Sign In
SHARE
Now and Yen: Obama Bonds?
The U.S. Treasury faces a quandary next year. It will need to fund a gigantic budget deficit as a result of the financial rescue through a sale of securities, but could face resistance from foreign investors, the biggest holders of U.S. Treasuries, who might be leery of holding dollar-denominated assets.
Hold on, hasn't the dollar been climbing of late? Yes, but many contend that its rise has been inflated by American investors liquidating foreign assets for dollars. The long, steep slide of the dollar is expected to resume soon.
The prospect of a sharply weaker dollar against the yen has prompted economists in Tokyo to call for Barack Obama to issue U.S. Treasury securities denominated in yen and other foreign currencies, the Asian Times reports.
"The U.S. will be forced to issue foreign currency-denominated US Treasures in its hour of need," Kazuo Mizuno, chief economist in Tokyo at Mitsubishi UFJ Securities, told the paper. "The U.S. cannot finance its deficit by itself. The U.S. financial system cannot survive without foreign investors. We will see 'Obama Bonds' in the future."
When the dollar has been weak before, in the 1990's and 1980's, there were calls for yen-denominated Treasuries.
And there were Carter Bonds, denominated largely in German marks. Treasury sold some $6.4 billion of these bonds between 1978 and 1980.
Yves Smith on the Naked Capitalism blog says of the Obama Bonds proposal:
"What has been interesting is that even though this idea is obvious (and unless the trajectory changes, inevitable) our foreign creditors have not said anything of the kind in a public forum. Given how forward the Chinese often are, and how they seem particularly unhappy about continues dollar accumulation (even though their currency peg is the proximate cause), they have been surprisingly quiet on this topic."
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- ACBJ to relaunch Portfolio.com
- May 20 2009 1:44PM EDT
- 44, Day 97: On Golf, Swine Flu, and a "Hallmark Holiday"
- Apr 26 2009 5:39PM EDT
- 44, Day 96: Where's the Suggestion Box?
- Apr 25 2009 2:10PM EDT
- 44, Day 95: Let Them Have Student Loans
- Apr 24 2009 6:49PM EDT
- Stressing Out Over Stress Tests
- Apr 24 2009 2:14PM EDT
- King of the Private Equity Hill
- Apr 24 2009 8:23AM EDT
- 44, Day 94: What's in Obama's Wallet?
- Apr 23 2009 6:39PM EDT
- Madoff Clawback Campaign Targets Ex-Clients
- Apr 23 2009 3:00PM EDT
- Merrill, Muzzle, and the Mob
- Apr 23 2009 1:45PM EDT
- 44, Day 93: Earthly Concerns
- Apr 22 2009 7:14PM EDT
- Stanford Prosecutor Arrested for Assault
- Apr 22 2009 5:47PM EDT
- IMF Downgrades the Global Economy
- Apr 22 2009 2:00PM EDT
- Ackman Opens His Target Slate to Questions
- Apr 22 2009 11:51AM EDT
- Freddie Mac Acting CFO Found Dead
- Apr 22 2009 8:42AM EDT
- 44, Day 92: About Those Interrogations
- Apr 21 2009 5:53PM EDT
Archive
