Thursday, May 14, 2009

Caribbean Banking Centers and Treasuries

According to Treasury's February TIC data that details foreign holdings of US Treasuries, Caribbean Banking Centers (including Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama) are the 3rd largest holder of US Treasuries in the world, behind mainland China and Japan.

Notice the large increase between July and October 08. That's 74% increase. Just what kind of interest do these island banking centers have in accumulating US Treasuries?

The top two holders, China and Japan, are the large net exporters to the US. In fact, top 10 holders are mostly countries that have something to sell to the US, with the exception of United Kingdom (No.7, but it includes its offshore banking centers Channel Island and Isle of Man) and Luxembourg (No.8, money center in continental Europe).

Some people have suspected that the Caribbean Banking Centers act as conduit to the central banks, including the US Federal Reserve, Bank of England, and Bank of Japan, that they have been purchasing the US Treasuries and sovereign debts on behalf of these central banks: covert monetization of the debts. (Or you could say money laundering by central banks, I suppose.)

Now listen to this BBC interview on May 12, in which journalist David Cay Johnston talks about the Caribbean Banking Centers in relation to the Obama administration's avowed crack down on "tax havens". (Fast-forward to about 3 minutes. And his invasion remark is around 6 minutes.)

  • "The US government should invade Cayman Islands [a British territory], seize all of their records, and prosecute every single tax cheat!"

    Invade? Is he serious? Or is he stupid? Or is he ignorant? (Or all of the above?)
  • "What benefit do the taxpayers of the US, UK, anywhere in the world, get, by having these banking centers?"

    Benefit, like having their national debts purchased by them so that their governments can keep on spending and wasting?

TIC data for March will be released tomorrow.


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