Posted on 03/20/2016 11:09:19 AM PDT by pilgrim
For years, the US government has been able to finance it's debt at cheap interest rates because there have always been plenty of enthusiastic buyers. As long as the Chinese, the Japanese, and others continue to hold and buy large amounts..
....then the US government would have to entice them and others to take on the debt by promising to pay a higher interest rate on it. In turn, this would require more spending on debt service by Congress.
If this should ever happen, it would require significant cuts to government programs — or tax increases, or both — in order to pay the larger amounts needed to keep paying the federal government's debts. Otherwise, the US government will default on its debts.
So, for some people who are actually paying attention, it is concerning that the Chinese government has been selling off it's US government debt. If this continues, all things being equal, the US Treasury will have to begin offering higher interest rates in its debt.
CNN reported this morning that foreign governments have been dumping US debt as record rates.
And it seems they're doing it for reasons other than spite.
For years, the discussion over a possible debt-dumping scenario has focused on the possibility that the Chinese and others would dump US debt and US dollar holdings as part of a geopolitical scheme to bankrupt and destabilize the US government. As I noted in this article, the scenario is not theoretical, and has happened to a major power in modern history. The British Empire ended not on a battlefield, but on a bank ledger when Eisenhower threatened to use financial warfare of this type against the United Kingdom if the UK did not withdraw from Egypt in 1956.
(Excerpt) Read more at businessinsider.com ...
They aren’t stupid.
dollar took a beating against foreign currencies last week.
The Chinese has been loading up on gold bullion, prestigious American hotels and real estate, and purchasing natural resource mines.
All those are priced in dollars.
Plus China has increasingly made arrangements to settle foreign trade in currencies other than dollars.
That reduces the need to maintain dollar reserves.
The day of reckoning draweth nigh.
No worries....we are just buying our own debt these daze. The Federal Reserve just creates $$ out of thin air and lends it to banks for this purpose. Problem solved.
It's also worth noting that the dumping of U.S. bonds doesn't seem to have had any effects elsewhere in the U.S. economy. With the rise in the U.S. stock market over the last two months, I wonder if these investors are simply selling U.S. bonds and buying U.S. stocks.
FOR THE ONE MILLIONTH TIME: The amount of money we owe to China or for that matter, to ALL foreign governments COMBINED is INSIGNIFICANT compared to the amount of money we owe to OURSELVES.
Yes, I am screaming[!!!] because BI and all the other dumbasses of the world seem to think that closing the money spigot from China, or Japan, or the UK is going to stop (or even slow down) our irresponsible profligacy.
No it is NOT.
Beijing is not being ransomed. Our parents' and our own retirement and our children's, and grandchildren's and great-grandchildren's futures are what is being ransomed. That debt is literally orders of magnitudes greater than the piddling bit we own to the Chinese.
Got that? Have you stupid, stupid, morons at Business Insider finally got that?!
Dumbasses.
“..it is concerning that the Chinese government has been selling off it’s US government debt.”
Who are they selling it to?
FOR THE ONE MILLIONTH TIME: The amount of money we owe to China or for that matter, to ALL foreign governments COMBINED is INSIGNIFICANT compared to the amount of money we owe to OURSELVES.
I don’t understand what you mean by “owe it to ourselves”. We owe the money to a private for profit cartel. The US based branch is called the Federal Reserve. “Ourselves” are broke and in debt to this cartel forever, as it cannot be paid off.
Smells like Romney and his ilk have been advising Communist Chinese leadership.
What elementary school did the author of this piece attend?
Regards,
Nobody ever tells the whole story. Foreign governments are dumping US debt. So who is buying US debt. You can’t sell it unless someone is buying it.
For years, the US government has been able to finance it's its debt [..]
Regards,
You beat me to it. For every seller there is always at least one buyer.
If foreigners dump our debt more than we dump theirs, the value of the dollar against other currencies will decline. Imports will decline and exports will increase — bad for consumers, but favored by mercantilism advocates in the Trump/Buchannan camp.
To the proverbial "greater fool?"
Regards,
> “For years, the US government has been able to finance it’s debt at cheap interest rates because there have always been plenty of enthusiastic buyers. As long as the Chinese, the Japanese, and others continue to hold and buy large amounts.”
Stupid writer looking to fill space for a deadline.
Chinese have dumped nearly all of their US Debt as have other nations, for years now.
Fed Reserve is now biggest purchaser of US Debt, by far, very far.
International haters of America are pissed that its central bank, the Federal Reserve ‘printed all that money’.
Normally such money creation (printing = digital fund creation) would result in inflationary collapse but in today’s world of international currencies, it’s a race to the bottom and major currencies other than the US Dollar are leading the race to the bottom.
It seems a fortunate circumstance but long term it grows the government reservation of the United States with a resultant decline in the US population’s ability to lead and innovate. Seemingly benign actions have unforeseen circumstances.
1913 was a bad year.
Money paid to Social Security and Medicare by law must go into the general fund. ALL of that money is owed by us to ourselves.
I wonder what would happen if the Treasury did a select default on debt owed to the FR?
Considering that it was purchased with fiat currency by a non auditable entity?
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