Saturday, 14 March 2009

Luxembourg? What's That About Then?

The UK's holdings of US Treasury paper goes down $27bn in a year - surely a sign we've needed to pull out some savings to cover financial gaps since the crisis began?

& Luxembourg's holdings go up by $28bn. What's that about?

Ah, could it be that's what it is about. Luxembourg was a tax haven and the 'hot money' has fled to the alleged safety of the dollar?

From the Guardian today.


  1. Charlie, let me get this right, are you saying that large amounts of money held as US Treasury bonds (say in the region $27bn) has been shifted from British jurisdiction to Luxembourgeois jurisdiction? Or that the British government's sovereign wealth held as US Treasury Bonds has gone down in value this year, while Luxembourg has increased its ownership of this form of wealth? Sorry for being a but thick, but what is this about? (I don't doubt it's significant.)

    Meanwhile, thanks for the Paul Mason quite about sweatshop labour in Shenzhen not just producing the cheap trainers, but also providing the finance for us Westerners to buy them as well. It's a shame Mason pulled his punches by talking about distant Detroit. He could have as easily said London, Manchester or Chipping Sodbury.

  2. I very much doubt that there has been a direct shift of £27bn-$28bn from Brit to Luxie jurisdiction.

    My guess - and its an uneducated one, I freely admit - is that the UK has had to reduce its holdings of US Treasury securities to paper over the holes in our public finances after last Sept and or simply to diversify in the light of the crisis. But Luxembourg is/has been a tax haven of sorts - where hot money goes to sleep, before being put back into play. I think the increase in US Treasury holdings by the good burghers of Luxemburg may show a flight to safety, because the hot money can't stand the heat of the crisis.

    On reflection I think the post is unclear - I'll alter it.Thanks for making me realise this.

    Yes, Mason is pretty good isn't he? I have 'Paul Mason for Chancellor' as my thought on my Facebook page. I agree he could be talking about here as well as the States.

  3. Thanks Charlie, much clearer and I'm sure you're right. Yes, the concept of the US public finances/dollar as the beneficiary of "the flight to quality" has always been a slightly odd one, given the state they're in. But these things are relative, I guess. What asset is a repository of genuine value immune to devaluation? None. Certainly not gold, which is a bigger confidence trick than any of them, BritArt excepted.

    Meanwhile, am I right that this data is showing UK residents/banks/businesses as well as government selling US Treasury Bonds to paper over cracks in their finances?

    Finally, I put a post up on Red Pepper along the lines of "only Paul Mason can save us now" and got rebuked by a few for saviour worship. I was only kidding, though obviously I do rate the guy. Must read his book sometime. Either before or after Mike Davis.........

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