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Andrew Reinbach

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Right Wing "Facts" V. Reality

Posted: 06/12/11 01:45 PM ET

Back in the day, Democrats and Republicans agreed on the facts and goals and argued about how to get there.

That's gone now; Democrats think Republicans are fascists and Republicans think Democrats are communists. And the longer this goes on, the more American politics becomes trench warfare -- with the country in the crossfire.

If I ask conservatives about why their facts and my facts are so different, I get nowhere. A promising email exchange collapsed when I asked my correspondent the question, and since he's bed-ridden, I doubt he's just been swamped with chores.

My guess: They think I'm calling them idiots or fools.

Well, they're not. Many conservatives I know are intelligent, civilized, educated people interested in ideas, and we can have enjoyable conversations -- as long as we avoid politics: Because then we find ourselves talking to somebody from another planet. Even when we agree on a premise, we come to completely different conclusions.

Why? My own guess is their source for facts is the right wing media, a more or less alternate reality filled with alternate facts. And they're proud of it, because they believe that everything the mainstream media says is a lie -- Rush Limbaugh even calls it the "state-run media" -- and they know the truth.

Of course, it's called the mainstream media because it reports the agreed-upon facts from a mainstream perspective -- the place both Democrats and Republicans used to come from.

The right wing media, on the other hand, takes its readers and listeners through the looking glass to another place -- very subtly, and in ways that most people wouldn't notice and are hard to uncover or explain. But it can be done.

Consider, for instance, a story that came out recently from the right wing's CNS news service that claims China's sold off 97 percent of its US Treasury bills since 2009. You should read it.

This story is a perfectly solid piece of journalism that's perfectly truthful as far as it goes: It tells the facts about who and what. But it leaves out the why -- the context that tells the reader what the story means.

The result? An impression that's an almost total lie, probably floated to stoke fears that China's about to dump its Treasury portfolio and crash the American economy.

From there, it's a small step for a perfectly intelligent person to conclude -- on their own -- that we have no choice except to shrink the government, so we can bend the growth curve of the national debt before it overwhelms us.

The truth is that in the period it examines -- May 2009 to March 2011, China's overall US Treasury portfolio wasn't gutted: It's true that China sold off much of its short-term US Treasury bills -- but it bought long-term Treasury bonds. This is a distinction that would be lost on most non-specialists.

The reason for the move? Said specialists would say China was chasing yield.

That is, China did what it could, in the period in question, to get the maximum overall return on its portfolio of Treasuries by switching out of short term debt and into long-term debt. Yields on both sorts of Treasuries fell beginning in mid-2008; but comparatively, yields on bonds -- long-term debt -- held their value, while yields on bills -- short-term debt -- were in free-fall.

It all happened against the background of the Crash of '08-'09.

Between May and December of 2008, as the world's financial markets lurched into free-fall, short-term Treasury bill yields, depending on maturity, fell from 4.72 percent to 0.03 percent , and haven't really recovered; on June 8, 2011, T-bill yields, likewise depending on maturity, ranged from 0.01 percent to 0.17 percent -- that is, that factoring in inflation, investors are now paying us to buy our short-term debt.

In comparison, long-term Treasury bonds paid between 4.35 and 4.49 percent in May 2008 -- depending on their maturity -- and, again depending on maturity, were still paying between 3.77 percent and 3.88 percent on June 8, 2011.

In the period the CNS story examines, China did sell off most of its short-term Treasury bills -- that portfolio shrank from $2.1 trillion to $5.6 billion -- but its overall portfolio of all US Treasuries -- short-term bills and long-term bonds -- grew from $801.5 billion in May 2009 to $1.1449 trillion in June, 2011.

In other words, China's portfolio managers acted rationally. No portfolio manager in the world would have held their job for a week it they'd done anything but move from short- to long-term maturities; in China, for all I know, they might have been shot.

What happened to the other $1.7 trillion? China's statistics aren't as available as America's. But does it matter? It probably put its money where it thought it could get the best return at the least risk, considering what was going on at the time. My guess is they diversified into the securities of various other governments -- England and Germany, probably.

The point is that China's not dumping its Treasuries and probably won't, since it would flood the market with supply, slash the prices it could get, and cut its own financial throat in the process.

But by leaving out the background, the CNS editors left their readers with the impression that China was dumping its US debt. Perhaps they were hoping nobody would actually look at the chart linked to in the story and would confuse both short-term T-Bills with long-term Treasury Bonds, and not understand the relative importance of the short-term portfolio compared to China's overall Treasury portfolio.

If you did look at the chart it linked to, you'd know that China held fewer short-term US Treasury bills in March (the last month reported by the US Treasury) than they did in February -- $5.6 billion versus $14.2 billion -- but more than they held a year earlier, when they held $3.9 billion. They also measured from the peak of China's T-Bill holdings -- $2.1 trillion -- to its near- trough.

Plus, they left the impression that China's currently selling off its overall Treasury portfolio. But while China has sold some of its Treasuries, it's nothing like the alarming picture CNS implies.

In March 2011, China's overall US Treasury holdings were $1.14 trillion, compared with June 2009, when it owned $1.4 trillion -- but it was way up from March of '10, when it only had $895 billion of the stuff.

Why the screaming distortion? Just consider the source. CNS, or Cybercast News Service, is owned by the Media Research Center. Its goal is "documenting, exposing and neutralizing liberal media bias"; it makes a point of telling its readers it doesn't take government money like NPR or PBS, and it's owned by L. Brent Bozell III.

Mr. Bozell's conservative credentials are impeccable. He's the son of William F. Buckley's college roommate and business partner, Brent Bozell Jr., founder of the far-right Young Americans for Freedom and of Operation Rescue. In 1960, Bozell Jr. and Buckley parted ways after Buckley, Barry Goldwater, and others drove the John Birch Society from the conservative fold.

It's hard to imagine someone with that background undermining a right wing meme.