[Marxism] China's holdings of US Debt

S. Artesian sartesian at earthlink.net
Tue Mar 3 07:28:50 MST 2009


Exactly.  But the reserves held by a central bank are reserves held by a 
bank that functions essentially as a bank, as THE bank to and of OTHER 
bankers.

So what are the origins of the reserves held by China's central bank?  What 
are the origins of the reserves that are used by all the banks to purchase 
US debt instruments?   What are the origins of the dollars that are used in 
the purchases?

Profits and cash reserves deposited by trading companies, manufacturers, 
subsidiaries of multinationals make up some portion of those reserves in 
those banks,  and the bankers, if the central bank in China functions as 
most central banks do, are obligated to assign a portion of all deposits to 
the central bank as a sort of minimum capital requirement.  Both the member 
and the central banks need to maintain a high degree of liquidity with these 
deposits in order to meet depositor demands for access to the currency for 
international transactions, trading, purchasing, tax payments etc.

I believe it is a mistake to simply, and immediately, identify these "demand 
deposits" as somehow "belonging"  to the Chinese govt.

No doubt,  no doubt whatsoever, that if the US for example had not stepped 
in to guarantee the GSE debt of FNMA and FMAC, the Chinese banks would have 
howled to the central bank, the central bank would have howled to its own 
government and directly AT the US govt., but I do not believe that the 
potential for howling gives China economic leverage over the US.  I think if 
the US hadn't stepped in... well, looked what happened after Lehman Bros was 
allowed to sink......

My point is NOT that the US is in great shape, just as it has never been 
that China will replace the US-- but rather that the shape the US is in is 
indicative, more than indicative, determining, of the shape of the whole 
network of international capitalism, and if the money is the universal 
equivalent, then the US and its monetary instruments represent the black 
hole in this universe, quite capable of sucking everything and everyone into 
its deadstar gravity.

The international framework of exchanges may fray-- more than may--  
absolutely will fray, with protectionism etc. growing; alliance will 
collapse-- I don't things look particularly good for the EU, but these 
things, all of them will occur to capitalism as a system and not because an 
imbalance in one sector is going to shove aside an old player to make way 
for a new player.

Anyway, I really am compelled to induce part of this analysis as I can't get 
hold of any sold numbers of cash assets held by multinationals in China--  
but I think it makes sense.  Of course, I would say that, wouldn't I?


----- Original Message ----- 
From: "Lüko Willms" <lueko.willms at t-online.de>
To: <sartesian at earthlink.net>
Sent: Tuesday, March 03, 2009 8:47 AM
Subject: Re: [Marxism] China's holdings of US Debt


On Tue, 3 Mar 2009 05:20:35 -0500, S. Artesian wrote:

> The basis of my contention is trade volumes between US-China, EU-China,
> Japan-China, and that the size of the reserves are too large to be
> exclusively "official" govt revenues, i.e. taxes, fees, licenses,
> import/export duties.

   The reserves held by the central bank are not just based on government
revenues, on the contrary. What before was gold, is now the USD, mainly in
the form of US government bonds.






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