debt, the story

if you didn't know, the treasury department keeps an (occasionally) updated list of who we've mortgaged our future to, and it what amount. who are the shylocks to whom our flesh is hocked? the top five is rounded out first by china, japan, and the united kingdom, but becomes a little hazier at 'carib banking centers' and 'oil exporters'. what's most interesting to note is that china's share has begun growing exponentially since june of last year: after hovering around five-hundred billion since january it hit six-hundred and fifty billion in october. that's a change of 30%, the second fastest debt-acquisition among any of our major creditors (more on the first, later). i'm not prepared to jump on the bandwagon with all the other fear mongerers (i don't want a cold war with china) and point out that the chinese now have our balls in a vice. as was pointed out earlier, our relationship is, at least for the time being, somewhat mutual--if, of course, you consider nothing to be as important as clobbering prices on low-value consumer goods. as the washington post pointed out last september, however, there are some serious considerations that deserve to be highlighted in allowing an economy with the features of china's to be in the position of primary creditor. the first is that it will be the real death knell of american industry. with the chinese buying up 10% of our securities (or more; the treasury department has apparently forgotten to provide statistics past october, when, not inconveniently, we really started to rattle our tin cup) they're converting massive amounts of yuan into us dollars. in other words, demand is exploding, and the dollar, as we've seen these past few months, is gaining serious strength. that's great for a guy like me, one who's lost in the wilderness of the outlands, but for exporters in america it is absolutely crushing. we've spent decades bemoaning the pressure on prices from international competition, and especially the competition offered by china's vast industrial enterprise, and now we are taking on trillions of dollars in obligations with no forseeable means of paying it back. that means that we're directly lowering our competitive advantage against china, and, by doing so, cutting ourselves off from the means to a real, wealth-generating recovery: a productive one.

the rest of my analysis with regards china is purely speculative, and will need a serious addition to the dataset, both chinese and american, to have any relevance. i do want to draw attention to number four on the debtor list, the enigmatic 'caribbean banking centers'. while the other creditors (minus china) have maintained a constant dollar total of debt, these banks have added 119.5 billion to their share, an increase of more than 100% since january of 2008. this is where the financial crisis gets really tricky, folks. the location of these banks is clearly irrelevant; the caribbean is, as is well known, a laundromat for cash, with major depositors from asia and the middle east. it's the fact that these creditors are anonymous which should worry us. caribbean banks operate on a minimum disclosure policy, a policy which is their primary appeal. at this point, what looks set to be our third most-important source of financing in the future is a hodgepodge collection of semi-legal entities funneling money from anonymous private interests in some very unsavory places. does that seem like a recipe for disaster to anyone else?