” having Japan solidly out of the market really should make them think differently. “
Then, there’s the scenario that no one talks about - even in whispers —
One of the ways this could play out could be that Japan, rather than buying or continuing to hold, liquidates its T-Bill holdings to pay for the rebuilding...
That would prompt a QE response from the FED (to keep the value of US Treasuries artificially inflated in a suddenly glutted market) that makes QE2 look like pocket change....
Yep, this is entirely reasonable. NO, another round of QE would not keep the value of treasuries inflated. But, agreeing to buy these notes for Dollars would be the same as another round of QE and artificially seem to reduce the outstanding debt at the same time.. but it will also aggravate the inflation spiral.
Japan is pretty much screwed in this because trying to use these dollars to buy materials to rebuild will cause the increased the cost of those materials immediately, fueling the commodities inflation spiral. But, Japan may still choose to do this because something is better than nothing.. and if the Dollar collapses that is what these Bonds will be worth.
Yes, indeed you have found a way to make me feel sicker. Thanks.. :(