Japan surpasses China as largest foreign holder of US Treasurys
cnbc.com
cnbc.com
The treasury level rising and falling is not usually intentional or by itself sinister, merely a byproduct of a fluctuating export surplus.
This article has a nice illustration of the process:
https://www.theatlantic.com/business/archive/2011/03/infogra...
https://www.theatlantic.com/business/archive/2011/03/infogra...
Of course their holdings have to do with their belief in US debt, those dollars could be spent on many things.
Anything that they buy things that are denominated in $ are usually US imports hence goes back to the net export calculation.
Of course they can also use to buy global commodities like Gold, Oil which are denominated in $$, but that is just a proxy for selling $ in foreign exchange and using that currency.
So, logically only 2 options. Sell US $ in FX or buy US assets (Bonds, Stocks, Real Estate)
The reason they hold $ is a 'belief in our currency won't inflate' (by monetizing debt) which implies 'belief in our debt' If China is a net exporter to Argentina or Venezuela, rest assured they are selling those currencies as fast as they can
Note that even gold "inflates" through the production of gold mines - and gold miners produce more as the price of gold (in dollars or equivalents) rises so mining serves as a check on the relative value of gold.
Compare that to, say, American dollars, where we expect at some point (hopefully not in the next few decades) the government will lose its discipline and allow the dollar's value to drop to 0, its true marginal cost of production. My memory is the vast majority of governments have cracked on that score, sooner or later.
Really it reflects a belief in the as-observed-in-the-market marginal cost to produce, which is easier to think about than inflation. It also explains bitcoin and shows how important the large pool of mining power is.
This ignores subsidies and tariffs. Those factors dominate pricing over energy equivalence.
Could you explain more about why it is the amount of energy required that determines the price? That could get rather circular (what determines the price of energy).
A Marxist would say it is the quantity of labour power required; a classical economist would say it is the balance of supply and demand, but I haven't heard this one about energy.
The point is that it is possible to bring a practically unbounded amount of new dollars into the market at a cost-to-create of 0 (ie, in real terms, new dollars can be created for free) and cause inflation. Which is exactly what the central banks try to do except in a controlled manner.
Can't happen with gold, because the marginal cost of creating new gold is roughly the price of gold. The 1-2% increase in supply from mining isn't going to cause real inflation in gold that behaves anything like inflation in the dollar. Supply increases to meet demand, but the value that the gold represents does not change.
If someone finds a super-nugget the size of a cargo ship to mine that might change, but that isn't what the original point by joe_the_user was going to.
We don’t have to wait several decades for that. The dollar lost about 70% of its value since the ‘70’s. https://en.wikipedia.org/wiki/United_States_dollar
That may have been generally true for the last 6000 years, but I doubt it will be true over the next 100 years; once asteroid mining becomes remotely viable then the price of gold will plummet.
But flying cars have never been practical because of the human element and the lack of physical constraints that could readily be placed on their control. Plus, people realized that as ugly as a highway is, sky highways are a hell of a lot worse. The idea became less and less popular, and now there's no real demand for anything of the sort.
There's plenty of demand for precious metals. And the technology for asteroid mining, even largely automated, already exists. It's a matter of driving the costs down enough to make if profitable, or waiting until supply drys up enough that even if the costs remain relatively stable that it will still make money.
We already see a lot of progress and promise in launch costs being driven down. There's ambition within these companies to expand farther and do more. The technology is getting to the point where there's little question on whether it will happen, barring some sort of extinction of modern society type event, it's just a matter of how soon.
I don't necessarily expect asteroid mining to happen on any large scale in my lifetime, but, I also wouldn't be surprised at all if it does. In 100-150 years? I'd be surprised if it hadn't.
It goes further because it basically means a country is likely to be in deficit if these surplus dollars lay around somewhere - Twin Deficit Hypothesis.
You commonly hear about how we are indebted China or whoever and because of that, they wield power over us.
This isn't loan shark style debt. The US holds all the cards in this case. It's sort of like, the mantra, "if you owe the bank millions of dollars, it's your problem". If you owe them billions, it's their problem.
The US could even pay back that debt with money they themselves issued if needed.
Hyperinflation is effectively defaulting. No one will give credit to those who pay with Monopoly money.
Here, Zimbabwe for hyperventilators:
For example various currency’s have dropped so their only value is as a novelty item or physical object. But once it hits that point it’s value can’t continue to fall.
In my opinion, it's misleading to insist that the cause of hyperinflation is "printing" money and, never mention, that the real cause is the falling in the productive capacity of the economy.
For instance, the narrative about the Zimbabwe crisis is always the same: The government just went crazy and started to print money.
In my opinion, that's a totally dishonest narrative (and politically motivated maybe?), when what really happened is that they destroyed their main productive activity (agriculture).
>>"Similarly, hyper inflation requires the state to continue to exist."
Well, yes, of course, are you saying that the state stopping to exist would be a better alternative?
I would recommend you to read the below link. It doesn't seem to me that the problem was "printing too much money".
From http://bilbo.economicoutlook.net/blog/?p=3773 :
-Unemployment rose to 80 per cent or more and many of those employed scratch around for a part-time living.
-45 per cent of the food output capacity was destroyed.
-In 2007, there was a 57 percent decline in export mineral shipments (see Financial Gazette for various reports etc).
-Manufacturing output fell by 29 per cent in 2005, 18 per cent in 2006 and 28 per cent in 2007. In 2007, only 18.9 per cent of Zimbabwe’s industrial capacity was being used. This reflected a range of things including raw material shortages. But overall, the manufacturers blamed the central bank for stalling their access to foreign exchange which is needed to buy imported raw materials etc. The Reserve Bank of Zimbabwe is using foreign reserves to import food. So you see the causality chain – trash your domestic food supply and then have to rely on imported food, which in turn, squeezes importers of raw materials who cannot get access to foreign exchange. So not only has the agricultural capacity been destroyed, what manufacturing capacity the economy had is being barely utilised.
[1] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#Inf...
i.e. the Zimbabwe narrative should be: the government tried to dig itself out of a hole by printing money.
Similarly, the German government printed money in the 1920s to try to keep up with reparations payments which were larger than the economy could bear through taxation. (Though of course printing money is effectively a tax on savings, with the added effects of disruption to contracts.) And since the reparations were denominated in hard currency there were diminishing returns, as the government was printing ever-devaluing Papiermarks with which to buy Pounds Sterling and Francs.
Ok, I though we were talking about the final cause of inflation, not the mechanism, maybe you had something else in mind.
Now, if half of the productive economy disappear overnight, inflation is going to happen whatever the government do. You make it look like a government have an option in that situation.
If tomorrow morning half the fields and factories in the USA have magically disappear you will have inflation. In those circumstances, what sense would make to say that the "government is guilty because they printed too much money"?
Maybe you can tell me some example where something so catastrophic to the real productive economy happened like in Germany in the 20's or Zimbabwe and where inflation didn't happened.
Also of note hyperinflation does not occur with when the physical currency has high intrinsic value. Such as with the gold or silver standard meaning that any physical cause is insufficient on it’s own. Though a currency can and generally will be moved off of these standards in though economic situations.
So really the minimum requirements are fiat currency or a close equivalent allowing for significant money creation. Everything else is at best a trigger, but is not always repeated in every instance.
It a morbid thought, but perhaps this is because such a war may lower demand a significant amount by killing or impoverishing sufficient numbers of people.
In the German case, there was no massive damage to the economy; the war had been fought on the territories of France and Russia, and the only major disruption was a brief occupation of and general strike in the Rhineland, affecting maybe 10-20% of the German economy.
A last note: recessions are generally accompanied by deflation, though there the cause-and-effect relationship is complicated.
We agree. Inflation is caused by too much money chasing too few goods. That can happen because the money grows or the goods shrink. My point is that the historical episodes of hyperinflation are originated by the later.
>>"In the German case, there was no massive damage to the economy [..]"
From https://alphahistory.com/weimarrepublic/reparations/ :
"Berlin had failed to pay a £1 billion interim instalment, leading to the occupation of three industrial cities along the Rhine."
"In April the London meeting of the Commission fixed a final reparations figure of £6.6 billion. The reparations instalments were to be paid quarterly in gold or foreign exchange backed by gold, along with tradable commodities such as steel, raw iron or coal. Berlin was informed that any defaults on these payments would lead to the occupation of the industrial Ruhr region and the confiscation of raw materials and industrial equipment there. Though this revised amount was less than two-thirds the figure first proposed, it remained well beyond the capacity of the war-ravaged German economy"
I don't think hyperinflation could be avoided after that.
Inflation could have definitely been avoided by harsh taxation of the general population... but again, the government tried to dig itself out of the budgetary hole by printing money instead. (A budgetary hole exacerbated by the government promising to pay the salaries of workers on strike in the Rhineland.)
Yep, I keep Zimbabwe currency from around then as a reminder. I have a paper note for 1/2 a Zimbabwe dollar (aka 50 cents) and a few others printed less than two years later with amounts up to 100 TRILLION dollars.
Argentina is a serial defaulter, every decade or so it defaults on it's debt.
The next day creditors line up to give it money again.
It's hilarious.
https://ftalphaville.ft.com/2019/04/30/1556614127000/Why-inv...
I agree that state-level credit dynamics are unique, but playing like they don’t matter at all typically lands one into trouble.
Because in order to develop an industry you need investments and protection of the new industry until it's able to compete. Investment can't be only in your currency because you need to import things for the new industry. And protection is "discouraged" by those that are already developed (1).
(1)[pdf] - http://www.personal.ceu.hu/corliss/CDST_Course_Site/Readings...
Because if you are Argentina (a country with little industry and exports) and you get a debt in Dollars in order to be able to import, of course you can get in the situation where you have to default your debt in a foreign denominated currency.
At what rate? In what currency?
The creditors are also using Monopoly money.
Using the quantity theory of money as your model, how do you define the size of the money supply? Do you include or exclude government debt? It is a highly liquid financial asset, so maybe it should be included. Maybe not at par, but at some discount.
If it is included at par, then monetizing the debt (issuing new money and buying debt with it) [2] does not change the money supply. Here's the math: money supply is M + D (money + debt), and you monetize X dollars of debt, then the new money supply is (M + X) + (D - X), which is equal to M + D. Therefore, according to the model, we should not expect inflation.
Note that, in the US in the last 10 years, the Federal Reserve monetized trillions of dollars of debt [3]. Has there been hyperinflation, as you would claim?
[1] https://en.wikipedia.org/wiki/Quantity_theory_of_money
[2] https://en.wikipedia.org/wiki/Monetization#Debt_monetization
[3] https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1,_QE...
Intergovernmental debt is a geopolitical concern. The U.S. could freeze interest payments and redemptions to China. It could place those holdings in receivership and pass a law granting those oppressed by Beijing damages from it.
With international debt, the debtor holds the cards.
I think this sentence needs "if the debtor has equal or superior military capabilities". Some small country owing to the US certainly isn't in the same position.
Please point to a case where US attacked a defaulting debtor.
You can't, because using the military against a defaulting debtor is against UN law.
The fact of the matter is that military strength is what -internationally- decides who holds the cards.
Just look at how EU was forced to erase more than 50% of Greece's debt.
Or look at how US hedge funds are still fighting Argentina (in court) to recoup some of the money. According to your logic US should have threatened Argentina by now.
Greece is a member of the EU.
> Or look at how US hedge funds are still fighting Argentina (in court) to recoup some of the money.
Private interests aren't the nation's interests, until they are large enough or invest enough money into PR, see United Fruit Company.
It also doesn't mean that any and all questions of international diplomacy will be handled by the military. But if push comes to shove, and the country with the far superior military isn't happy with the conditions of the default (or nationalization, or annexation, or... anything, really), they tend to come down not to international contracts, the UN, or ethics, but to military strength. Consider the situation in Ukraine for a well-documented example that certainly would have played out very differently, were Ukraine and Russia similar in military strength (that is in this case: if Ukraine still was a nuclear power).
Show me an after WW2 example were one country used the military against another because of unpaid debt.
Gunboat diplomacy [1] features vibrantly in history. "The Venezuelan crisis of 1902–03," for example, "was a naval blockade imposed against Venezuela by the United Kingdom, Germany and Italy from December 1902 to February 1903, after President Cipriano Castro refused to pay foreign debts and damages suffered by European citizens in recent Venezuelan civil wars" [2].
Broadly speaking, the UN provides guidelines--not actual limits--to the anarchy that is geopolitics.
[1] https://en.wikipedia.org/wiki/Gunboat_diplomacy
[2] https://en.wikipedia.org/wiki/Venezuelan_crisis_of_1902–1903
>>If you owe them billions, it's their problem.
It is also entirely possible that if the US decides to actually make this (say) China's problem by overtly refusing to pay back the debt, everyone else who holds US Treasuries would start dumping them, driving demand lower and lower until both (US and China) the giant economies come crashing down.
That is, this may not a zero sum game. By which I mean, both countries could lose (and also end up taking the entire world economy down with them for at least a while).
That is to say, I think it would be a mistake to read much into this. The largest share of Federal debt is held domestically, really the lion’s share. China and Japan are generally within the trillion dollar range, and are always #1 and #2 foreign holders of US debt.
To your point the majority is held domestically but this does create pressure on the instruments at the margins and raises the cost of borrowing both now and over time. Some of that is being masked now by the flight of capital to safety, particularly domestically, over concerns of the same recession.
Less buyers of T-bills raises interest rates, which in turn raises the cost of borrowing money, which in turn pushes down equities. I doubt the Chinese could sell off their T-bills any faster without risking de-valuing their holdings. With that said, I doubt their holdings go up until this trade war ends, if ever, and this will prove problematic once the dust settles. A worst-case scenario for the US is higher interest rates [wiping out current bond investors] combined with lower equities [wiping out current stock investors]. This yields inflation and removes the levers of economic control from the federal reserve -- it could be devastating.
[1] (May) https://www.bloomberg.com/news/articles/2019-05-15/china-s-u...
[2] (June) https://www.bloomberg.com/news/articles/2019-06-17/china-cut...
[3] (July) https://www.scmp.com/business/companies/article/3018924/chin...
Long-term interest rates are lower now than in recorded history.
> flight of capital to safety, particularly domestically
Is there any evidence that domestic demand is stronger than foreign demand?
> over concerns of the same recession
Europe is much closer to recession than the US. Maybe they're the marginal buyers of US bonds and driving down rates?
German manufacturing just fell off a cliff. European banks are in crisis. European bonds have negative rates from 3 months to 30 years, while US bonds still have a positive yield. The dollar is strengthening.
> A worst-case scenario for the US is higher interest rates
This is a bizarre conclusion given dramatic and relentless reductions in US rates, and negative rates in Europe and Japan.
I'd say the worst-case scenario is if rates go negative in the US and policymakers lose the ability to stimulate in response to recession. Zero and negative rates push the pension crisis into catastrophe. Then US and global economies turn deflationary at the same time. Very difficult problem to fix.
It's based on past scenarios that have little to do with the current scenario. A common mistake even among economists. X thing happened in the 1960s or 1970s, therefore it will happen now. Their dogma is the same reason they are nearly all baffled by the lack of wage growth, productivity increases, dynamism, etc. in the economy.
There is no scenario where the US experiences rampant inflation (traditional consumer inflation) and soaring interest rates. The only guaranteed bet in fact, is on low interest rates 'forever' (or until default).
$35 trillion in debt * 3% = hahaha, very funny, stop kidding around!
Take the Japan scenario to the bank. The Fed is going to do everything in its power to pursue that route, as it's the only one left (short of the miracle of spending cuts with tax increases and spending locked to ~1% annual growth).
Makes sense, since the majority of their debt now has negative yields.
I think "wiping out" is grossly overstated, but setting that aside... why do you think this yields inflation and removes the levers of economic control from the federal reserve?
I have the opposite conclusion, but I'm not sure.
It seems to me that if rates are higher and stocks are lower, that should make both of those more appealing investments, which would cause more dollars to flow into financial assets. Which would continue the existing trend whereby the financial world soaks up the excess dollars and very little of it gets into the "real economy" where it would increase wages of workers and cause inflation.
The One Belt One Road contractors that are not Chinese want dollars. https://www.economist.com/business/2017/08/03/western-firms-...
They are using dollars to pay down dollar denominated debt.
https://www.axios.com/china-business-debt-trade-war-yuan-dol...
China’s Banks Are Running Out of Dollars
https://www.wsj.com/articles/chinas-banks-are-running-out-of...
But to contradict myself China has been buying a lot of gold https://markets.businessinsider.com/commodities/news/china-b.... But if they are buying it from Russia then they are probably partly paying in Yuan.
[1] https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
2 Of the foreign debt, Japan + China hold the lion’s share at about 40%, so definitely worry if you ever see those two aligning against us. It will be important for the US not to piss off Japan.
I'm not sure why you think it matters whether China or Europe is holding the debt.
That may matter to you as an individual but governments get to print money. It's like if I issued IOUs denominated in Steve's Funbucks that I'm the sole issuer of, and those IOU holders lived across the ocean and also I had half the world's armed forces at my disposal. Then when things went sideways I fired up the Epson and paid you off. As it turns out inflation is not directly connected to the issuance of new money, although it does contribute. Balancing a federal checkbook isn't the same as your home finances.
I'm not saying you should go to town and print a ton of money and that nothing would happen, I'm saying it can play a role and isn't directly equatable to small-scale finance.
(Edit) further, borrowing to create economic activity is not zero sum. If you borrow 100K and create a business worth $1M, and reap the tax returns, it doesn’t matter how much you owe. If I borrow $1T and create a $5T economy, I doubt the kids will mind. This is in part why the money supply increases over time — to reflect the new scope of the economy.
The only material risk of taking on debt is that you need to create returns in excess of your interest payments.
The government should on being the best administrator of markets possible. They should never be taking part unless there's a ton of evidence it'd be the best option compared to alternatives or simply a moral obligation, like health care and (more so in the past, before parcels) the postal service.
Otherwise they need to go away and focus on bettering and updating the regulatory and tax regime. Not "bringing jobs" or generating economic activity, or w/e else via directly putting money and management themselves. The former is the only way they can really improve the economy. By letting the millions of highly capable do what they are already doing, while efficiently dealing with externalities that the markets and courts can't handle.
It’s well worth asking but it is a completely different domain. From an Econ perspective this is pretty clear. Borrowing when things are cheap is more efficient than when they are expensive.
Also as a side note, you present lots of opinions as facts in your argument (even if they are opinions I might find agreeable).
Interest on the debt in 2019 is equal to about 60% of the much maligned defense budget, to put it in different terms.
Re: return on debt, that's really not a strong argument when you consider where the budget actually goes. About 75% of the 2019 budget goes to entitlements (of which the majority goes to retired persons who receive more in benefits than they ever paid in) and military, neither of which really seems like they're going to bring in significant returns to justify the debt.
Sure, there are probably some programs where this argument makes sense but my impression is that most large-spending proposals from progressives are more motivated by lofty idealism designed to motivate the voting base than policies where the cost of debt vs ROI is being carefully considered.
That said, irresponsible spending on Washington is definitely a bipartisan sport these days. And as an incumbent politician, why not? You reap the electoral benefits of lavish spending on the voting public, and neither you nor voters in general care much to think any longer-term than the next election cycle.
Logic tell us that there is not reason whatsoever for the only issuer of dollars defaulting in a debt denominated in dollars.
Alan Greenspan (ex-chairman of the federal reserve) will confirm it (video):
Are you saying that because of QE? If so I don't buy it. QE is an ongoing experiment. We'll see.
No, governments (unless Zimbabwean) don’t get to print money. They get to borrow money, and pay back previous loans with newly borrowed money.
Well, this is patently false on its head. The Treasury Department and Federal Reserve certainly print money.
>They get to borrow money, and pay back previous loans with newly borrowed money.
What? Money has to come from somewhere - you can't borrow a thing that has to be produced if no one can produce it. When you hear comments like "The world economy grew 3.1% in 2018" that's measuring monetary output - for it to grow new money plainly has to be created
You don't physically print much money these days, but what the US Federal Reserve, and other similar central banking systems in other countries do, is draft new liquefiable accounts (US Treasuries are a popular one and in line with the current discussion) that then adds them to existing reserves that the other banks have with the Fed - if the Fed buys a bond from a bank, it just credits the payment to the reserves that bank has at the Fed - it does not debit an equal amount from elsewhere. Then the banks themselves continue to print money - they only need to keep 10% of their deposits in reserve and can lend out the other 90%, of which ends up in other banks as deposits, which then only need to get 10% of that value, and can lend out the rest, etc. So if the Federal Reserve creates $100B in new assets and loans them out, the nominal monetary increase in the economy could be as high as $1T.
One of the fundamental pillars of the modern world economy is the fact that both central reserve banks and regular banks can print money. Without this the world economy looks almost entirely different.
If investors are willing to lend to the US for 30 years at 2%, doesn't seem like they see much risk of default.
And before you say “just buy EUR/gold/stocks” that just means someone else (the seller of EUR/stocks/gold) would now be in the above situation.
Buying US Treasuries for USD has little to do with absolute risk of the bond, and everything to do with the non-existence difference in risk between the bond (US Treasury) and the currency (USD) it’s denominated in.
So far.
Where are those debt repayments going? The majority go to US citizens. That's the point. Government debt are assets (read: wealth) to the owners of the bond.
It's astonishing to me how many times people fail to look at both sides of an economic transaction. It's like Ray Dalio talking about China weaponizing their treasury holdings yesterday. Yeah, China is going to "hurt" the US by selling bonds it bought for $1000 to someone else for $700. Who does that hurt again? Not the US; the debt repayment remains the same, no matter the holder.
>It's also going to get a lot worse if investors start to worry the US might default on its debts and demand higher yields on return.
You're missing a part of the logic here: interest rates are low because there is high demand for these instruments. It's easy to talk about some hypothetical scenario where people "demand" higher returns[1], but in reality, people the world over are lining up for US debt and many other investments that pay far less than treasuries (speculative equity, for example). Creditors don't get to choose their returns; they are at the mercy of those putting the capital to work.
[1] I'm sure you, as do I, want higher returns right now. How do you intend to demand this?
No, what excessive deficit spending does is generate an excess of financial assets that lay claim to the same pile of goods and services. This makes the financial assets less valuable, reducing the ability for current savers to trade their assets for today's real goods and services. This is through a combination of an increase in interest rates (reducing the value of bonds) or through outright inflation.
Another way of thinking about it: the supply of real goods and services is relatively fixed, so what happens when the government consumes more today? Somehow this needs to reduce the real goods and services consumed by society, and that can only happen in a few ways: involuntarily through taxation, involuntarily through loss of purchasing power due to inflation, or voluntarily through selling more attractive financial assets.
On my side, I have evidence like the global population doubling while poverty plummeted.
There's still lots of people without enough to eat, but 30 or 40 years ago was a completely different story, it was much worse.
$22T - Total Federal securities outstanding
$9T - Federal Reserve and Government accounts + State and local governments including pension funds
$2T - Mutual funds
$2T - Depository institutions, private pension funds, insurance companies.
$3T - Other domestic investors. Includes individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors
$6T - Foreign and international
It means China is dumping US debt. Which will mean a surge in interest rates, a weaker US dollar, and in a nightmare scenario, hyperinflation.
But then again, the popular wisdom seems to be that a weak currency supports exports. So I don't know that this is clearly a bad thing. Hyperinflation I would peg to be usually caused by a break down of the domestic market.
This is really only slightly simplified as they wouldn't use Robinhood, but they could. Convenience improvements work for all market participants.
Synonyms to save you time understanding this market:
Government bonds = sovereign debt = (when US federal bonds are the context) US treasuries aka US treasury bonds
Fixed income = the market of bonds = credit markets
Junk = not "investment grade" bonds = high yield, but doesn't mean "junk, bad investments"
The U.S. government issues several varieties of securities, informally referred to as "Treasuries." Substantially anyone can own one; you can buy one directly from the US yourself (treasurydirect.com) or from any of a host of financial institutions, which both hold them for their own account and resell them routinely.
Because the US is so central to the international economy and so good a credit risk, there is an active market and infrastructure for holding Treasuries substantially everywhere. How good credit is the US government? Well, for a variety of purposes it is useful to have the notion of a "risk-free rate of return", and whatever the US is paying on treasuries is assumed to be that rate. (This is assumed to be risk-free because the US knows that default on treasuries would be cataclysmic and would do anything to stop it, and one of their options is creating more money and using it to repay treasuries as they come do, which has consequences but is not a default.)
Governments routinely hold debt securities of each other. This gets complicated, because the thing you think of as "the Japanese government" is both a) distinct from other things you might think of when you think of Japan and b) actually comprised of thousands of units that could in principle beneficially own a treasury, but the overwhelmingly most likely one by dollar weighting is the Bank of Japan as opposed to e.g. Ogaki City Hall (which could purchase a treasury on any Tuesday from anyone presently owning them, which includes every financial institution Ogaki City Hall has an account with).
The Bank of Japan does not purchase most of its Treasuries on the secondary market; they get originally issued Treasuries at auction. The Treasury runs auctions regularly: https://www.treasury.gov/resource-center/data-chart-center/q... Governments and very large financial institutions, the kind which make transactions denominated in billions of dollars, participate in the auction; the Treasury awards the newly created securities to the bidders with the most competitive (cheapest for the US) bids.
After the securities are issued and released onto the market via the auction, they are tradeable. The secondary market (technically, MANY secondary markets) for treasuries is the most liquid market for any security in the world. Large institutions, small institutions, etc etc buy and sell billions all day every day.
As it gets farther from J.P. Morgan Chase and closer to e.g. individual HNers, it is more likely that a retail investor is purchasing a Treasury either not-terribly-competitively from whomever they hold an account with and/or they're purchasing financial services from an intermediary who owns a lot of treasuries themselves either directly on the behalf of their account holders or indirectly. For example, a mutual fund could easily have hundreds of millions (all beneficially owned by fund holders), or a bank might be paying interest on their checking accounts while keeping a substantial amount of treasuries on the bank's own account. (The checking account holder doesn't have direct exposure to the treasuries.)
Make sense?
Seriously though, that was a great explanation.
>The short answer is that the "misspelling" is on purpose, done to differentiate Treasury bonds from the plural for the Department of Treasury, though I'm not sure why you'd ever need to pluralize that. In any event, a number of business news organizations, including CNBC, use the "Treasurys" spelling.
Brawndo: it's what plants crave.
So if it's done on purpose, that's even more idiotic.
Some other reasons for the alternative spelling:
In many style guides, proper nouns ending in -y are pluralized as -ys, not as -ies. For example, Casey plural would be Caseys, not Casies. Treasury, referring to the type of institution is not on its own a proper noun, but "Treasury", the name of the security emitted by the US Treasury, might be.
Another reason for the alternative spelling is in financial settings, the plural of Treasury (notes, bonds, etc.) is abbreviated as Tsys. Treasurys is a reasonable "backronym" for that.
Is? No.
"treasuries" is the long-accepted spelling here.