Given the rise in Treasury yields last week, can it now be safely assumed that China has ceased all purchases of US Treasuries?
American Economics Thread
- Thread starter Bernard
- Start date
Bond auction is tomorrow, they may be buying more then.
If they don't, then everyones stock market gets trashed.
Imagine China buying US treasury bonds only to then watch the US inflate it to heaven lol
The US can't actually do that right now, thats why China is needed at the bond auction.
If yields spike any higher due to inflation concerns, then the stock market is toast.
Letting yields spike also drives the price of the bond down, so anyone currently holding them takes a giant hit.
That tends to scare off the buyers.
And who is suppose to fund the Demokkkrat's 1.9 trillion bill if no one is buying the debt?
The FED is trapped. Either option is terrible.
A good auction that drives the price of bonds up (and consequently sends yields down) will keep the situation from going critical.
For now.
I was thinking about that actually. If they sacrifice the dollar they lose the leverage they have with the rest of the world.
Would Powell really make that call?
I still think that they have time (famous last words lol), i remember that i had read on Bloomberg a year ago.i think where they noted that China had slowed down its purchases and that Taiwan and especially Japan had accelerated their US treasury bond purchases by a lot, my memory is not good though so take it with a grain of salt
It's a dead end either way. But the easier/politically sensible route is to sacrifice the dollar and let the $ bag holders take the hit. Otherwise the US collapses.
When Paul Volcker came into action, he put interest rates at 20% to fix 14% inflation leading to 18% unemployment rate.
National debt then was only 30% of GDP.
Imagine trying to fund government spending while paying 20% interest on >$30 trillion (>130% GDP) of existing debt. There isn't a government out there that doesn't try to inflate its debt away.
They will have to sacrifice dollar reserve status. The main question remains when this will occur. The more they delay higher interest rates (exactly what they've been doing since 08) the greater the pain later on.
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Maybe that's why they are calling for a meeting. If China agrees to a meeting between diplomats then they are unlikely to do something rash before the bond auction.
Will china care that much if the stock market crashed?