Two items worth noting today:
First, last month, I wrote a piece for Marketwatch.com noting that, despite the strengthening chorus of international criticism protesting the dollar’s domination of the global financial system, even the countries protesting loudest keep buying dollars.
That article was based on Treasury Department data that brought the story up until May. Yesterday, the June data were published – and the trend I described is still firmly in place.
Total foreign holdings of long-term U.S. Treasury securities rose 0.61 percent over their May levels. In May, they were only 0.26 percent higher than in April. Foreign government holdings of this U.S. debt most directly reflect official foreign views of the dollar’s role, and represent about two-thirds of all foreign dollar holdings. These increased by 0.39 percent on month in June – slower than their 0.61 percent May monthly increase, but hardly a sign of significant dissatisfaction.
As for the countries complaining most vociferously, France did sell off 3.52 percent of its Treasury holdings in June. But they’re still up 9.74 percent since January. The BRICS countries (Brazil, Russia, India, China, and South Africa) say they’re so unhappy with the dollar’s “hegemony” that they’ve created their own development bank. But three of the five bought dollars on net in June – even Russia. China, by the far the largest BRICS dollar holder, appears to have sold off 0.20 percent of its holdings.
As is so often the case, however, appearances may be deceiving when it comes to China. Benn Steil of the Council on Foreign Relations has recently presented compelling evidence that Beijing’s avid dollar buying – which importantly helps keep down the yuan’s value versus the dollar and in turn China’s export prices – remains strong. But according to Steil, the data indicate that, to avoid undue U.S. criticism of this protectionist currency manipulation, the Chinese are disguising their dollar buying by sending its new holdings to Belgium.
Our second follow up item: On July 21, I published an item on the news that GE was reported to be exploring the sale of its appliances division. This divestiture would matter big time because, as I noted, GE appliance-making was portrayed in a recent Atlantic cover story as the poster-child for the renaissance allegedly being enjoyed by U.S. domestic manufacturing. Indeed, one of President Obama’s leading manufacturing policy aides made a high profile visit to the company’s main appliance production complex in Louisville, Kentucky in February, 2011.
On Thursday, GE confirmed reports of its desire to unload appliances, listing Swedish white goods powerhouse Electrolux as one possible buyer. Especially significant for manufacturing renaissance claims – a Washington Post reporter’s observation that “The appliances division in particular has grown less profitable as foreign appliance makers command a growing share of the U.S. market .” With renaissances like this, who needs industrial decline?