Latest report: foreign holdings of U.S. government debt are up by 10%, year over year. China has been buying. It now holds $1.2 trillion.
The total comes to $5.66 trillion. Of this, 72% is held by foreign governments and central banks.
This policy of inflating the domestic currency and buying U.S. Treasury debt with the new money holds down U.S. interest rates. It helps keep recession away. It also holds down the dollar value of foreign currencies. This is great for American consumers.
Foreign governments and their central banks buy our government’s debt. Foreign manufacturers then send us goods, which we can buy cheaper because foreign currencies have been kept lower. American consumers are getting subsidies from foreign governments. This is mercantilism in action. American consumers are the great beneficiaries of this policy of foreign government intervention.
The longer it continues, the richer Americans get. When it ends, as it must, Americans will find that imported goods cost more. But until then, the subsidies will continue. This is reverse foreign aid. It is far larger than domestic foreign aid programs created by Congress. It is the poor (Chinese citizens) subsidizing the rich: you and me.
Is government stupid? Yes.