U.S.TREASURY BONDS: “WE HATE YOU GUYS” BUT THE “ONLY OPTION.”

U.S. TREASURY BONDS: “WE HATE YOU GUYS” BUT THE “ONLY OPTION.” About 18 months ago I posted here about an article in Harvard Magazine which interviewed several economists on the subject of the American dollar. Most thought that the American trade deficit posed major risks of a sudden decline in the value of the dollar. On the other hand, Richard Cooper thought that the trade deficit could continue to grow because America would continue to be a good place for a foreign investor to put his money. With all the bad things that have happened since then, American government securities continue to be a place that foreign investors choose to put their money. A week ago, a “senior Chinese banking regulator” was quoted in this story in the Financial Times as saying that U.S. Treasury bonds are the “only option” for Chinese investments even though they expect the dollar to depreciate. The official said, “Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. For everyone, including China, it is the only option.” Although what has happened is surprising, I think that even 28 months ago, pessimists would have acknowledged that the ultimate safety of Treasury bonds was a reason to hold them. The official was quoted as using the words in the caption: “…we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.” (I love his colloquial use of English, both charming and eloquent..)