Japan, China to keep buying U.S. debt despite downgrade

Japan is really letting me down here. Over a trillion dollars in reserve and they still buy US junk debt.

May be i stupid, but why Japan buy US debt after 11.04?

@jeff, are you living in Japan and paid in $$? Hope not.

The US $ may keep going down in value for a while. I am not surprised if it goes to 56 yen to dollar.

One way the U.S. can reduce its debt is by letting the value of the dollar decline. When foreign governments demand repayment of the face value of the Treasury bond, it will be worth less in their own currency if the dollar's value is lower.

@sfjp330, that's the plan!

No, I'm living in America and paid in dollars. I preserve and increase my purchasing power by buying physical gold and silver.

@jeff, Oh, good.

Not a good thing, its like buying toiletpaper.

"...they still buy US junk debt."

"... its like buying toiletpaper."

Silly comments.

Is this PhD. 101?

If you are American, then you own more of the debt than all of the other countries combined. They won squat.

Look at the numbers. We guarantee our debts, and every govt. knows that.

The S and P has made lots of other mistakes in the past too. Look it up. They should not be playing politics, but just shuffling numbers.

Thanks Paul, Agreed

For some in this world, the USD is like or worse than toilet paper and for many others in the 3rd world etc..the USD is like gold, even now, so it just really depends in which country you live in, right??

@JapanGal, you paid 120 yen to buy $1 treasury, and we only have to pay 56 yen back to you in 10 yrs from now. FYI

We are talking about the #1 economy in the world, sitting a long gap away from #2. Do you really expect the world to just drop the US or ignore that kind of economic power? Or for that matter to forget that much of the buying going on world wide is done in the US?

China and Japan both understand that no sales to the US means near death for their home economies. We are all interlinked now and so buying debt will continue.

It is utter unrealistic nonsense to expect otherwise. Good or bad, this is the global economic reality.

Agreed tkoind2

@global.

What? English 101 please.

The USA really stinks right now due in most part to the Obama Regime.

Still better than the rest of the world ten to one thousand over depending on country of comparison.

Sure, China's economy is growing, for example, but would you actually want to live there (permanently)?

China and Japan both understand that no sales to the US means near death for their home economies. We are all interlinked now and so buying debt will continue.

@ikoind2, you are absolutely correct.

We have sent T. Geithner, Hillary Clinton, President Obama and J. Baiden (8/23) to China to negotiate Chinese currency issue in the past. As a matter of fact, G7, G20 have also tried to see if China could go to a currency floating system. Our attempts all failed.

Meantime, China is not exporting the rare earth to Japan and US.

China is exporting unemployment to the world, and US is exporting inflation to China.

Japan is in middle of two countries doing a tag of war.

@legs, whatever... It is your money.I am not here to give you a free lecture of ECON 101.

@Mexicano, you are correct. It is called an Arbititrage in ECON 101.

Definition: An arbitrage opportunity is the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.

"By the way, the ratings agency is Standard & Poor's. Who's going to listen to a company whose name translates to Average & Below Average?" - Jon Stewart

cactusJack, I love your post. You made my day! Thanks.

How is my post "silly"? America has over $52 trillion in total debt and $115 trillion in unfunded liabilities. American debt and America in general is not a good investment.

How can Japan or China sell anything to the US? Most Americans are going to end up becoming dirt poor when hyperinflation occurs.

@jeff, yep, I agree with you there. We will see hyperinflation on horizon.

anybody hoping for stronger dollar in a near future is an obvious day-dreamer. not during obama's day.

Jeffrey Duelley

How can Japan or China sell anything to the US?

the article mentioned that they don't have other choice. current monetary system means if USD falls, they will fall as well.

To those blaming Obama. I am sorry but that is also utter nonsense. The state of the US economy did not get there in just the last couple years. It got there in the years since the Clinton administration and was largely driven by a long history of de-regulation and lack of oversight over banks. Long before Obama was even in politics.

Combine that with the post Lehman shock and the collapes in global economics and you have a real picture of where we are today.

As for fixing it. The partisanship in US politics has rendered the government essentially useless. Not much better than our friends here in Japan. Congress especially in their inability to get anything done due to nonsense and idiotic political posturing.

I am not DEM or a GOP supporter. Both parties have failed America and her working people.

for those backing obama, it is just a plain track record that he wouldn't do any radical measure to reverse the effect. or maybe he isn't capable to do it.

of course it started years before obama (nobody said it started yesterday) but obama wouldn't resolve it.

for whoever dislike my comment, FYI I did it rationally.

"Until the U.S. reins in its trade and budget deficits, there's no reason to believe that the dollar will strengthen significantly." Roger Ibbotson, Ph.D. Professor of finance at the Yale School of Management

"Until the U.S. reins in its trade and budget deficits, there's no reason to believe that the dollar will strengthen significantly." Roger Ibbotson, Ph.D. Professor of finance at the Yale School of Management

Thanks, Mike! So, substitute "Japan" - whose budget deficit and debt far surpass the US - for "the US" and the same logic still stands?

A weaker dollar helps exporters; that is all there is too it. Those who say the US is weakening its currency to cut bond payments are off the mark: for the Treasury, $100 is $100, regardless of any exchange rate. Inflation can cut into the debt as the borrowed money is offset by higher income, but exchange rate fluctuations have no effect whatsoever.

@michael, you are right on!

US, French, Italy and Japan cannot get out the heavy burden either. We are all in a deep trouble together unless we are willing to make a big sacrifice..

A weaker dollar helps exporters...

Not only that, it helps producers operating in America displace imports, perhaps a more important distinction. For Japan, China and other creditor countries, realizing a healthy America is of mutual interest; this will happen when American businesses begin hiring again and workers have money to spend. To that end, China should allow its exchange rate to drift upward, not radically but irrevocably.

Postwar economic superiority has left some in America with the illusion that the country was somehow "special;" this is obviously not the case, and a convergence between American and living standards and those of comparable (democratic, capitalist, industrialized) countries was inevitable. The unfortunate fact is that the US squandered the first decade of the 21st century hunting ghosts in Middle East deserts instead of preparing itself, but it is not too late. The hard work starts now.

@Laguna, the hard work must starts now, but nobody want to give up anything that they already have. That's a big problem. It is easier to say than done.... Well... I am ready to give up some.

@laguna, $100 is $100 if you are living and investing in US, but not so for foreign investors including China and Japan.

PIMCO is a middle man for US Treasuries. They receive Japanese yen from Japanese investors and banks, then exchange it to dollar to buy US treasuries. When they are all matured,the dollar goes back to PIMCO, then exchanged to Yen to Japanese investors and banks.

$100 is $100 if you are living and investing in US, but not so for foreign investors including China and Japan.

That is very true, but that is their problem, not that of the US. It doesn't matter to the US Treasury whether the yen/dollar exchange rate is 300/1 or 50/1 - the same dollars need to be paid out.

My point is that the US would gain nothing in debt payment advantage by weakening its currency.

We are talking about the #1 economy in the world, sitting a long gap away from #2. Do you really expect the world to just drop the US or ignore that kind of economic power? Or for that matter to forget that much of the buying going on world wide is done in the US?

Too Big to Fail.

Too Big to Fail.

I am sure the old Greek, Roman, Byzantine, British, ... empires felt the same. ;)

of cause weakening of dollar is disadvantage to the debt payment. but it really help exporters to compete at global level yada yada.. so i think there is also a point there. of course US can't find single solution for all the problems but seems like US decided on it.

i think anybody could easily recall the time when US fiercely attempted to pull up under-valued chinese yuan. yes, chinese are stubborn, so no. what happen next for US? dollar falls. the big picture.

chinese are stubborn, so no. what happen next for US? dollar falls. the big picture

Hyperinflation on horizon.