Why were people still buying real estate, even after the market started to turn south?
In the case of the bond market — it could be a case of “the greater fool” theory in action. IOW, it's just the latest Ponzi scheme. The test will come soon enough. Obama wants to borrow & spend $1 trillion for “economic stimulus” & he's been talking about trillion dollar deficits for years to come. If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?
“If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?”
It will collapse, and Chinese products will suddenly be far more expensive for US consumers, and the Chinese economy will tank. China knows that, so they won’t stop buying our bonds unless they are forced to. In fact, right now they are pushing in the opposite direction, doubling down on their weak yuan policies. I expect that, instead of cutting bond purchases outright, China will likely try to prod us constructively into more responsible fiscal policies by making threats to do so.
and BTW China has already talked about pulling out of US debt.