dinsdag 18 maart 2014

Belgium Buys Another Load of U.S. Treasuries

Thanks to Econoblogger Martin I was reminded that today we have another update on the U.S. foreign debt holders and surprise surprise. Belgium keeps on buying more than $50 billion of U.S. debt, much more than any other country is doing now. If Belgium keeps buying like this, it will hold even more debt than China in a year or so. I'm just wondering where they get the money from.

Foreign U.S. debt holders

Look how much they bought, starting from November 2013.

U.S. debt held by Belgium

I have no idea why they are doing this. That the ECB would buy U.S. treasuries to get the euro down, maybe. But why is Belgium buying so much U.S. treasuries? $50 billion accounts for 10% of Belgium GDP. Can they support this?

We see Belgium's own public debt has been rising since the crisis. Instead of using the money for servicing its own debt, they buy U.S. debt.

Debt to GDP Belgium
Let's look at Belgium's treasury yields. The 10 year is at 2.2%, which is below the 2.7% of U.S. Nothing much to see here, but look what happens in November 2013. Yields on U.S. treasuries are going up. Do you remember what happened then?

Yes, the Chinese came out saying they will stop buying U.S. debt. So who goes to the rescue? Belgium.

Belgium 10 Year Yield

U.S. 10 Year Yield

Probably Belgium is the heart of Europe as Europe started from Belgium. These European people want to support the U.S.

But actually, I think being in U.S. treasuries isn't such a bad idea at this moment. When stocks collapse, U.S. treasuries are pretty safe.What I'm worried about though, is that the U.S. dollar is now starting to collapse. The dollar cash index is moving towards 70, when Belgium holds all of these U.S. treasuries, it will realize losses on the U.S. dollar currency value. A 10% loss in currency value, means at least a $30 billion dollar loss for Belgium and I heard that they even bought U.S. treasuries that the Russians dumped in March 2014. These are dangerous things to do.

For more info, here is a link to Zerohedge.

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