Why are Foreign Private Investors buying LONG TERM U.S Treasuries? The Answer is obvious when you live OUTSIDE of the United States – November 20, 2022,
I’ve been writing for some time now about AUSTERITY measures and the timeline I expect austerity to occur, which by my estimates, could be about ten+ years. Because we’re unlikely to see corporatism and socialism go away anytime soon, chances are significant that the GLOBAL economy is going to come to a SCREECHING halt in the not-so-distant future.
Now, if you know anything about the western world, during a recession, the last thing people are going to want is for the government to SPEND less or sell off parts of the government that keep a ton of people EMPLOYED. Now, if you think BIG GOVERNMENT is purely a U.S problem, you’re wrong, it’s a global problem, and it’s WAY worse outside of the U.S than it is inside the U.S.
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In Canada, as an example, the current prime minister is doing the COMPLETE OPPOSITE of what his predecessor did; in Canada, FORMER Prime minister Stephen Harper ENCOURAGED the Private Sector to get into debt, the debt of choice being housing, the current and unpopular Liberal Prime Minister of Canada Justin Trudeau, has put the Canadian GOVERNMENT in records levels of debt.
Now, common sense would tell you that in Canada, what’s likely going to happen is the Federal Government of Canada is going to further DEBASE the Canadian dollar to SERVICE existing debts, meaning MORE CONSUMER PRICE INFLATION in Canadian dollars; however, if you play the FOREX markets, the cure for Canadian dollar debasement is to purchase LONG TERM U.S Treasuries, why? Well, because the MARKET has decided that the U.S dollar is the world’s reserve currency.
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Although some would like the Gold Standard to return, the truth is that Gold currently doesn’t have the global INFRASTRUCTURE to dethrone the dollar. Don’t get me wrong, the Federal Reserve and the U.S Federal Government could destroy the U.S dollar with bad policies, but so far, so good. If the individuals purchasing U.S treasuries are anything like myself, they also hoard Gold as insurance.
I still see the U.S dollar as a CURRENCY, which can fail, but until it fails, I have to pretend it will live on forever, whereas, if you’re NOT an American, you already have an idea of the fate of your currency. Now, if you’re an American a strong U.S dollar isn’t causing for celebration; there still might be SHORTAGES in the United States.
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The Foreign exchange markets and the DOMESTIC U.S policy aren’t the same things; most BUSINESS transactions are done in U.S dollars, so as other currencies are debased, if I have dollars, I might be able to buy a ton of assets on the CHEAP, if I’m an owner of U.S dollars.
Interesting times ahead!