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timosman
04-16-2016, 09:06 AM
http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html


APRIL 15, 2016


WASHINGTON — Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated. In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot.

“It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation.

President Obama will arrive in Riyadh on Wednesday for meetings with King Salman and other Saudi officials. It is unclear whether the dispute over the Sept. 11 legislation will be on the agenda for the talks.

A spokesman for the Saudi Embassy did not respond to a message seeking comment.

Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.” But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role. Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot.

Those conclusions, contained in 28 pages of the report, still have not been released publicly.

The dispute comes as bipartisan criticism is growing in Congress about Washington’s alliance with Saudi Arabia, for decades a crucial American ally in the Middle East and half of a partnership that once received little scrutiny from lawmakers. Last week, two senators introduced a resolution that would put restrictions on American arms sales to Saudi Arabia, which have expanded during the Obama administration.

Families of the Sept. 11 victims have used the courts to try to hold members of the Saudi royal family, Saudi banks and charities liable because of what the plaintiffs charged was Saudi financial support for terrorism. These efforts have largely been stymied, in part because of a 1976 law that gives foreign nations some immunity from lawsuits in American courts.

The Senate bill is intended to make clear that the immunity given to foreign nations under the law should not apply in cases where nations are found culpable for terrorist attacks that kill Americans on United States soil. If the bill were to pass both houses of Congress and be signed by the president, it could clear a path for the role of the Saudi government to be examined in the Sept. 11 lawsuits.

Obama administration officials counter that weakening the sovereign immunity provisions would put the American government, along with its citizens and corporations, in legal risk abroad because other nations might retaliate with their own legislation. Secretary of State John Kerry told a Senate panel in February that the bill, in its current form, would “expose the United States of America to lawsuits and take away our sovereign immunity and create a terrible precedent.”

The bill’s sponsors have said that the legislation is purposely drawn very narrowly — involving only attacks on American soil — to reduce the prospect that other nations might try to fight back.

In a closed-door briefing on Capitol Hill on March 4, Anne W. Patterson, an assistant secretary of state, and Andrew Exum, a top Pentagon official on Middle East policy, told staff members of the Senate Armed Services Committee that American troops and civilians could be in legal jeopardy if other nations decide to retaliate and strip Americans of immunity abroad. They also discussed the Saudi threats specifically, laying out the impacts if Saudi Arabia made good on its economic threats.

John Kirby, a State Department spokesman, said in a statement that the administration stands by the victims of terrorism, “especially those who suffered and sacrificed so much on 9/11.”

Edwin M. Truman, a fellow at the Peterson Institute for International Economics, said he thought the Saudis were most likely making an “empty threat.” Selling hundreds of billions of dollars in American assets would not only be technically difficult to pull off, he said, but would also very likely cause global market turmoil for which the Saudis would be blamed.

Moreover, he said, it could destabilize the American dollar — the currency to which the Saudi riyal is pegged.

“The only way they could punish us is by punishing themselves,” Mr. Truman said.

The bill is an anomaly in a Congress fractured by bitter partisanship, especially during an election year. It is sponsored by Senator John Cornyn, Republican of Texas, and Senator Chuck Schumer, Democrat of New York. It has the support of an unlikely coalition of liberal and conservative senators, including Al Franken, Democrat of Minnesota, and Ted Cruz, Republican of Texas. It passed through the Judiciary Committee in January without dissent.

“As our nation confronts new and expanding terror networks that are targeting our citizens, stopping the funding source for terrorists becomes even more important,” Mr. Cornyn said last month.

The alliance with Saudi Arabia has frayed in recent years as the White House has tried to thaw ties with Iran — Saudi Arabia’s bitter enemy— in the midst of recriminations between American and Saudi officials about the role that both countries should play in the stability of the Middle East.

But the administration has supported Saudi Arabia on other fronts, including providing the country with targeting intelligence and logistical support for its war in Yemen. The Saudi military is flying jets and dropping bombs it bought from the United States — part of the billions of dollars in arms deals that have been negotiated with Saudi Arabia and other Persian Gulf nations during the Obama administration.

The war has been a humanitarian disaster and fueled a resurgence of Al Qaeda in Yemen, leading to the resolution in Congress to put new restrictions on arms deals to the kingdom. Senator Christopher S. Murphy, Democrat of Connecticut, one of the resolution’s sponsors and a member of the Senate Foreign Relations Committee, said that Congress has been “feckless” in conducting oversight of arms sales, especially those destined for Saudi Arabia.

“My first desire is for our relationship with Saudi Arabia to come with a greater degree of conditionality than it currently does,” he said.

Ronin Truth
04-16-2016, 09:28 AM
There may just be some other kind of fallout, Saudi Arabia should be more concerned about.

FindLiberty
04-16-2016, 01:09 PM
...and the 22 redacted pages

twomp
04-16-2016, 05:13 PM
WASHINGTON — Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated. In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot.

“It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation.

http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html?_r=0

dannno
04-16-2016, 05:30 PM
Think they have the balls to pull off a terrorist attack here in the US on their own for once?

pcosmar
04-16-2016, 05:46 PM
We just spent years invading and destroying two countries that had nothing to do with 9-11.

and personally,, I don't like threats.

phill4paul
04-16-2016, 05:58 PM
We just spent years invading and destroying two countries that had nothing to do with 9-11.

and personally,, I don't like threats.

I thought, that as policy, the U.S. doesn't give in to terrorist demands so as not to encourage them. ;)

jkob
04-16-2016, 07:58 PM
This would be a declaration of war by Saudi Arabia,

oyarde
04-16-2016, 08:20 PM
Let the Kingdom of crap sell off the billions in assets .Who cares ?

LibertyRevolution
04-17-2016, 01:55 AM
They are worried about getting sued, so they threaten to damage the US economy??

Did they forget what happened to Iraq when Saddam threatened to switch to euros?

dannno
04-17-2016, 04:05 AM
They are worried about getting sued, so they threaten to damage the US economy??

Did they forget what happened to Iraq when Saddam threatened to switch to euros?

Did they forget what happened to Sydney Berstein???


https://www.youtube.com/watch?v=wXf_eaQcSdM




and merge http://www.ronpaulforums.com/showthread.php?493988-Saudi-Arabia-Warns-of-Economic-Fallout-if-Congress-Passes-9-11-Bill

dannno
04-17-2016, 04:06 AM
This would be a declaration of war by Saudi Arabia,

More like a blackmailish bribe.... and a confession.

asurfaholic
04-17-2016, 04:35 AM
I like it.

Two guilty parties fighting over who should hang first.

jmdrake
04-17-2016, 06:30 AM
...and the 22 redacted pages

22 pages? I keep hearing about the 28 pages. Is this something else?

ChristianAnarchist
04-17-2016, 06:38 AM
I like it.

Two guilty parties fighting over who should hang first.

+rep

Zippyjuan
04-17-2016, 09:31 AM
Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Oil exporting countries (including Saudi Arabia) hold $281 billion in US Treasuries.

pcosmar
04-17-2016, 09:50 AM
Oil exporting countries (including Saudi Arabia) hold $281 billion in US Treasuries.

uh huh

so what?

puppetmaster
04-17-2016, 10:28 AM
Oil exporting countries (including Saudi Arabia) hold $281 billion in US Treasuries.

That means the other 500b would be real assets we could just seize.

Brian4Liberty
04-17-2016, 10:44 AM
The bill is an anomaly in a Congress fractured by bitter partisanship, especially during an election year. It is sponsored by Senator John Cornyn, Republican of Texas, and Senator Chuck Schumer, Democrat of New York. It has the support of an unlikely coalition of liberal and conservative senators, including Al Franken, Democrat of Minnesota, and Ted Cruz, Republican of Texas. It passed through the Judiciary Committee in January without dissent.


I must have missed it. What bill are they talking about?

And what were Paul Ryan and other congressional leaders doing in Saudi Arabia last week?

angelatc
04-17-2016, 10:49 AM
They are worried about getting sued, so they threaten to damage the US economy??

Did they forget what happened to Iraq when Saddam threatened to switch to euros?


I think they are worried that their assets would be seized, which seems like a valid concern, because FFS - the courts just ruled Iran was responsible. Which is nuts.

If the shysters can make a case for seizing Iranian assets, it should not be hard for them to make a case seizing Iranian assets.

devil21
04-17-2016, 11:06 AM
I must have missed it. What bill are they talking about?

And what were Paul Ryan and other congressional leaders doing in Saudi Arabia last week?

Manufactured reason for SA to dump their dollar holdings since the petrodollar standard (of which SA oil is the main linchpin) is ending. If Ryan is there, he's probably working out the game plan to get Congress to pass the bill just so SA can have their excuse to dump.

AZJoe
04-17-2016, 11:37 AM
Saudi Arabia to Washington: Continue the Cover up to Protect the Saudi Dictatorship!
http://s3.amazonaws.com/oratv-admin-wysiwyg/2015/04/24/ARTICLE-911COMMISSION.jpg


Or Else the Saudi Regime will threaten this:


http://russia-insider.com/sites/insider/files/styles/s400/public/petrodollar3.jpg?itok=8lF9ku5i

twomp
04-17-2016, 12:22 PM
Oil exporting countries (including Saudi Arabia) hold $281 billion in US Treasuries.



As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds.

http://www.bloomberg.com/news/articles/2016-01-22/u-s-is-hiding-treasury-bond-data-that-s-suddenly-become-crucial

Zippyjuan
04-17-2016, 04:39 PM
http://www.bloomberg.com/news/articles/2016-01-22/u-s-is-hiding-treasury-bond-data-that-s-suddenly-become-crucial

Which is why I listed the entire group holdings. Thanks.

Saudi Arabia is also getting squeezed by the low price of oil. Some estimate that they have enough financial reserves to survive for about three years- by which time they hope to have some of the other producers (read: US fracking oil companies) out of business to reduce the current excess supplies and increase the price of oil back to where they make more money on it. Countries like Russia, Venezuela, and Mexico get most of their government revenues from oil and are facing budget difficulties. Russia did have some budgetary reserves but those are mostly gone. When the US and Europe imposed sanctions on Russia over the Ukraine, the value of the ruble was crashing and Russia was selling a lot of their foreign exchange holdings to keep it from falling further.

Zippyjuan
04-17-2016, 04:41 PM
http://finance.yahoo.com/news/saudi-arabia-depleting-foreign-exchange-221632592.html


Saudi Arabia Is Depleting Its Foreign Exchange Reserves

Saudi Arabia, which enjoyed a fiscal surplus balance of +30 percent of gross domestic product (or GDP) in 2009, had a -21 percent deficit of GDP in 2015, as estimated by the International Monetary Fund (or IMF). Saudis need financing for the war in Yemen and a generous system of state handouts (government spending cuts have limits, especially when some 90 percent of the population is employed by the government).

This “more going out than coming in” pattern is supported by the decline of the country’s foreign exchange reserves, still the highest in the region, to $640 billion as of the end of the 2015 third quarter, from a peak of $740 billion in 2014, according to data accessible via Bloomberg.

http://l2.yimg.com/bt/api/res/1.2/Soc.f65cZAYHIl2vHpJoVA--/YXBwaWQ9eW5ld3NfbGVnbztxPTg1O3c9MzAw/https://marketrealist.imgix.net/uploads/2016/02/3-saudis-forex-reserves.png?w=300&h=214&fit=max&auto=format

$640 billion being the total of all of their foreign denominated holdings which may or may not all be in dollars.

Zippyjuan
04-17-2016, 04:53 PM
Interesting article I found on this: http://www.forbes.com/sites/timworstall/2016/04/17/saudi-arabias-threat-to-sell-off-750-billion-of-us-assets-over-911-bill-is-pretty-empty-really/#49f6920612b4


Some people aren’t quite getting the news right:

The Barack Obama-led government has been warned by Saudi Arabia that it would sell off American assets worth $750 billion if the US Congress passes a bill declaring the latter responsible for the September 11, 2001 attacks.

No, that’s not quite what is going on. No one is trying to get a bill through Congress which states that the Saudis were responsible. It’s a much more tenuous connection than that. Rather, sovereign nations have certain protections against being sued in the US courts. The bill would lift a certain amount of those protections. This would then open the door to people to claim that Saudi Arabia was connected in some manner with 9/11 (yes, we know that certain Saudi citizens were but that doesn’t prove that any part of the Saudi government or state was) and if that could be proven then the path would be open to claim some compensation possibly.


The bill, which passed the Senate Judiciary Committee earlier this year, would take away immunity from foreign governments in cases “arising from a terrorist attack that kills an American on American soil.” The New York Times NYT +0.71%, citing administration officials and congressional aides, said “the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon.”

That’s a better reading of what is happening. The full report is in the New York Times:


Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

And that’s the real point here. It’s not so much that there is a worry that the Kingdom will be found responsible. It’s that courts might freeze those assets for however many years it takes for the whole process to rumble through the courts.

The technicality here is interesting. Because it is almost certain in my mind that in order to get those assets out of the reach of the American courts they would have to not just sell those Treasuries and any other securities, they would also have to move the money out of US dollars. Because the US Government does indeed insist that movements of US dollars around the world (at least through the banking system even if not in cash) fall under US law. This is what tripped up a couple of foreign banks just recently. They were dealing in US $ with places like Sudan (from memory) and the US had sanctions against Sudan. Those banks said, well, we’re European, in Europe, what do American sanctions have to do with us? The response being that dollar transactions clear through the US banking system and thus fall under US law whoever is doing them wherever. The same would presumably apply to US $ bank accounts around the world. The account itself might be outside the reach of those courts but transfers from them would not be (shades of Judge Griesa and the Argentine bond problem there).

But let us walk back through this and see whether $750 billion of assets fleeing would actually be a problem. It would be noticeable, yes, but would it actually be a problem? The foreign exchange markets are certainly deep and liquid enough to be able to deal with it. Obviously not as one transaction to be done in the next 10 minutes, that would cause chaos. But daily foreign exchange volumes around the world are some $5 trillion. That’s per trading day. Not all of that concerns the US $ of course but well over 80% of it does include the dollar as one or other end of the trade. Done over a few weeks traders would notice it and prices would change but there wouldn’t be any problem with being able to process the amount.

Walking one step further back, these are of course assets, not incomes or flows. So the amount needs to be compared with the total US assets, not GDP (GDP itself being an income or flow). Total US assets are up at $270 trillion and net assets are reportedly $124 trillion. That looks a little high to me as rolling around the back of my mind is the idea that the asset value is more like $70 trillion. But still, $750 billion is 1% of that total value, or rather less than that dependent upon which number you want to use. So, again, we’ve got something that would be noted but certainly wouldn’t be any form of existential crisis. We might not want the Saudis to sell off but we could cope with it easily enough.

Then one step further backward: what if it’s all Treasuries (it isn’t, but what if?)? The Treasury market is the world’s largest and deepest bond market but with the national debt (which is, of course, the same as Treasuries outstanding, given some fiddling for the Social Security Trust Fund) but at $14 trillion odd even that might choke a bit at having to absorb $750 billion of selling. Fortunately there’s a very easy way out of that. The Federal Reserve could just step up its open market operations. Think of it as being akin to an increase in quantitative easing (which is itself really just a development of those open market operations). If that selling looked like making bond yields spike (yields move inversely to prices, so this is the same as saying Treasuries fall in value) then the Fed could simply create some more money on its computers and buy more Treasuries. Exactly as it has done with QE. And for the same reason too: they’d like interest rates to be at a certain level and they’ll buy Treasuries until they are. That QE has already expanded the Fed’s Balance sheet from the hundreds of billions to the trillions and there would be very little difficulty in expanding it again to cover this $750 billion. Especially as no one would be thinking that it would be a permanent expansion of the Fed’s balance sheet. The market could absorb this sort of amount over a few weeks at most. OK, let’s be pessimistic, a couple of months.

I don’t say that it’s desirable that the Fed does this, nor even that it is so that Saudi Arabia does this. Only that while the sums seem unimaginably large in comparison to an economy the size of the United States they’re simply not threatening numbers. We could cope with this quite easily. In terms of this being a threat it just isn’t much of one. Thus public policy should not be that it is much of a threat.

Please also note that this says nothing at all about whether Saudi Arabia was or was not responsible in any manner for 9/11, nor whether the law should be changed in the manner mooted so that the case could be tried. That’s all well beyond my remit of looking at economics and also well outside my knowledge base. $750 billion isn’t chopped liver for sure, but someone deciding to take that amount out of Treasuries and out of the US dollar isn’t much of a problem.

pcosmar
04-17-2016, 05:03 PM
Saudi Arabia is also getting squeezed by the low price of oil.

https://d.gr-assets.com/hostedimages/1396856196ra/9195701.gif

Cry me a river.

donnay
04-17-2016, 05:27 PM
Imagine my shock upon reading this...

Victims of 9/11 families accuse Obama of 'siding with Saudi Arabia' by refusing to declassify 28 pages of report that 'shows Gulf nation backed atrocity' as they threaten to pull $750 billion in US assets
http://www.dailymail.co.uk/news/article-3544355/9-11-families-furious-Obama-administration-siding-Saudi-Arabia-country-threatens-pull-750-billion-U-S-assets-government-holds-liable-2001-terrorist-attacks.html

bunklocoempire
04-17-2016, 06:29 PM
Bingo.

Screw the troops, support the banks!


Saudi Arabia to Washington: Continue the Cover up to Protect the Saudi Dictatorship!
http://s3.amazonaws.com/oratv-admin-wysiwyg/2015/04/24/ARTICLE-911COMMISSION.jpg


Or Else the Saudi Regime will threaten this:


http://russia-insider.com/sites/insider/files/styles/s400/public/petrodollar3.jpg?itok=8lF9ku5i

Chieppa1
04-18-2016, 12:48 PM
Call their bluff, pull out support, let the Bin Laden followers raid the Kingdom. America wants to be the big dick in the room? Be the big dick.

jllundqu
04-18-2016, 01:09 PM
This Bill will not pass and even if it does, nothing will come of it, though it would be nice to f^ck Saudi Arabia in the @ss over 9/11 as well as other modern geopolitical atrocities.

No.... This is all theater. Obama would veto it even if it did make it.

devil21
04-19-2016, 12:10 PM
This Bill will not pass and even if it does, nothing will come of it, though it would be nice to f^ck Saudi Arabia in the @ss over 9/11 as well as other modern geopolitical atrocities.

No.... This is all theater. Obama would veto it even if it did make it.

He said something to the effect that he would veto it as currently written. As always, they leave wiggle room. But keep in mind that SA said they would dump if Congress passed it. Didn't say Obama has to sign it into law!


WASHINGTON — Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

OTOH, it strikes me as opening a can of worms toward providing jurisdiction to a World Court...same World Court setup as envisioned in the TPP and the NWO agenda as a whole.

openfire
04-20-2016, 01:41 AM
Peter Schiff has a great explanation @ 10:40


https://youtu.be/PkjHSn5zS7g?t=10m40s

Madison320
04-20-2016, 10:14 AM
This is what happens when you rack up 20 trillion in debt. You become a slave to your creditors. The only surprise to me is that it was Saudi Arabia. I thought China would be the first one to use dumping treasuries as leverage.

phill4paul
04-20-2016, 10:21 AM
This is what happens when you rack up 20 trillion in debt. You become a slave to your creditors. The only surprise to me is that it was Saudi Arabia. I thought China would be the first one to use dumping treasuries as leverage.

^^^ This.

Contumacious
04-20-2016, 11:51 AM
This would be a declaration of war by Saudi Arabia,

"However, if the Saudis panic or intentionally dump their entire holdings on the market at once in a revenge move, the bond market could crash, sending interest rates skyrocketing. (http://247wallst.com/economy/2016/04/18/can-the-us-treasury-market-absorb-a-750-billion-saudi-arabian-fire-sale/) According to JPMorgan, the amount of Treasuries that can now be sold in 2015 without affecting price is $80 million worth, down from $280 million in 2014. This may be due to China’s ongoing liquidation. Since the Chinese are no longer significant buyers, liquidity has dried up. The $80 million number is based on bond yield fluctuations on October 15, 2014, about four months after China became a net seller of Treasuries. On that one day, bond yields fluctuated 14% from highs to lows, something that had never happened before."

Zippyjuan
04-20-2016, 11:59 AM
This is what happens when you rack up 20 trillion in debt. You become a slave to your creditors. The only surprise to me is that it was Saudi Arabia. I thought China would be the first one to use dumping treasuries as leverage.

US debt is just over $19 trillion. "Oil Producing countries" which includes Saudi Arabia hold $281 billion or 1.5%.

http://www.trbimg.com/img-5714f26f/turbine/la-1460990622-snap-photo/2000

Note that chart is only showing FOREIGN holders of debt. They have $6.2 trillion or a third of all of our debt.

Zippyjuan
04-20-2016, 12:12 PM
http://www.latimes.com/business/hiltzik/la-fi-hiltzik-saudi-threat-20160418-snap-htmlstory.html

Saudi Arabia is threatening to sell $750 billion in U.S. assets. Talk about an empty threat.


A few things need to be cleared up about this bill and the so-called Saudi threat. First, the bill doesn't hold Saudi Arabia responsible for 9/11 or declare it liable for damages from the attacks. It deals with the immunity enjoyed by foreign sovereign governments in U.S. courts, removing it in cases where foreign governments are found responsible for attacks that kill Americans on American soil. The bill passed the Senate Judiciary Committee in January with a bipartisan vote. But since the Obama administration has been lobbying against it, the bill is likely to be vetoed even if it is passed.

Since the Saudis long have been suspected of complicity in the attacks, it's fair to say they're the prime target of the legislation. But the Saudis' immediate concern is that their U.S.-based assets could be frozen by a court for the lengthy period it would take for lawsuits for damages to make their way through the judicial system. That makes their representation about U.S. assets look a bit less like a threat than an expression of defensive strategy.


In the game of telephone invariably played by social media, the original report's careful phrasing of "up to $750 billion in treasury securities and other assets in the United States" quickly morphed into $750 billion in Treasury securities. That would be a sizable chunk of the roughly $6.2 trillion of Treasuries held in foreign hands (by the Treasury's estimate) and even of the $12.6 trillion in U.S. government debt estimated to be in public hands (that is, not held by government agencies).

But it doesn't appear that the Saudis hold anywhere near that sum in U.S. Treasuries.


It's proper to note that the figure of $750 billion in U.S. assets may itself be a gross overstatement. Saudi government investments are managed through its SAMA sovereign wealth fund, which was worth about $750 billion in 2014, but has declined to less than $685 billion since then, in part because the oil-price slump has forced the Saudis to liquidate some of their holdings for cash. Of that, about $423 billion were in overseas securities, including U.S. Treasuries, as of November.

Not all those investments are in the U.S. or in dollar-denominated assets. SAMA's holdings include much more than government securities, U.S. or otherwise. About 20% of its portfolio is estimated to be in global equities. The fund also holds real estate, including refineries.


Whatever the Saudis' holdings, how much could they liquidate and how fast? The answers probably are not so much and not very quickly. Liquidating their entire holdings of U.S. Treasuries would have to be done over time, and if the sales began to move market prices--not necessarily the case--that would have an effect on the Saudis' own portfolio. As Tim Worstall observes at Forbes.com, sales on this scale could be easily absorbed by the bond market; even if they appeared to have a price effect, the Federal Reserve could step in and compensate with purchases of its own.

Another question is what would Saudi Arabia do with the money? If the government really is fearful of dollar-denominated assets becoming subject to a freeze, they would have to be moved into another currency. That entails a whole new category of risk, for the dollar is still regarded as the most stable currency in the world.

The bottom line is that selling assets on the scale that the Saudis have reportedly talked about would be extremely costly, possibly more for the Saudis than for anyone else. The talk about dumping U.S. investments begins to look less like a threat than a plea born of desperation. The message is, please, please don't make us do this.