(OT) H.R.3293 Debt Limit Reform Act Proposes to Stop Counting Intragovernmental Debt

As if that reduces the actual amount of the national debt.

I thought it was a joke when I saw the headline at Zero Hedge, so I followed the link in the article. And there it was, the bill by Florida Congressman Alcee Hastings (who happens to be one of only eight federal officials in the US history to be impeached and removed from office - he was a Judge on the United States District Court for the Southern District of Florida).

From Govtrack.us:

HR 3293 IH
113th CONGRESS1st SessionH. R. 3293To reform the public debt limit.
IN THE HOUSE OF REPRESENTATIVES

October 15, 2013

Mr. HASTINGS of Florida introduced the following bill; which was referred to the Committee on Ways and Means

---

A BILLTo reform the public debt limit.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Debt Limit Reform Act’.

SEC. 2. REFORM OF THE PUBLIC DEBT LIMIT.

(a) Authority of President To Increase Public Debt Limit- Section 3101 of title 31, United States Code, is amended by adding at the end the following new subsection:

‘(d) The dollar amount in effect under subsection (b) shall be increased at such times and in such amounts as the President of the United States, or his designee, may provide.’.

(b) Government-Held Debt Not Taken Into Account for Purposes of the Public Debt Limit- Section 3101 of title 31, United States Code, as amended by subsection (a) is amended by adding at the end the following new subsection:

‘(e) Obligations held by the United States Government (including any obligation which is classified as an intragovernmental holding by the Secretary of the Treasury or which is held by any agency or instrumentality of the United States) shall not be taken into account for purposes of applying the limitation imposed under subsection (b).’.

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Bloomberg: Japan's Abe to Create 50 Trillion Fund to Buy Foreign Bonds Including US Treasuries?

Shinzo "pork-cutlet-over-curry-rice" Abe is going to be the best friend of Ben "Blackhawk helicopter" Bernanke.

Bloomberg News quotes Nomura Securities, JP.Morgan, and ex-BOJ deputy governor among others who say the Abe administration has pledged to create a 50 - 100 trillion yen (US$558 - 1,116 billion) fund to buy foreign debts, with more than half that money going into the US Treasuries.

Abe's rationale? To make absolutely sure that Japanese yen gets depreciated and inflation rises, which he seems to consider as a sign of robust economy.

Well, I seem to recall a headline several days ago that Mr. Bill Gross of PIMCO, the world's largest bond fund manager, had raised the holding of US Treasuries in December. If these analysts in Japan knew (they talk like it's a given that Abe will create such a fund), Mr. Gross would have known about it long time ago.

From Bloomberg News (1/13/2013; emphasis is mine):

Abe Aids Bernanke as Japan Seen Buying $558 Billion Foreign Debt

Shinzo Abe is set to become the best friend of investors in Treasuries as Japan’s prime minister buys U.S. government bonds to weaken the yen and boost his nation’s slowing economy.

Abe’s Liberal Democratic Party pledged to consider a fund to buy foreign securities that may amount to 50 trillion yen ($558 billion) according to Nomura Securities Co. and Kazumasa Iwata, a former Bank of Japan deputy governor. JPMorgan Securities Japan Co. says the total may be double that. The purchases would further weaken a currency that has depreciated 12 percent in four months as the nation suffers through its third recession since 2008.

The support would help Federal Reserve Chairman Ben S. Bernanke damp yields after the worst start to a year since 2009, according to the Bank of America Merrill Lynch U.S. Treasury Index. Government bonds lost 0.5 percent as improving economic growth in the U.S., Europe and China curbed demand for the relative safety of government debt even with the Fed buying $45 billion in bonds a month.

“I can’t imagine the U.S. would be disappointed in Japan buying Treasuries,” Jack McIntyre, a fund manager who oversees $34 billion in global debt at Brandywine Global Investment Management in Philadelphia, said in a Jan. 8 telephone interview. “The Fed’s been doing all the heavy lifting.”

...Strategists are already paring back bearish forecasts for U.S. debt. The 10-year Treasury yield will rise to 2.2 percent by year end, according to the median prediction of economists in a Bloomberg survey. In July, the estimate was 2.7 percent.

Hiromasa Nakamura, a senior investor for Tokyo-based Mizuho Asset Management Co., which oversees the equivalent of $38 billion, is more bullish. Ten-year Treasury yields will fall to a record low of 1 percent by year-end as Japan ramps up purchases, while the yen falls to 90 per dollar, he said in an interview on Jan. 11. Japan’s buying “will be one of the positive factors in the market.”

...The fund could be twice that size or more as “there’s no upper limit,” said Masaaki Kanno, the chief Japan economist for JPMorgan and a former BOJ official. Abe can hold off on unveiling a large plan now until the next time the currency starts to appreciate, Kanno said by telephone Jan. 11.

...Whatever the foreign bond fund’s amount, more than half will probably be funneled into Treasuries because they are the most easily-traded securities, Yoshiyuki Suzuki, the head of fixed-income in Tokyo at Fukoku Mutual Life Insurance Co., which has about $64.8 billion in assets, said on Jan. 8.

(Full article at the link)

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US 10-Year Treasury Bond Yield Falls to 60-Year Low, As World Is Getting Unhinged

If it's any comfort to the Japanese, the world (at least OECD members) seems to be joining Japan in getting out of control one way or another.

For the EU and the US, it is over the sovereign debt crisis that could lead to a global banking crisis, a la Lehman, this time potentially much bigger. The apparent safe haven bid is on the US dollar and the US Treasuries, which drove down the yield on 10-year bond to 1.896 percent earlier today.

The supposed trigger for today's move is the resignation, though planned, of the ECB board member Juergen Stark because of conflict over the central bank's bond buying program.

Earlier this year before March 11, Japan was one of the two countries (the other is China) who pledged to buy European debts to support the Euro regime (and support their export industries). I wonder if it is still doing that.

From Reuters (9/9/2011):

NEW YORK (Reuters) - Treasury debt prices rose on Friday, taking benchmark yields to the lowest in at least 60 years as investors looked for a safe haven on revived worries a European debt crisis could have a significant global impact.

Stocks plunged on Friday, losing over 2.5 percent and bolstering the safe-haven allure of U.S. government debt, with few investors looking to go into the weekend short Treasuries due to the uncertainty surrounding the European debt crisis.

The worries over Europe were sparked by the planned resignation of European Central Bank (ECB) Executive Board Member Juergen Stark. The ECB confirmed a Reuters report that said Stark was quitting because of a conflict over the central bank's bond buying program.

"The Stark resignation just kind of raises an eyebrow at a time when there's already concerns about what's going to happen next," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

A debt swap meant to help Greece avoid default and win time to repair its tattered public finances hung in the balance Friday, with expectations of take-up by private creditors slipping amid fierce European pressure on Athens.

"There is a real danger that a European default or bank failure would lead to a global banking crisis akin to that seen after the fall of Lehman Brothers," said Paul Dales, U.S. economist at Capital Economics in Toronto.

Benchmark 10-year notes were trading 19/32 higher in price to yield 1.91 percent, down from 1.98 percent late Thursday. Benchmark yields touched 1.896 percent, marking the lowest since at least World War II.

(The article continues.)

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Japan's Finance Ministers Say "US Treasuries Attractive, Top-Notch"

Don't worry Timmy, Ben and Barry. Japanese politicians still say the US debt is the best investment for them.

But then, the same Japanese politicians also said Fukushima I Nuke Plant was under control and safe.

From Asahi Shinbun (in Japanese; 4/19/2011):

Minister of Finance Yoshihiko Noda: "US Treasures continue to be an attractive investment for us. No particular effect [of downgrading] on Japan's holdings. President Obama has embarked on a deficit reduction."

Minister of State for Economic and Fiscal Policy Kaoru Yosano: "Everybody in the world wants to hold the US Treasuries. The US Treasures that Japan owns are particularly good ones."

ROTFLMAO..

"Japan holds about $1 trillion foreign bonds as part of the foreign reserves, most of which are considered to be the US Treasuries," says Asahi, complaining that the details of the foreign reserves are not disclosed. Well, Asahi can simply check the US Treasury Department's TIC, and find out that Japan owns $890 billion US Treasuries as of February 2011.

(And they talk about taxing the citizens to pay for "recovery and rebuilding" cost and Fukushima I nuke plant accident compensations.)

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Fears Rise that Japan Could Sell Off US Debt Because of #Earthquake

Yup. Japan, sell away. Don't be such a good "global citizen" and continue to buy/roll over the US Treasury debt. You need money, tons of it. $1 trillion is what I would suspect it would take, or 20% of GDP, if that (depending on the Fukushima I Nuke Plant situation). Well well, you have the US Treasury notes and bonds to the tune of ... $885.9 billion! If you add US agency bonds, I'm sure you get $1 trillion right there at Bank of Japan.

Instead of issuing "recovery" bonds and having the Bank of Japan monetize them, and further going into the debt level that's just impossible to even comprehend, cash out your "savings" that you've accumulated over all these years and put it to good use.

From Washington Times (3/24/2011):

Some lawmakers and market analysts are expressing rising concerns that a demand for capital by earthquake-ravaged Japan could lead it to sell off some of its huge holdings of U.S.-issued debt, leaving the federal government in an even tighter financial pinch.

Others say a major debt sell-off by Tokyo is unlikely, but noted that the mere fact that questions are being raised speaks volumes about the risks involved in relying so heavily on foreign investors to fund U.S. debt.

“This natural disaster in Japan concerns me that it could speed up what’s coming, because they are the second leading buyer of our debt,” Sen. Rand Paul, Kentucky Republican, told The Washington Times. “Small degrees of differences in how much they buy of our debt, I think, can make a big difference in interest rates that we have to pay people to buy our debt.”

Yes, Dr. Paul. Do you think the US can arm-twist Japan into continuing to by the US debt?

The answer is yes, of course. That's how Japan is. Japan will forever be a good "global citizen" and do what's good for the world, even if no one else cares.

I wonder what will happen to their pledge to buy euro debt from PIGS...

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Bill Gross Dumps Treasury Holdings from His Total Return Fund to Zero

Uh oh... No QE3?

From Zero Hedge (3/9/2011) [Emphasis is original]:

And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash. After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to a whopping $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28). This is the most cash the flagship fund has ever held, and the lowest amount in Treasury holdings since January 2009 before it was made clear that the Fed was going to adjust QE1 to include Treasurys in addition to Mortgage Backed Securities. PIMCO's Treasury holdings peaked in June 2010 at $147.4 billion and have declined consistently ever since. And while we expected that the spike in MBS holdings (at times on margin) was indicative of an expectation that QE3 would monetize mortgage backed securities, the ongoing decline in that asset class now leads us to believe that Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.

Note the plunge in Treasury holdings in the chart below (blue line), offset by the surge in cash (dotted pink line). Time to panic.

In his Investment Outlook from November 2010 (when QE2 was announced), Bill Gross said "Run Turkey, Run". He was determined that his fund and his investors would not be Thanksgiving turkeys on the platter.

Batten down the hatches...

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"The Free Market Death Panel" and Fail-to-Deliver US Treasuries

We are being robbed by Wall Street banks every single day and we don't even know it.

There was an article on Zero Hedge by Miss America aka Rich Hartmann on Friday (3/4/2011) titled "The Free Market Death Panel". "A nice sensationalism," I applauded, and started reading the article. As I read, I kept thinking "This can't be true! Just can't be..."

After all that's happened since the cascading market crash in October 2008, I thought I was immune to any surprise coming from banksters - mortgage fraud, foreclosure fraud, securitization fraud, bailout fraud, high-frequency trading fraud, regulatory capture (revolving doors of Wall Street to Washington), sovereign capture (Libya's favorite banker is J.P.Morgan Chase) - everything they do is fraud, and action to cover up the fraud (that's where the "capture" comes in).

But in the ZeroHedge article, Miss America / Rich Hartmann talks about the Treasury Market Practices Group (TMPG) at the Federal Reserve Bank of New York (the same bank that does POMO almost every single day to shower money on the Primary Dealers), and how the Group has enabled the same Wall Street banks to swindle potentially billions of dollars from pension funds and mutual funds where the rest of us keep our dwindling savings.

How? By shorting the Treasuries and deliberately failing to deliver them.

The article gives a hypothetical example of how a broker screws a pension fund and ends up collecting money from the pension fund:

BrokerX sells 2 lots of 5mm shares to pensionsuckersfund (PSF) of cusip 912828XXX.
BrokerX then buys 10mm shares back from pesionsuckersfund (PSF) at a small loss in the same day of the same cusip 912828XXX.

PSF’s Net buys = $9,999,950 ($4,999,975 + $4,999,975)
PSF’s Net sells = $10,000,000 (for a $50 gain. These daily turns ranging to 50million par are extraordinarily commonplace, especially for a flooded Treasury Market.)

Sounds good for the pensionsuckerfund as they just made $50. …but here’s the rub:

In the real world of street settlements, BrokerX can now withhold on ACTUALLY delivering 1 of the 5mm pieces to the pensionsuckerfund. Since BrokerX is short, for whatever reason, BrokerX does not deliver the 2nd piece of 5mm. In MANY scenarios, the pensionsuckerfund will now wind up failing on the larger 10mm because they needed both 5mm pieces to position the trade. (Duh!! Thus a “pair-off/turnaround”.) …but BrokerX would never “intentionally” fail to deliver something! (wink wink)

So What!!!

So you say: “But why would Wall Street banks care about that those small claimable amounts!?!?!” They don’t care about that 1 trade. They care about the net of the trades! You see, this is the market! These types of treasury flips are done all day. The entire MBS market of TBA trades equate to thousands of trades netted out to small net gains and losses. This is what they do.

In the meantime their nice little $1,000 gains, in a tightly traded market (With razor thin margins) could add up. How?!?!?! On a daily basis there are $3-$6bilion in fails! Let me repeat!!! $3,000,000,000.00 to $6,000,000,000.00 in fails!!! …and that equates to $250,000.00-$500,000.00 in potential claims daily! EVERY DAY!!!

And with a huge spike ($20-90 billion per day) that seems to happen once in every quarter, potential claims may run into a few billions per year.

And this TMPG has made matters worse for the pensionsuckerfund (and better for the BrokerX) by "actually writing in their “suggestions” that BrokerX does “NOT HAVE TO ACCEPT ANY PARTIAL DELIVERIES”.

So BrokerX can actually reject your partial delivery of the 5mm shares you do have, just to get the claim on something they are intentionally botching! So that loss of $50 actually turns into an $850 gain!

Get it? The process is, as I understand:

1. BrokerX sells 2 lots of Treasuries, $5M each, to Pensionsuckerfund. BrokerX then only delivers 1 lot, $5M.

2. Pensionsuckerfund then sells $10M Treasuries it just bought from BrokerX, back to BrokerX, at a slight profit of $50. Problem: it only has $5M Treasuries at hand.

3. BrokerX says No to partial delivery, and insists on $10M delivery. Pensionsuckerfund cannot deliver.

4. BrokerX makes a claim for the fail, for $900. Net $850 profit.

Rinse and repeat, by Wall Street banks, every day, every week, every month, every year.

The TMPG has essentially created a new way for Wall Street banks to rob in the broad daylight with their victims unaware that they're being robbed. Or "raped", to use Miss America's word.

Miss America / Rich Hartmann's final words:

We all know that Wall Street has been raping America for years! Finally realizing this, the government stepped in! …and they made Wall Street put a condom on!

Groups like the TMPG are not out to protect us. They don’t stop the rape. No, they are actually protecting Wall Street from the virus that we have become.

…and I am here to spread the disease and spread the word.

Go read the whole piece. A must read, IMHO.

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Bob Chapman: US Has Given China "Eminent Domain" Option as Collateral for China's US$ Holdings

In his February 23 newsletter, Bob Chapman (of The International Forecaster) claimed his sources in the US Embassy in Beijing have confirmed to him that the US gave China a written agreement that allows China to exercise "Eminent Domain" to seize assets in the US in case of US government default on its financial obligations; however, the section was dropped from the newsletter sometime after it was posted on the net.

The February 23 newsletter that contained the section about this "Eminent Domain" option for China on Chapman's site has been altered - the newsletter got truncated and it now ends right before the discussion of this secret deal. The summary at the top of the newsletter still refers to it by mentioning "mortgaged to China".

But I printed out last night, before it was apparently altered, and read it.

Here's what it said, and what is no longer in the newsletter posted on his site:

Sources at the United States Embassy in Beijing China have just CONFIRMED to me that the United States of America has tendered to China a written agreement which grants to the People’s Republic of China, an option to exercise Eminent Domain within the USA, as collateral for China’s continued purchase of US Treasury Notes and existing US Currency reserves!

The written agreement was brought to Beijing by Secretary of State Hillary Clinton and was formalized and agreed-to during her recent trip to China.

This means that in the event the US Government defaults on its financial obligations to China, the Communist Government of China would be permitted to physically take inside the USA land, buildings, factories, perhaps even entire cities to satisfy the financial obligations of the US government.

Put simply, the feds have now actually mortgaged the physical land and property of all citizens and businesses in the United States. They have given to a foreign power, their Constitutional power to “take” all of our property, as actual collateral for continued Chinese funding of US deficit spending and the continued carrying of US national debt.

This is an unimaginable betrayal of every man, woman and child in the USA. An outrage worthy of violent overthrow.

I am endeavoring to obtain images or copies of the actual document but in the interim, several different sources both in the US and in China have CONFIRMED this to me.

Since the section has been pulled from the newsletter, it must have been some mix-up, a mistake.

Right?

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Reuters Says China Is the Biggest US Creditor

as of the end of October 2010, at $906.8 billion.

Well, not any more. The biggest US creditor is Big Bad Ben at the Fed, at $1,024 billion. The holdings will increase by about $100 billion every month. Beat that, China.

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POMO under the QE2: $105 Billion, 11/12-12/9/2010

18 operations in 20 trading days.

From NY Fed announcement just released (emphasis is original):

Across all operations in the schedule listed below, the Desk plans to purchase approximately $105 billion. This represents $75 billion in purchases of the announced $600 billion purchase program and $30 billion of principal payments from agency debt and agency MBS expected to be received between mid-November and mid-December.

Quickly scanning the details, I see that they may purchase up to $10 billion in 30-year bonds.

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Rumor of the Day: Governor of Chinese Central Bank Gone Missing?

over $430 billion US Treasury holdings loss. He may have fled to the United States, one rumor says. Also, it may not be their US Treasury holdings but Fannie and Freddie bonds. At this point, nothing is confirmed, just a rumor circulating in Chinese media.

But how he could have lost that much? Do you smell Goldman Sachs or Morgan Stanley? Do you smell some synthetic positions recommended by them either to hedge or to speculate (betting that the Treasury prices go down), which may have spectacularly blown up in the recent weeks? And if his bank was also doing the currency hedging and/or speculation ...

For more, go to Zero Hedge, who cites Stratfor:

Rumor PBoC Governor Zhou "John Meriwether" Xiaochuan Has Defected From China After Suffering Half A Trillion In UST-Related Losses

Where In The World Is Zhou Xiaochuan? Stratfor Provides Update As 1 Month Chinese Repo Surges By 50%

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Federal Reserve POMO Is Back!

and the stock market melts up, like old times.

The Federal Reserve Bank of New York conducted a Permanent Open Market Operation (POMO) to buy Treasuries to the tune of $2.5 billion, its first since October 2009.

From the NY Fed:

Operation Date: 08/17/2010
Operation Type: Outright Coupon Purchase
Release Time: 10:15 AM
Close Time: 11:00 AM
Settlement Date: 08/18/2010
Maturity/Call Date Range: 08/15/2014 - 07/31/2016

Total Par Amt Accepted (mlns) : $2,551
Total Par Amt Submitted (mlns) : $20,949

For detailed schedule, see my other blog. (And just don't short the stock market on those days...)

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US Treasuries 'Safe Haven'? Not the Short-Term Bills

With the stock markets around the world diving last week, you would think the investors had gone to grab liquid Treasury bills, right?

Wrong.

Looking at the last week's auction result, Treasury bills were out of favor, even if the rates were higher. 4-week bill result was lackluster to say the least: bid to cover ratio was only 3.72 (4-week bill's bid to cover is usually well over 4), and the Treasury had to give a higher rate on 4-week bill than on 56-day CMB (Cash Management Bill).

Short-term Treasury bills have been under pressure for some time. Higher rates, lower bid to call ratio, and the increasing percentage of direct bidders.

Borrowing short-term fund and spend (invest) in longer-term projects - oh wait, wasn't that what destroyed Bear Stearns and Lehman Brothers when the short-term fund dried up?

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AP: Foreign Demand for Treasury Securities Falls

but AP got the number 180-degree wrong for Japan...

AP Economics Writer Martin Crutsinger reports that:

"The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record of a $44.5 billion drop in April 2009"; and

"The big drop in China's holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.

"Japan also reduced its holdings of U.S. Treasuries, cutting them by $11.5 billion to $768.8 billion in December, but that amount was still more than China's December total of $755.4 billion."

Except Japan didn't reduce the holdings.

If you take a look at the Treasury Department's TIC chart, China did reduce its holdings from $789 billion in November to $755 billion in December 2009. However, Japan increased its holdings from $757 billion to $768 billion, an increse of $11 billion.


Aside from Japan, one notable country that increased its US Treasury holdings is United Kingdom. UK's Treasury holdings increased from $277 billion in November to $302 billion in December, $25 billion increase. UK increased the Treasury holdings by 132% in one year.

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Chinese Military Wants Government to Dump US Government Bonds

to punish Washington over the planned arms sales to Taiwan.

China PLA officers urge economic punch against U.S. (2/9/2010 Reuters)

"BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

"The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.

"The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.

"The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings. Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.

"While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.

""Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences.

""Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."" [Emphasis is mine. The article continues]

So in the eyes of the People's Liberation Army, the U.S. is the disease.

I am not so sure of the usual argument that China will refrain from actually dumping the U.S. Treasuries because that would decimate their foreign reserves, much of which is denominated in U.S. dollar. I have a feeling that the Chinese government couldn't care less, and would be quite willing to take, say 50 cents on a dollar and be done with the U.S.

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Lower Dollar to Sell More Treasuries?

Is that what Geithner and Bernanke have been doing?

Treasury Secretary Timmy Geithner periodically espouses his "support" for stronger dollar, no matter how he may get ridiculed. Fed Chairman Ben Bernanke recently said he was "watching the dollar drop closely". He may have meant that he was watching the dollar closely to make sure it weakens in an orderly manner, but it was generally interpreted as he is concerned about weak dollar. Even the spendthrift president of the U.S. chimed in, saying he was concerned about the growing government debt.

Weak dollar means stronger Euro, yen, yuan, ruble, real, etc. Foreigners who holds U.S. dollar-denominated assets (majority of them in the form of Treasury notes and bonds) doesn't like to see their assets decline in value as the dollar tumbles. So what do they do, other than protest to Geithner and Obama when they have a chance?

They buy U.S. Treasuries.

According to the Treasury Department's Treasury International Capital (TIC) data released on November 17, foreigners (including foreign central banks) increased their holdings of U.S. Treasuries in September. Treasury auctions of all durations continue to enjoy decent bid to cover ratios, and the rates are getting lower.

In September, total foreign Treasury holdings increased from $3,452.9 billion in August to $3,497.3 billion. It is a fifth-consecutive increase since April this year, coinciding with the stock market turnaround. Year over year, it marks 25% increase. Foreign central banks hold $2,369.5 billion Treasury bills, notes and bonds, or 68.6% of the total foreign holdings.

Foreigners, governments and private entities alike, are defending the dollar by buying up the Treasuries.

So, Geithner, Bernanke, and Obama don't need to do a thing. They can just sit pretty, occasionally express their verbal support for a stronger dollar to placate the foreign creditors, and simply let the dollar slide gradually. As long as the slide is gradual, they can rope in more and more buyers who hope to arrest the decline of their asset value by buying up Treasuries.

Some might say they can't do a thing. If the dollar strengthens too much or too rapidly, that would jeopadize the dollar carry trade, particularly the one engaged by the foreign governments (issuance of U.S. dollar-denominated bonds; here's a post from October, by The Debts of a Nation blog).

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Case of Counterfeit US Treasuries in 2002

The news of two "Japanese" in their 50s arrested in Italy for possessing undeclared US Treasury bonds ($134 billion, about 1/4 of total Japanese holding) and attempting to carry them into Switzerland has been reported widely in the US.

It looks to me like a usual business between Japanese "yakuza" and foreign counterparts, whether it is Italian Mafia, Russian Mafia, or Chinese Triad. If that's the case, it is highly likely these Treasuries are counterfeit.

It has happened before, on a much bigger scale.

According to old Kyodo News on April 7, 2002, two Japanese in their mid 40s, a Japanese American businessman, and a real estate broker in Hong Kong were indicted by the Hong Kong Police for the possession of counterfeit US Treasury bonds ($370 billion, if they were genuine). Two Japanese and the Japanese American were arrested in a Hong Kong hotel for the possession of the counterfeit Treasuries, and the real estate broker was arrested when he came to the hotel to meet them; he had 88 counterfeit US $100 bills on him. One of them is said to have admitted that they had arranged a meeting with a certain group in Guanzhou in China.

I couldn't locate the original news, as Kyodo has changed the site. The link that points to Kyodo news is broken, but the article summary above is here. (In Japanese. They put the year first on the date, by the way. Year-Month-Day format.)

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