IS the US treasury kind of like the world's bank?

Question

Why do countries around the world buy US Treasury bonds and store their money there?
Dont they have better things to do with their money like invest in their own economies?
Is the US Stock Exchange and the US Treasury kind of like the World's investment bank?

p.s. Why would China want to store so much money in US treasuries as well? I mean why not invest it in their glamorous economy?
Why would they want to store all their cash in US treasury if the US economy was ready to crumble ( like so many are speculating to happen?)

Answer 1

To clarify something for you, foreign governments do not take the cash they receive from their taxation and then deposit it all in the US. When we say that the "UK" is a large holder of US Treasury bonds, to a large degree we mean that individual British corporations and investment firms are choosing to buy US Treasuries as an investment option or for purposes of managing their cash. Many mutual funds invest in US Bonds, and any major corporation might park money into US Treasuries as part of their cash management strategy.

Foreign central banks often end up with a lot of US Dollars as a result of the trading activities of companies in their country (the US currency flows through their banking system to the central bank); or they buy US dollars as part of their efforts to manage the exchange rate of their own currency, then invest those dollars in US bonds (gotta do something with it).

But to the degree that foreign entities purposely invest in US debt and equities, they do it for same reason anyone does -- to make a profit. US Treasury bonds are very stable and highly rated, and are considered "riskless" by financial economists. And the US is a large developed market, so there are always opportunities to make money.

None of this makes the US the "World's Bank", not a good analogy.

Answer 2

U.S. bonds and securities instruments are the best investment vehicles in the world. The U.S. is the most stable country with a solid economic policy and it has yet to default on its debt. The dollar is among the most stable currencies in the world and is the most proactive in terms of battling inflation which erodes the value of the dollar overseas and the investments made in U.S. securities. China does not have a very good monetary policy. Its own currencies do not provide the stable returns the U.S. dollar promises, and China is seen as less trustworthy and not as good at providing investment returns.

The dollar is the world standard in today's currency markets. Even if the U.S. economy is ready to crumble (and that is currently debatable), the U.S. still provides a much stabler investment vehicle because it the most credible in the world. The government does not have nearly the amount of corruption in its government China has and promises to repay international debt have among the best track records in the world. How many foreign nations and corporations invested in China before Chairman Mao and lost all they had? China has a history of not honoring its debts. While China's economic growth has been exploding at a 10% annual clip, such growth carries with it dangers of inflation which means investors in Chinese debt will not get as good a return on their money as they would if they invested in America's debt securities. This will affect China's ability to raise capital through debt offerings, so Chinese investors must invest outside of China. Inflation means that as the value of Chinese yuan drops, U.S. dollars buy more yuan. So by investing in U.S. Securities (in the U.S. dollar), Chinese investors can convert back from the dollar into the yuan and at the very least keep up with the rate of inflation.

In essence, foreign nations invest in American debt and equity securities because their own currencies are weak and investments in their own countries will not return as much of a value as they will investing in the U.S. dollar, which is much more stable and is usually always strong.

U.S. Treasury is not a bank. It collects taxes and prepares debt securities that in turn are issued by the Federal Reserve. The Treasury does not regulate credit as a bank would nor does it determine interest rates and reserve requirements for banks to follow.

Answer 3

Tick, Tock! Time will tell what takes position, yet spending funds like it grows on timber isn't an outstanding element. ultimately, someone has to pay the pastime and taxes on the money being borrowed.

Answer 4

No, people from all countries buy bonds in many other governments.

You point is a wildly USA-centric view.

Just a stab in the dark, but are you from the US ?