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When Does China Dump US Bonds?
Posted on 1/30/21 at 9:10 am
Posted on 1/30/21 at 9:10 am
So we all know China is gunning to be the worlds dominant power. Don’t think when they do they fire a massive economic shot to seriously degrade our financial system. We’ve been living beyond our means for years, and at some point China is going for the kill shot.
11
Posted on 1/30/21 at 9:13 am to Catchfalaya
This belongs on political talk unless we are discussing how we can make money off the event. Just my opinion
Posted on 1/30/21 at 9:16 am to Catchfalaya
China needs the US consumer to continue to buy their products. We will always be one of the largest markets in the world for consumer goods simply due to our population and culture.
Posted on 1/30/21 at 9:22 am to Catchfalaya
They’ve already started:
And while total foreign holdings have continued to increase, their % ownership relative to total debt outstanding has been decreasing. That means we are increasingly relying on the Fed to finance US government deficits, which could put downward pressure on the dollar and upward pressure on inflation unless we get our house in order and start tightening the belt.
I ultimately think we’ll be forced to go the belt tightening route, likely with some combination of allowing zombie firms to default.
And while total foreign holdings have continued to increase, their % ownership relative to total debt outstanding has been decreasing. That means we are increasingly relying on the Fed to finance US government deficits, which could put downward pressure on the dollar and upward pressure on inflation unless we get our house in order and start tightening the belt.
I ultimately think we’ll be forced to go the belt tightening route, likely with some combination of allowing zombie firms to default.
Posted on 1/30/21 at 9:23 am to Dawgfanman
quote:
This belongs on political talk unless we are discussing how we can make money off the event. Just my opinion
Disagree. This is a very relevant macro discussion, and macro, while necessarily requiring some political discussion, is more related to finance and economics that it is politics.
Posted on 1/30/21 at 9:27 am to Catchfalaya
quote:
When Does China Dump US Bonds?
Why don't you explain what you think is going to happen when they sell US bonds?
Posted on 1/30/21 at 9:34 am to Catchfalaya
They'd be hurting themselves, not us.
A Treasury bond pays a specific amount every six months until the maturity date, when the holder receives the face value.
The holder can sell it to a third party at any time. The amount they receive depends on the interest rate on the bond, the maturity date, and the return on competing investments.
If Xi sells US bonds at less than market value he's throwing money away. The good deal he offers to his buyers will temporarily cause a dip in stocks and new bond offerings, but as soon as he stops offering the good deal the other investments will return to normal.
And he doesn't hold enough Treasury bonds to blow up the market by dumping what he has.
A Treasury bond pays a specific amount every six months until the maturity date, when the holder receives the face value.
The holder can sell it to a third party at any time. The amount they receive depends on the interest rate on the bond, the maturity date, and the return on competing investments.
If Xi sells US bonds at less than market value he's throwing money away. The good deal he offers to his buyers will temporarily cause a dip in stocks and new bond offerings, but as soon as he stops offering the good deal the other investments will return to normal.
And he doesn't hold enough Treasury bonds to blow up the market by dumping what he has.
Posted on 1/30/21 at 9:36 am to Catchfalaya
quote:
and at some point China is going for the kill shot.
For every $1 in US debt that China and Japan own, we own $1.50 of their debt. China cannot go for the kill shot.
Now, this pandemic is gonna skew the owe vs owed ratios, but even so, they can't afford to declare an economic war on us.
Posted on 1/30/21 at 9:51 am to Catchfalaya
Never, they need us too badly.
Posted on 1/30/21 at 9:53 am to Catchfalaya
quote:you don't understand macro economics at all.
We’ve been living beyond our means for years, and at some point China is going for the kill shot.
Posted on 1/30/21 at 12:05 pm to Catchfalaya
Japan thought this in the 80s.
Posted on 1/30/21 at 12:10 pm to Vols&Shaft83
quote:
For every $1 in US debt that China and Japan own, we own $1.50 of their debt. China cannot go for the kill shot.
People who think Chinese ownership of our debt is some existential crisis are simply uninformed.
Posted on 1/30/21 at 12:32 pm to slackster
quote:
People who think Chinese ownership of our debt is some existential crisis are simply uninformed.
It's hilarious how much people freak out about Chinese ownership of US debt. Cyber warfare and apparently biomedical warfare are legitimate Chinese threats, bond dumping is not.
In fact, I almost want them to try
Posted on 1/30/21 at 12:34 pm to Catchfalaya
quote:
So we all know China is gunning to be the worlds dominant power. Don’t think when they do they fire a massive economic shot to seriously degrade our financial system. We’ve been living beyond our means for years, and at some point China is going for the kill shot.
China could go to the kill shot anytime they want, just unplug from the federal reserve system. The global financial system will look like a mushroom cloud in a matter of hours.
Of course, 100s of millions of Chinese are going to have to go because of no global credit system.
There is no backup system which is why China is trying to assimilate the U.S.
Posted on 1/30/21 at 12:39 pm to Vols&Shaft83
quote:
It's hilarious how much people freak out about Chinese ownership of US debt. Cyber warfare and apparently biomedical warfare are legitimate Chinese threats, bond dumping is not.
In fact, I almost want them to try
Its not the ownership of United State government debt, its more or less China no longer being a creator of debit/credit in the Federal Reserve System.
China could simply disconnect from the Federal Reserve System, $10s of trillions of debt/credit goes poof over night... the daisy chain of derivatives would make a nuke blast look like peanuts.
Of course, I would expect 100s of millions of Chinese to have to be liquidated for the the coming decades maybe even more than that i.e. starvation, war, fighting, disease, etc.
Posted on 1/30/21 at 1:17 pm to Catchfalaya
Never. Would you dump a tenet paying rent on time for decades?
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