The concept behind this is largely all old news. But the story is interesting, and concerning http://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret Lot more at the link, but excerpt below: The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret How a legendary bond trader from Salomon Brothers brokered a do-or-die deal that reshaped U.S.-Saudi relations for generations. May 30, 2016 Andrea Wong MsAndreaWong Share on FacebookShare on Twitter Photographer: Dirck Halstead/Liaison via AP Photo President Nixon walks with Saudi King Faisal in Saudi Arabia in June 1974. Failure was not an option. It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin. Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia. The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world. It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks. Treasury Secretary William Simon, left, sits with Nancy Kissinger and Secretary of State Henry Kissinger as they listen to former President Nixon talk to his staff prior to leaving the White House for the last time, August 9, 1974. Treasury Secretary William Simon, left, sits with Nancy Kissinger and Secretary of State Henry Kissinger as they listen to former President Nixon talk to his staff prior to leaving the White House for the last time, August 9, 1974. Source: AP Photo At first blush, Simon, who had just done a stint as Nixon’s energy czar, seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.” But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars. With that knowledge, the administration hatched an unprecedented do-or-die plan that would come to influence just about every aspect of U.S.-Saudi relations over the next four decades (Simon died in 2000 at the age of 72). The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending. It took several discreet follow-up meetings to iron out all the details, Parsky said. But at the end of months of negotiations, there remained one small, yet crucial, catch: King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database. Special Report: Where Next for Saudi Arabia? In response to a Freedom-of-Information-Act request submitted by Bloomberg News, the Treasury broke out Saudi Arabia’s holdings for the first time this month after “concluding that it was consistent with transparency and the law to disclose the data,” according to spokeswoman Whitney Smith. The $117 billion trove makes the kingdom one of America’s largest foreign creditors. Yet in many ways, the information has raised more questions than it has answered. A former Treasury official, who specialized in central bank reserves and asked not to be identified, says the official figure vastly understates Saudi Arabia’s investments in U.S. government debt, which may be double or more. The current tally represents just 20 percent of its $587 billion of foreign reserves, well below the two-thirds that central banks typically keep in dollar assets. Some analysts speculate the kingdom may be masking its U.S. debt holdings by accumulating Treasuries through offshore financial centers, which show up in the data of other countries.
So they're buying an objectively safe investment with cash they got from exporting a good to us that fuels our economy. I have a little difficulty imagining this wouldn't have happened anyways but I probably need a better grasp on comparably credit worthy debt from other countries. This reminds me of all the comments about our government raiding Social Security, but all I can gather is the SSA managers are just buying T-bills.
the title should be " The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt NO Secret" the minute US reveal how much they owe the Saudi, the more likely Saudi's neighbors to stand in line begging while complaining enviously of how unfortunate they are . so no thanks keep it secret and confidential. thanks for your business
It's a 100° F sandbox, there arn't too many options on what they can do. They could bury the money, find somebody else to "buy" "their" oil, or just not sell oil.
I'm ready for Tesla and the like to take over the world. Perhaps they will let women drive then so they will have someone buying their gas.
The bottom line is that there is a foreign military base of the most powerful country in the world within their borders. Yes, they have the ability to manipulate markets, but that is insignificant considering they can be demolished in days, and their country can be turned into ISIS 3.0 with the right bombings and PR spin, and their leadership removed. Imagine for a second if China had a military base inside your country and the Chinese media and some people start whining that your billionaires have the ability to manipulate markets. If they started complaining that militias are forming to protest and attack the Chinese military base in America. Terrorists, they'll be called, for resorting to violence against a far more technologically superior enemy. The last time this kind of happened to you guys, Kennedy was ready to start a nuclear war with Russia - putting the entire population of the world at risk. And that wasn't for a base IN your country, that was for a base NEAR your country, inside another supposedly sovereign country. We've learned from America and Israel that nothing trumps an existential threat. Today American media makes it seem like ISIS is an existential threat to America, but this is a joke of course. You guys don't know what existential threat means, you've never felt it. Maybe your grandparents got a little sense of it when pearl harbour was hit, but the retaliation of nuking and firebombing 3 mostly civilian cities in Japan more than made up for your insecurities. Some time in the future, if we maintain the status quo, history dictates that you will be walking around in good ol' America, you will walk past a barbed wire military facility with foreign (for example, Chinese) and English warnings all over such as "no photography", "do not enter", "private access" and only Americans loyal to those foreign military generals will be allowed inside. The American citizens who work hand in hand with Chinese generals to achieve STABILITY OF THE CURRENT SITUATION will be lauded as the most forward thinking people. That will be in a town near you. When you experience that, then we can understand each other. It doesn't really matter that your rich are rich when you're staring down the barrel of a loaded gun and you don't get to decide what happens with the money.
Reaganomics and Thatcherism were highly touted in some circles as breaking stagflation in the West. All it really took was bribes and trafficked blonde women to the Saudi kingdom. In a sense, the U.S.is the party now backing out of this nasty friendship.
I don't get why the Saudis holding a few hundred billion in gov't debt is all that big of a deal when the total outstanding debt is 18 trillion. So the Saudis have 1% of our national debt. Is that really that big of a concern today?
