Like the process by which they do it.
I’m guessing government T-bills are offered to private companies and then traded within the system until they reach the hands of non-American companies.
If this theory is correct then why do the T-bills end up in the hands of foreigners like the Chinese rather than circulate in the US system?
I learned about the situation of the world economy with Peter Schiff’s island analogy. That was just the outline. Now I want to know the details.
Chinese had lower time preferences than Americans. Hence, the risk-adjusted returns on US bills makes them very juicy in Chinese and Japanese markets, whereas they are not so exceptional for the higher-time-preference firms. Hence Chinese and Japanese firms outbid US firms for those bills. That for the private part.
The public (and unrelated) part stems from the Eats Asian fixation with ‘stable’ and even outright pegged currencies. If you want the yuan to exchange at a fixed value or range with the US dollar, you can either forbid anyone form trading in any other value (which would only work inside your country and would be practically unenforceable) or you could try to sell and buy dollars to drive the exchange rate where you want it.
In ’s case, they want to keep the rembibi undervalued, hence they need to lower the supply of dollars, hence they need to boost their dollar reserves. They could just buy dollars but purchasing bills is better as it brings in extra cash. Thus the Chinese CB too, besides private firms, holds immense reserves of US bills.
Dear Kenneth:
The USA has almost entirely ceased to generate wealth for future US generations, and instead we support our standard of living and non-productive lifestyle by selling the assets that were created by previous generations of US citizens. The US government economic policies has encouraged the sale or export our existing wealth and assets, including title to privately owned businesses, factories, casinos, hotels, farms, land, ports, businesses, refineries, forests, ports, breweries, refineries, and other privately owned wealth and assets located in the USA that were created by previous US generations in order to pay people in foreign countries to manufacture the things that US citizens consume, and also to pay for expanded US government expenses when the expenses exceed the taxes raised by the US government.
The US government raises money for expenses by selling freshly printed paper US bonds and other US paper debt instruments that promise that our children and our unborn grandchildren will pay off these debt instruments on the date of the bond maturity with US dollars.
The US government is redeeming these freshly printed paper US bonds with title to our privately owned US located businesses, factories, casinos, hotels, farms, land, ports, businesses, refineries, forests, ports, breweries, refineries, and other assets instead of Gold from Ft. Knox.
These privately owned US located assets are our children’s heritage and their main means of creating future wealth to pay off these bond obligations that present US citizens have placed onto these future US citizens when they are mature, or when they are born.
US citizens continuously pay US dollars to people and companies in the industrial nations (through Walmart, Home Depot, and the other imported/distributor/retailers) with US dollars to manufacture and supply the imported products that US citizens consume (instead of US citizens producing these products ourselves). This creates a constant flow of wealth from the USA to foreign industrial nations that produce the things that we consume.
The US government does not really borrow US dollars from US banks to pay for its expenses that are greater than the taxes that they collect, because US banks do not have that much money.
The US congress periodically passes laws that authorize the US Treasury to buy some paper and then print a bunch of new interest bearing paper currency instruments (US Bonds) in varying amounts with the promise of the US government repaying these loans in US dollars at the future dates specified (when they become due). This total congressional authorized amount of US debt instruments that is in excess of the value of the Gold Reserves stored at Ft. Knox is normally referred to as the “National Debt”.
The US Treasury then auctions off and sell these freshly printed paper US Bonds, and other debt instrument securities at periodic US Federal Reserve Bank public bid auctions for US dollar amounts at DISCOUNTS LESS THAN CURRENT VALUE AND/OR PRESENT WORTH to mostly foreign manufacturers, foreign banks and foreign individuals in China, India, Brazil, Pakistan, and other industrialized countries in return for the US dollars that these foreigners earned by making consumer goods for US citizens.
The US government then spends these US dollars, plus US dollars collected by taxation, on various government expenses and acquisitions.
These US government expenses include government payrolls, hiring of the unemployed to dig holes today then re-fill the same holes tomorrow, pork barrel projects constructed with foreign made imported construction materials, free educations, free medicine, subsidized housing, humanities, art, music, writing poems, make-work schemes, entertainment, roads and bridges to nowhere, and/or similar things that does not contribute positively to correcting the basic structural problems with our economy.
Foreigners continue purchase these freshly printed paper US Bonds (at an increasing discount from face value or present worth) ONLY because these US bonds can be redeemed by purchasing title to privately owned land, hotels, farms, businesses, casinos and other wealth and assets that were created by previous generations of US citizens and located in the USA, before the de-industrialization of the USA, and instead of redeeming US currency with Gold as other foreign nations do.
These freshly printed paper US Bonds, T-Bills, Dollars and other security instruments that the US government sells to people in industrialized nations have no value, except that they are redeemable for title to privately owned businesses, factories, casinos, hotels, farms, land, ports, breweries, refineries, forests, ports, breweries, refineries, and other privately owned assets located in the USA that were created by previous US generations instead of Gold.
This is an over simplification of the process, but I hope that you will understand and work to correct our US government policies!