Posted on 05/11/2022 6:40:35 PM PDT by elpadre
TOKYO – The Japanese yen’s sharp decline may be producing an unexpected loser: the US Treasury Department.
One of the most intriguing mysteries of the last three months is this: Why is Japan, the biggest foreign holder of US Treasury securities, placing so many “sell” orders? In three months, Japanese institutional managers have dumped a cool $60 billion of US paper.
Granted, that is a drop in the proverbial bucket considering Tokyo holds a $1.3 trillion stack of Washington’s IOUs. But the magnitude of the selling is getting increasingly hard to ignore.
The most plausible explanation is the yen’s 13% drop so far this year. That fall complicates the economics of loading up on US debt at a moment when US inflation is at 40-year highs. That’s despite the negligible 0.22% return investors receive on 10-year Japanese government bonds.
You say you want a revolution,
Well you know,
We all want to change the world
They already do, and further politicization of the USD makes it harder to sell new bonds.
The feds are going to get into pensions and then skim the savings of the “rich”.
Well stated
Everything has a price.
If I was President, I would close the Fed so they could not print money and tell the bond holders we would not make any more payments. Congress could only spend the money they had and people around the World would stop buying our IOU’s. That means No One Would ever Loan the USA money! Country would need to Live within it means.
They would lose a ton of money. With interest rates going up the value of their bonds goes down. And if you flood the market with more bonds, they’ll go down even more.
It’s something they would do if they thought it’s better to cut their losses now than wait until things get even worse here.
In the short term China and Japan hold enough Treasuries to rock the market on any given day.
The Federal Reserve Bank however, has the ability to step in and buy every one that they might sell, if it seemed important to stabilize that market, and/or interest rates.
For at least the past decade there have been these “China will sell their US treasuries and destroy America” stories, always written by clueless wonders who have never done any serious trading.
If China dumped treasuries the yield would go up. Others (retirement portfolio managers, sovereign wealth funds, etc) would gladly start buying those bonds to lock in the higher yields. Plus China would take huge losses on their portfolio, effectively blowing off their own feet. And as you pointed out, FED could simply monetize the 1 trillion of CHICOM held bonds. For the FED that would be a light snack.
These financial and trading illiterates should read:
Why China Buys U.S. Debt With Treasury Bonds
https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp
THAT, at least, is simple:
Article I, section 10: "No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts".
“Nobody will buy them. Because they will never, ever be paid. Never.”
The US Treasury has never missed an interest payment even once in its 233 year history.
“One of the most intriguing mysteries of the last three months is this: Why is Japan, the biggest foreign holder of US Treasury securities, placing so many “sell” orders? In three months, Japanese institutional managers have dumped a cool $60 billion of US paper. “
One of the most intriguing mysteries? Is this guy on crack? At the start of an interest rate rising cycle, currently held bonds lose value so that triggers some selling. Who wants to hold a bond paying 2% when a year from now you can buy one paying 3.5% and avoid holding a capital loss? “A cool 60 billion”?! What percentage of that to $1.3 trillion? 1/2 of 1 percent, in the noise level.
” Congress could only spend the money they had and people around the World would stop buying our IOU’s. That means No One Would ever Loan the USA money!”
That would be an excellent recipe for transforming the US into a 3rd world economy.
Alexander Hamilton did exactly the opposite when he used a funded public debt to strengthen the cash strapped United States’ finances.
“I would close the Fed so they could not print money”
Closing the Fed wouldn’t stop “printing money” since banks were able to do it before the Fed existed. They even issued their own currencies.
But since the Fed obsessed have no idea how the US banking system operated before 1913 getting rid of it will always bring utopia in their imagination.
“Article I, section 10: “No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts”.”
Lincoln’s Greenback US Note issue put that inconvenient prohibition to rest.
Was the USA a third world economy in 1850? In 1910?
As opposed to our current system of sending billions of dollars around the world to every 3rd world country robbing our country of the funding required to enhance and maintain our current country’s responsibilities?
When interest rates are going up, existing bonds actually lose re-sale value, unless they are close to maturity.
My guess - the US Dollar is too expensive for them.
In spite of all the trash talk about the US Dollar, it is currently selling for 104.70 against a basket of currencies.
That is the highest level in twenty years!
Dump = sell.
For a seller to sell there must be a buyer so what’s the difference to the US treasury
FOUR defaults.
And, sometimes, people want the principal in addition to the interest.
Don't they own the debt? We owe the debt.
Of course, we make payments on that. They're not making payments on their debt to us. They are uber defaulters on their debt to us.
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