Posted on 05/19/2023 3:47:58 AM PDT by FarCenter
TOKYO – Japan’s decision to hold this weekend’s Group of Seven summit in Hiroshima is appearing more and more “on the nose” with each passing day.
Worries that Russia might use nuclear weapons on Ukraine were part of Japanese Prime Minister Fumio Kishida’s calculus in choosing the city that was the first military target of such armaments in human history. Since that call, though, two economic nuclear options have emerged to fuel a bull market in Hiroshima symbolism.
One is the default drama that risks restoring the US to developing nation status. Republicans toying with financial Armageddon have US President Joe Biden truncating his Asia trip, scrapping stops in Australia and Papua New Guinea.
The other is how to play the China “decoupling” dynamic threatening to blow up world markets – and the Global South nations that host Kishida is inviting to the G-7. Along with Canada, France, Germany, Italy, the UK and the US, Japan has invited leaders from India, Brazil, South Korea, Vietnam, Australia and African Union and Pacific Islands nations.
Yet try as they may to send a clear message of unity versus China, G7 officials are likely to find that domestic disunity undermines any grand pronouncements, let alone bold joint actions.
Biden is sure to confront a torrent of questions about default risks. In just a matter of weeks, says US Treasury Secretary Janet Yellen, Washington will run out of cash. If so, all hell would break loose for every economy represented in Hiroshima – and those far beyond.
“If it does ultimately default on US Treasuries this would undermine the integrity of the world’s most popular ‘risk-free’ asset used in central bank reserves, low-risk private investments and as collateral,” says economist Will Denyer at Gavekal Research. “It would disrupt the global financial system and undermine the reserve status of dollar-denominated assets.”
Between Japan, China and other major Asian holders of US government debt, this region is sitting on somewhere near US$3.5 trillion of Treasuries. Yet Asia’s real exposure is its trade-reliant economies, which would be completely upended by the resulting surge in global bond yields, plunging share prices and gyrating exchange rates.
Even just the risk of the US missing a bond payment would do monumental damage. Joseph Abate, strategist at Barclays Plc, thinks US coffers might dip below $50 billion between June 5 and June 15. “Even this amount is too close for comfort a week or so ahead of mid-June tax date,” Abate says.
Adding to the dramas facing the G7, this is a 100% self-inflicted threat to the global system manufactured in Washington by craven US lawmakers.
Biden and the rest of the corrupt westerners would love Ukraine to be nuked.....it would make the reconstruction programs more lucrative than the war.
Trash analysis. The world is threatened by republicans not rubber stamping Biden’s endless debt? And they are still playing the victim about getting nuked. The lesson they should have learned was don’t be a world menace.
But it’s childish to pretend that there only thing keeping the world going would be giving Biden unlimited spending power.
Default won’t happen. We take in more than enough tax revenue to service our debt.
More “China is Superman” trash from the Han morons in the ChiComm party.
this farcical ‘debt-ceiling’ has been raised 100 times. does anyone really, truly believe it won’t be raised again?
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