Russia Dumping US Treasuries? But Why the Heck in Belgium?

Russia Dumping US Treasuries? But Why the Heck in Belgium? (Testosterone Pit, May 15, 2014):

Belgium is known for its surprises. For example, it got by amazingly well for a couple of years without a national government, and without breaking apart, to the endless chagrin of a lot of people. And it has a great variety of delicious beers, which I amply tested during the three years I was there. But now, that tiny country with a tiny economy is suddenly piling up a mountain of US Treasuries.

In March, according to new data from the US Treasury Department, it added another $40.2 billion to its existing mountain of Treasuries, now at the dizzying height of $381.4 billion, or 79% of GDP!

It put the country in third place, behind the second and third largest economies in the world, export machine China ($1.27 trillion) and former export machine, now money-printer Japan ($1.20 trillion). From August last year, Treasury holdings in Belgium have ballooned by 129%!

US-Treasuries-held-in-Belgium-03-2014

What the heck is going on?

Booming dollar-denominated exports of abbey beers and stinky cheeses and other products? Sure, they might have edged up a notch. But their impact on Treasury holdings, if any, would be minuscule. Belgium is not a country where something suddenly takes off. Compromises have to be negotiated according to the rules of Belgian finesse. People go on long vacations, and things come to a halt. The formidable bureaucracy – which didn’t go away just because they didn’t have a national government – has to be bored through with superhuman effort, as I found out. No, this surge in Treasuries isn’t caused by anything in the economy.

Leaves another option: Someone is moving billions of Treasuries around. There have been some mind-boggling movements. The Fed’s leger of Foreign Official Accounts hit a record of $3.02 trillion on December 18. Up over 150% in six years. Yup, the deficits binge of the Federal government, funded in part by foreign entities. But then it fell, and in the week of March 5, it plunged by a panicky $104.5 billion. At the time, the Ukrainian situation was elegantly turning into a fiasco. Western governments bandied threats of sanctions against Russia. Then some of those Treasuries rematerialized, only to de-materialize once again. This is what the weekly trail of sudden volatility looks like:

US-treasuries-held-in-custody-at Fed-foreign-accounts-05-2014

We were left to our own devices, trying to cut through official fog and speculating about this pile of Treasuries. But today, Treasury International Capital (TIC) System published the March data. Now we know – instead of just speculating – who was panicking: Russia.

Treasuries held by Russia have plunged by nearly $50 billion between October and March. One third. Over half of the plunge came in March ($26 billion) when the sanction spiral was launched. TIC Data for April won’t be available until June. Given what’s going on with Treasuries held by foreign entities (above chart), Russia’s holdings in April are likely to have continued their plunge. Is Russia – worried about having its US Treasuries frozen – dumping them until they’re down to zero?

US-Treasuries-held-by-Russia-03-2014

Clearly, President Vladimir Putin has had it with the US.

But why is Russia’s dumping of Treasuries not taking down the Treasury market? Treasuries have been strong over the period. So it seems Russia is actually not dumping them, or at least not that fast. It’s just moving them out of reach of the long arm of the US government, and it’s sending them to safer shores. Namely Belgium.

Belgium is a major financial center and transit point for all kinds of assets, via a massive outfit, Euroclear, headquartered in Brussels. It holds $33 trillion in assets, as it says, for over 2,000 global and local custodians, broker dealers, central banks, commercial and investment banks, investment managers, and supranational organizations in more than 90 countries. Every year, it settles over $780 trillion (with a “T”) in securities transactions for its clients. Or 1,177 times the GDP of Belgium (which makes you wonder about the Big Bang if Euroclear ever sneezes).

Moving Russia’s holdings of US Treasuries is no big deal for Euroclear. It would simply become the custodian of Russia’s holdings; so officially, they’d be held by Belgium. Then Euroclear would mingle them with other Treasuries and transfer the whole schmear under its own name back to the Fed. Being officially held by Belgium, they’d be beyond the reach of the American government. Neither Congress nor the Administration, which have been wildly but ineffectually flailing their arms about imposing more sanctions, could credibly threaten to freeze these Treasuries. And Putin is grinning off-screen.

The sanction spiral has turned into a battle between the US and France months ago, but now it has come to a head: the French government decided to spite the US and move forward with a contract to deliver two advanced warships to Russia. To heck with those silly sanctions. Read…France Thumbs Nose at Obama Over Sanctions: Will Deliver Two Warships to Russia

1 thought on “Russia Dumping US Treasuries? But Why the Heck in Belgium?

  1. In this world of corruption, with no regulations on who does what with their money if they are rich enough is intolerable………Russia might well be getting rid of US treasuries as obliquely as possible……..there are some big players here, not least of all, Putin. This is why a few people should never be allowed to amass such huge sums of money ever again, they can literally take a nation down…..and that hurts millions of people. How much is enough? Nobody needs a billion dollars.

    Foreign Investment in US treasuries has been dropping like a stone. Most of the investments are currently made by the FED……the FED has been carrying more than 80% of US debt…..keeping the national debt current. But, the FED isn’t national, it is a private bank, so Americans cannot trust it.

    There is one way to work it out…..a real audit. Yet, as corrupt as the system has become, such a process would probably be rigged and dishonest.

    Russia is vying for world power. The US is trying to wage a war with them (any war) to keep them from taking over world leadership status. Russia has China in their corner, the EU depends too much on Russian gas and the Russians provide about E120 Billion a year to the EU……so they are not going to knock that down. The US is facing the loss of world leadership and being the world reserve currency……..such currency is no longer needed thanks to electronic currency.

    All I can say is that there is a lot that isn’t being revealed. The FED got rid of the law revealing how much they borrow from public eyes over 30 years ago. So, there is no way to get an honest revelation.

    We have too many billionaires, and way too many poor by comparison. They intend to take over the world, and run it with them in charge, and the majority of the world at their beck and call.

    Back to the Feudal days?…….But, today’s people are not feudal, and they are used to better, and it won’t work.
    Also, the radioactive poisons pouring out of Japan cannot be stopped, and we are facing an era of hunger and shortage of safe food and water such as we have never seen. All birds, small animals, and animals we used to hunt will no longer survive.

    In the Feudal days, people didn’t have to worry about plutonium or cesium in their food, water, air, crops………the billionaires are not going to do any better than anyone else; radiation kills all. It is invisible, and there is so much of it lying around all over the globe, that it is terrifying to the ones who think.

    I have read there are underground bunkers being built for greedy guts, they can live under ground, complete with indoor pools. We are not geared to such a life, man needs the sun, and it will fail.

    War? How will man fight his wars underground? Man has never lived without wars….it is part of his makeup.
    It is absurd that could be changed.

    As a species, we are about finished, joining the 98% who have become extinct before us. All I can say is that I have often pondered what caused civilizations to vanish seemingly overnight, never dreamed I would see the end of one myself……I see it clearly now.

    I never dreamed I would see the end of a civilization happen so quickly. This is why people of the future should never allow folks to amass huge sums of money such as they have now. As it stands, one billionaire could be parking money in Belgium to dump US treasuries……and no one person should have such rights. It is wrong on too many levels; so many folks will lose all thanks to their greed.

    Why are we so destructive as a species? I don’t know, I just know man cannot live without war. It won’t take long to devise ways to wage war underground…….and it will kill all of them.

    I won’t be alive for the last days of this civilization, a rare spinal disease kindly removes me from the worst……and I now see it as a gift. But, I also think smart people will be looking for ways to escape before the bitter end is upon us…….the fearful, greedy ones will stay to the last second. Watch what is coming out of the Pacific Ocean, it seems to provide the most accurate forecast, and what is showing up is terrifying.

    I see no answer for this that ends well for anyone.

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