Tuesday, December 2, 2008

The Selling Of America: The List Goes On And On

Monday Market Footnote

Both Fed Chairman Bernanke and Treasury Secretary Paulson spoke Monday, and the markets had the typical reaction of a flight to quality and safety in Treasury's, and an accelerating slide in equities. Is there a way that until they leave office that they can give any public comments from inside the cone of silence (for all you Get Smart fans out there). They need to formulate a plan and give it time to work, as opposed to coming out with a new flavor of the day. That does little to inspire confidence. The S&P closed down over 7% and the Nasdq over 9%.

The more you listen to our our government financial leaders who seem not to be able to get any type of handle this crisis, as well as economic leaders outside the government that paint an extremely gloomy picture for the immediate future, one wonders what the economy's around the world will look like same time next year. What will the extent of the economic as well as social dislocation be?

Hilary Clinton Nominated For Secretary of State

As discussed in this blog on November 24, Hilary Clinton was nominated for the position of Secretary of State which is curious from the perspective of both the nominator and the nominee. It may go under the title of keep your friends close and your enemies closer.

AIG Announces Agreement to Sell AIG Private Bank Ltd to Aabar Investments

I was watching the business news Monday morning, and saw this cross the tape on the bottom of the screen. Not a big deal. AIG is in trouble, and an overseas company sees some value and is swooping in to pick up an attractive asset at what they hope is going to be an attractive price. Not a big deal, right? The reality is that we probably sell somewhere in the neighborhood of 50% +/- of our U.S. government debt to buyers that are foreign, as well as a piece of a variety of companies.

This fact puts us into a very dependent and vulnerable position, particularly as some of the biggest Treasury buyers are considered "friends", but definitely not the best of friends. More like acquaintances. Let's take a look at the list of the top holders of U.S. treasury debt:
  1. China, Mainland
  2. Japan
  3. U.K.
  4. Carib. Banking Centers
  5. Oil Exporting Countries including Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
  6. Brazil
  7. Luxembourg
  8. Russia
  9. Hong Kong
  10. Norway

(Department of the Treasury/Federal Reserve Board November 18, 2008)

Note that if numbers 1, 5, 8 and 9 decided to hold us economically hostage, they would be in a fairly good position to do so, particularly as our borrowing needs rise substantially.

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