🎯 US Debt – The world is watching (9 critical points) 👇
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US Debt – The world is watching
(9 critical points) 👇
✔“Foreign direct investment in the U.S. (investment in hard assets like plants, facilities, real estate, companies, etc.) tallied a staggering $5 trillion at the end of 2021, the last year of available data from the Department of Commerce (on a historic cost basis)."
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CHINA IS WATCHING AND LISTENING INTENTLY 👇
✔ "China is watching and listening intently. Despite the spike in U.S.-Sino trade tensions, Chinese holdings of U.S. Treasurys are still relatively large, with China holding some $870 billion in Treasurys at the end of March 2023, according to data from the Treasury Department. Japan’s Treasury ownership, as the largest foreign owner, was $1.1 trillion in the same month.”
✔ “These two nations, in addition to other states in Asia, have long recycled their excess savings/surplus into U.S. assets, inexpensively adding to America’s credit pool and relatively low-cost of capital. Any unexpected turn in debt ceiling talks could alter this arrangement.”
✔ “That is not our base case, but something we are tracking very carefully."
🚨 THERE ARE MULTIPLE BENEFITS TO THE U.S. FROM THE DOLLAR’S STATUS AS THE WORLD’S DOMINANT CURRENCY, SO IT’S IMPORTANT THE WORLD MAINTAIN ITS FAITH IN THE ALMIGHTY BUCK
✔ "As the world’s top currency, there is constant demand from central banks and foreign financial institutions for U.S. dollars and dollar-backed securities like U.S. Treasurys.”
✔ “This demand, in turn, means the U.S. can borrow more cheaply (at lower interest rates) than it would otherwise.”
✔ “That’s a big deal for one of the world’s largest debtor nations.”
✔ “For decades, the U.S. has relied on foreign savings to help plug its saving gap, and for decades, foreign investors have been all too happy to oblige."
✔ "Market volatility from the debt ceiling debate extends far and wide. The debt limit issue will ultimately be resolved, but the risks of brinkmanship will keep investors—at home and abroad—on edge."
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.