Russia buys up big on U.S. Treasuries, despite longer term doubts
Published: 04 March, 2009, 10:49
Russia has become the 5th largest U.S. creditor, after upping its investment in U.S. Treasury bills to more than $116 Billion. But the deteriorating economic situation in the U.S may is leading to longer term concerns.
The main problem is that an increasing debt will result in higher interest payments making less money available for socioeconomic development. To pay for the debt, the Government will have to raise taxes, which will reduce the competitive position of US in a global economy and chase investors away resulting in less economic activities and more job loss. Med Yones, global economic expert, calls it a vicious economic cycle. Details can be found at http://www.iim-edu.org/u.s.economyrisks/index.htm
Buying US Treasuries does not have any sense. The US will not be able to repay foreign debt. The advice US investors are getting now is to take their wealth out of dollars and out of the country. Russia would be better off by investing more in its own country.