Defaulting banks - where will it stop?

[Jan Klimkowski]

I still don't know what is behind the massive purchase of US Treasury securities (public debt) by the UK Bank of England (govt), much of it unloaded by the Chinese.

In July 2009, the UK owned 97.1 billion dollars of US Treasury securities.
The Chinese govt owned 939.9 billion dollars of US Treasury securities.

By June 2010, the UK owned 362.2 billion dollars of US Treasury securities.
The Chinese govt owned 843.7 billion dollars of US Treasury securities.
Source: http://www.treas.gov/tic/mfh.txt

It smells like some kind of geopolitical racketeering scheme, cloaked in smoke and mirrors.

ENGLAND BUYS $170B USTBONDS FROM SAVINGS ???

This story is a gem. The Chinese dump USTreasurys and England accumulates them. Or more accurately, the USFed hides its vast monetization efforts in the United Kingdom account ledger item. No way to the reasonable man can Britain purchase $170 billion in USTreasurys in five months from legitimate sources of savings!! In May 2010, China reduced their USTreasury holdings by $32.5 billion, now the lowest level since June 2009. China shed $35.4 billion in short-term USTBills, offset by a mere $2.9 billion in purchased USTBonds. Furthermore, Japan reduced holdings in USTBonds, as did the OPEC nations. However, buyers could be found, all Anglo descent, at least on the surface. The total foreign USTreasury holdings rose from $3957 billion to $3964 billion. Attribute the good tiding news to gigantic ongoing accumulation by England, just like the last several years. The UK-based buying is highly suspicious, like a neighborhood crack house purchasing a swimming pool, but arouses no attention except by intrepid analysis divorced from Wall Street or the USGovt, the bicameral syndicate. Generally, the United States financial system suffered a dramatic decline in May as foreign purchases of US assets hit a wall, falling from $110.3 billion to just $33 billion. See the graph of steady Chinese unloading of USTreasurys in the last several months.

http://www.marketoracle.co.uk/Article21285.html

$102 Billion In 2,5 And 7 Year Treasuries On Deck For Next Week As Fed Prepares To Become Top Holder Of U.S. Debt

Submitted by Tyler Durden on 08/19/2010 13:01 -0500

Even as the public debates aggressively on the nature of bond bubbles and whether they have a footing in the US economy, Tim Geithner's office has no intention to discover the denouement of this particular polemic, and instead is preparing to belch the lastest batch of US-backed paper. In the upcoming week the US Treasury will issue a total of $102 billion in 2, 5 and "curve sweetspot" 7 year notes, with nominal amount all in line with expectations.

August 24 $37 billion in 2 Year Bonds
August 25 $36 billion in 5 Year Bonds
August 26 $29 billion in 7 Year Bonds

And in the unlikely event that China decides to reorient its purchases to even more non-US debt and sell existing holdings as it did in June (previously discussed on Zero Hedge), there is always that UK-based nest of direct bidders who just can't get enough of their own, pardon, American issuance. With holdings of over $360 billion and rising, the otherwise insolvent UK needs just $440 billion to become the second largest holder. And since it has purchased $280 billion in the last year alone, the probability that the Fed, pardon, the UK will soon be the second, and possibly biggest holder of US debt is distinctly possible.

And incidentally speaking of the real, not shadow, Fed, its holdings of $777 billion in US Treasurys, and growing once again at a rate of $30 billion per month, will surpass Japan as the second largest holder of USTs by the end of September, and China, which holds just $40 billion more, by the mid-term elections. In other words, we should not worry that China will soon forsake us - after all the Fed is gladly once again monetizing the Chinese stake.

http://www.zerohedge.com/article/102-bil...er-us-debt