Who is the United States' Mysterious 5th Largest Creditor, Really?
Let's talk T-bills since we know the Fed is scraping the barrel to squeeze out that final $40 billion in QE and somehow the Treasury is going to have to figure out how to cover that $500 billion line of credit Congress promised the FDIC in the event of bankruptcy. The FDIC is there and Congress is no closer to funding the line but that's not our problem.
As the numbers from the Treasury show you, China started bailing out of T-bills in March of this year (coincidentally - or not - at the same time the Fed announced its quantitative easing plans and when we first learned how dangerously close to bankruptcy the FDIC was). After a tiny spike in May (I blame "irrational exuberance" or perhaps it was a final "screw you" to Timmy, as if to remind us that they have our monetary nuts in the vice), they're back to slinking away from the perceived safety of US debt (LMFAO!) as they probably should.
As I've said before, if Tim Geithner wants to send the message to China that the dollar is safe, I highly recommend he liquidate and put all his money in 30y Treasurys. Asshat.
Anyway. This isn't about China and how they plan to get the hell out of the dollar before it implodes, I've written plenty about that to date. This is about wild speculation (you know how much I love that) by the numbers.
The fifth largest holder of US debt is a group entitled "Caribbean Banking Centers" that supposedly encompasses Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama, and the British Virgin Islands. With about $189 billion in T-bills, this is no small amount of "faith" in the credit of the United States. Even stranger, this vague little group increased their holdings by about $80 billion in the period between June 2008 and June 2009.
Perhaps UBS can weigh in on the dangers of off-shore banking? Just sayin.
Shall I strap on my tin foil hat? Certainly I am not the only one who has wondered just who these Carribean bankers are.
In 2005, North Dakota Senator Kent Conrad wondered the same thing (to his Senate colleagues):
Well, increasingly we are going into debt with other countries around the world. We owe Japan over $680 billion. We owe China over $240 billion. We owe the United Kingdom over $140 billion. My favorite is the Caribbean banking centers.
We owe the Caribbean banking centers over $100 billion. I like to ask audiences back home if anyone is doing business with the Caribbean banking centers. I have never had a hand go up. I do not know where the Caribbean banking centers get their money, but we owe them $108 billion
I will save the truly wild speculation and say only "we saw what you did there" to whomever might read this and have sins to confess. Mind you, these "Carribean banking centers" likely hold more in US debt than they output in terms of GDP. I don't have time to crunch those numbers and will leave that particular rabbit hole to someone who doesn't have a day job, mmkay?
That is all.
naked capitalism covered "the monetization of debt" behind the scenes (no tin foil hat required) but we know that is but the tip of the iceberg here. But still relevant. Why do anything behind our backs when you can do it right there in the open?
(major h/t to GG for the inspiration.)