As a general rule of thumb, the revisions are not usually not that significant except in the case of China, which for the past few years has conducted a large portion of its Treasury purchases through London financial centers. The result has been that when the revision takes place and the Treasury Department releases its data to reflect the country in which the actual debt is now owned, China has seen a rather large jump in its holdings at the expense of the UK, which sees a corresponding decrease in its reported holdings.
Today's revision by Treasury showed exactly this same pattern as China ended up with a reported increase of $268.4 billion in debt in the month of June 2010. From that month forward, their holdings either increased or decreased but it did so starting from a higher base.
I have updated my data to reflect these revisions and the charts as well that I have been using to provide a graphical view of all this. These new charts are presented below for your convenience.
Note, that after the revision, the gulf between the total reported holdings of China and those holdings now on the Federal Reserve's balance sheet has shrunk considerably but the fact is that the Fed is still the largest holder of US Treasury debt on the planet thanks to its QE program.
When the Fed stops buying USA debt, interest rates will spike. Higher mortgage rates will make housing less affordable to new buyers, which will cause a further fall in housing prices. A further fall in housing prices will push more people underwater, and more people will walk away from their houses.
ReplyDeleteWith a further fall in housing prices, those holding mark-to-myth pools of mortgages will be further underwater.
This makes me consider the possibility the Fed will never voluntarily stop quantitative easing, because the banks will be done.