get to play Stanley Kowalski?

1 comment:

Anonymous said...

Your latest series of posts have been illuminating! Thanks!