For the last year maybe longer I have been suggesting that the reason the central banks have been able to keep selling such vast debts without apparent buyers is because they are selling it to each other.
18th February I wrote in “Chinas sells US debt. WHO BUYS?” about how we here in the UK had bought £24 Billion of US debt in the same month that Public finances had to borrow £3.34 Billion in the month we are usually in surplus.
Now this appears (thanks to Zerohedge). UK Treasury holdings of US debt have gone from $106 billion in October 2009, to more than double, or $231.7 billion in February 2010. More than DOUBLED in five months. Months when our own finances are falling apart and our debt rocketing.
And while this orgy of buying has gone on, both our PM and his conservative challenger have been pompously intoning to us their sound sense and grasp of economic reality, by telling us how we must, cut spending, and make ‘hard choices’, in order to curb our debt. With what, pray tell, are we buying all this US debt? Why are we buying it at all? Who is helped, what hospital is kept open, what ‘front-line’ service safeguarded by this gargantuan appetite for US debt?
Of course if the answer is, that while we been adding over a hundred billion of their debt they have bought the same amount of ours, then no money has actually been spent. All that would have happened is that both countries would have lied to the world about how much debt they sold and how much money they have.
Of course I don’t know and can’t know if this is true. But if it is then we are playing a stupid and deadly game.
If its not true, and I am proven to be wrong and my ideas silly, the fact of this vast purchase of debt while we are in debt remains.