That is exactly the point. As long as the US dollar remains the world’s reserve currency, it is essentially backed by the world’s economy. It gives Americans incredible access to the output of the world’s goods and services. There is no “controlling authority” to prevent its debasement. However there is an end point when the world will no longer accept the US dollar as a reserve currency. Cryptocurrency is just one of many challenges to soon come. However for the immedeate future , there is no real challenger to the US dollar’s primacy. Hence the politicians can continue to print, spend, incur debt and not pay the real price until their careers are over.
Well, Russia divorced itself from the dollar reserve currency a few weeks ago, and topped off by Putin's speech yesterday. Dominoes are falling.
Treasuries repo rout fueled by Japan’s rush out of global debt
en-based investors have been liquidating so-called older Treasury positions, according to traders in Asia, who asked not to be identified as they aren’t authorized to speak publicly. After four straight weeks of losses in U.S. sovereign debt last month, the investors are often selling at a loss, albeit one that is offset by profits from the equity market, added one of the traders.
The impact in the repo market comes from how dealers absorbing the Japanese supply in old bonds — those not used in benchmarks — often short current ones to hedge their positions.
The dropoff in liquidity has seen dealers opt for the more-liquid current 10-year Treasury — where borrowing costs hit as low as minus 4% on Wednesday — highlighting a significant short position in the bonds, while the general collateral repo rate closed at 0.03%.
That means the investor lending out cash for the 10-year bonds ends up having to pay, instead of getting compensated.