It's getting harder for governments to buy U.S. debt because our shrinking current-account gap is reducing the supply of dollars overseas, a Chinese central bank official says.
Zhu Min, deputy governor of the People's Bank of China, told an academic audience it is inevitable that the dollar will continue falling in value because Washington continues to issue more debt to finance its deficit spending.
"The U.S. current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the U.S. is supplying fewer dollars to the rest of the world," he said.
"The world does not have so much money to buy more U.S. Treasuries."
“The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said. "Double the holdings? It is definitely impossible."
Swiss fund manager and Gloom, Boom & Doom editor Marc Faber says that credit as a per cent of the economy in the US is still growing: Officially the debt to GDP is 375%. It was 186% when the US went into depression after 1929.
"If you add ... unfunded liabilities of Medicare and Medicaid and if you add Fannie Mae and Freddie Mac that have been taken over by the government, we are talking about the debt to GDP of over 600 percent," Faber told India's Economic Times.
“To get out of this mess, they will monetize and they will have all kind of stimulus packages which will lead to high inflation and the standards of living of the average household will go down,” Faber observes.
“It will enrich a few people — the elite, the ones on Wall Street.”
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