This national debt issue is mostly overstated. ..
The Federal Reserve also forgives interest payments on certain US Gov't debt (in theory, the FED is owned by the U.S.A), but this is more difficult to quantify. Paging
@unk45 for insights.
In reality, it's interest payments on Foreign Debt that is the main issue. I think that also resolves to a '
Balance of Trade' issue,,,
It'll be fine...
...
Not so fast, please. I'll skip most of the details, but if anybody wants a monetary policy primer I can make another thread on the subject. (my primary background on this subject stems form being a graduate student with seminar leader Scott E Pardee, Secretary of the FOMC at the time and later working with FOMC staffers on US Treasury open market operations). This response will also explain why Tesla will navigate all this with minimal risk.
The rare logical error for
@Artful Dodger is that he's posted about 'stock' rather than 'flow'.
In order:
1. Social Security is a huge holder, but shrinking as boomers retire, pre-boomers live longer, and the present workforce is shrinking proportionately. This problem is in many countries so retirement ages are rising and eligibility tightening worldwide. Not enough:
Social Security Administration Research, Statistics, and Policy Analysis
www.ssa.gov
2. China has been the largest buyer but now they are reducing US Treasuries. They are a net seller and have been for a while:
The amount of U.S. Treasury securities held by China fell by $1 trillion, according to data released late on Monday.
www.marketwatch.com
3. I'll not list more of the 'flow' problems, but here is the source that is definitive about the challenges:
Check out @FiscalService Fiscal Data’s new national debt page! #NationalDebt
fiscaldata.treasury.gov
4. So, why don't we see rapid rises in US Treasury yield this year:
Answering that accurately requires fairly deep analysis of buyers and sellers. The simplistic answer is that globally at the moment the US$ is less unattractive than are other options. That is what the idiot newspapers call, nationalistically, a 'flight to quality'. As it stands today more global trade is moving from US$ to CNY and Euro as well as various national currencies.
As this is developing the US$ global reserve position is falling, but still is dominant:
blog-dollar-dominance-and-the-rise-of-nontraditional-reserve-currencies
All of this makes clear that the US deficit problem is very serious and has been seriously neglected since the Clinton administration. This is not a crisis today but it soon will be. Why?
The IMF article pinpoints part fo the issue the issue succinctly, and as they always do, mildly.
1. Russia now is placing new reserves in CNY;
2. While China is steadily selling US Treasuries in small, for them, quantities;
3. The entire Eurozone is right now in serious deficit, Germany included.
4. With all that happening the US treasuries are getting a larger share of many countries national reserves;
5. So, the immediate problems dominate almost everyone, everywhere, and the auctions are fine so...
6. The only large clue that all is not well is the Fed tightening. Many people say Powell and the Board are incompetent. That is False. To those who are paying attention to detail they're being quite cautious.
Finally, much of this couples with commodity prices, transportation costs and logistic issues.
In y opinion, Elon Musk is one of very few major industrialists who actually understand all that and looks very hard at details. Everything I just posted is ignored by most people. Not Elon, not Zach. That, in turn is one key reason Tesla is now effectively debt free except for securitizations that give more liquidity at low cost and lower risk.
Just to clarify, when Elon Musk and his two partners formed x.com in 1999 they benefitted fro work done by Bank of Nova Scotia (Harris Fricker and Elon Musk met while entering at BMS). They, locally situated with SRI International (Stanford Research Institute) which had helped launch non-bank banks, and BNS was an SRI customer. The two learned US bank regulation and Federal Reserve functions very deeply. x.com was a non-bank bank. (anybody who wants more on that subject just PM me). Practically, liquidity management and funding were the two crucial requirements to launch a non-bank bank. The weaker the applicant the high the necessity for superb command of the subject. They( Elon and Greg Khouri )had only Zip-2 proceeds from sale to Compaq. Elon mastered all the principles ell enough to sail through Fed approval. At the time, IIRC, they were the only recipients of such a charter that had no corporate backing. FDIC insurance came with the package. This si not really a digression because Elon's Twitter plans, if they happened, were intended to form the base for a 2023 version. As a result of that interest Elon could write a PhD dissertation in liquidity management, bringing that knowledge to all his later ventures.
I know some of us talk about this rather than only about manufacturing, distribution and cash conversion cycles. Those are fundamental and Tesla is demonstrably superb at those.
We need to realize that, as some like
@The Accountant for example, repeatedly focus on liquidity. Another equally important issue is that Tesla is rapidly moving to reduce the risk of disruption of any single factory, market, component or material. That is also mitigating FX risks without engaging in expensive hedging in open markets.
[I'm serious about the monetary policy primer, but I'll need a bit of time to gather information and translate all the jargon.]
$83.22 → $78.80
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€76.47 → €90.50
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$120.59 → $135.18
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$128.38 → $154.04
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electrek.co
