signed, Martin Armstrong
Posted on 07/24/2025 6:55:53 AM PDT by delta7
China has been offloading its US Treasury holdings for years. Once the top holder of US debt, China cut its US Treasury holdings for the third consecutive month this May. Total holdings have fallen to $756.3 billion from $757.2 billion in April, according to the US Treasury, marking the lowest debt held since May 2009.
As of 2024, China has reduced its holdings by approximately 30% over a four-year period. China was able to use the exchange rate to buy yuan when the currency depreciated. China seemed to be assisting Trump years ago in lowering the dollar to ease trade frictions.
That is no longer the case here as the United States began engaging in economic warfare when it pushed Russia off SWIFT, implemented sanctions, and confiscated private assets. Politicians have threatened China with economic warfare over Taiwan, and there is no incentive to hold the debt of your political enemy. It is akin to holding a gun to someone and asking them to lend you money with the promise to pay it back.
In 2013, China held $1.317 trillion in US Treasury securities at its peak holding. Geopolitical rivalry followed as China increased its military presence in the South China Sea and the US responded by forming alliances with neighboring Asian nations and conducting military operations near Taiwan. Former President Obama and Xi Jinping met in 2013 as well amid ongoing conflict regarding arms sales to Taiwan, cyber espionage accusations, and disagreements over North Korea. China offloaded $550 billion in US Treasuries by the end of 2013 and Japan became the largest holder of US debt.
Let us not forget that the Ukraine war sprang up in 2014, and the West installed its puppet government. China observed and responded accordingly. Tensions heightened in 2015 when China continued to assert its dominance in the South China Sea.
The US refused to accept the One China policy, despite desperately needing China to remain an ally. Trump’s first term marked ongoing trade wars between the US and China that turned into outright hostility. The Hong Kong protests of 2019 further strengthened ties as the US aligned itself with Hong Kong and once again dismissed the One China policy.
By 2020, China was akin to Russia in terms of being the “communist” enemy of the West. Mike Pompeo delivered a speech in which he declared the end of an era of engagement with China due to intellectual property theft, territorial claims, and human rights abuses.
Both Trump and Biden blacklisted Chinese companies and spoke of an ongoing need to distance the US from China rather than form a concrete alliance with its top trading partner.
By 2022, we had Nancy Pelosi and other top politicians visiting Taiwan to show their support for sovereignty. The US vowed to intervene if China attempted to reclaim its territories. Three years ago, the Chinese government warned the provinces and private companies not to borrow dollars. The people and institutions were free to do as they pleased, despite China being deemed an evil communist nation by the West.
All of this was a political farce as the West is selective about which nations it wants to be the moral police over. China will never have the incentive to take on more debt of an enemy nation.
The Fed desperately needed China’s participation as its plan was to roll over its debts perpetually, but that is now out of the question. Japan is facing a massive crisis and will be the first to default. What will the US do when no one is willing to buy its debt?
The snake eating its own tail OR a genius move to find another source to buy our unprecedented Debt? …..we shall see how long it can last.
I will add it was a move that had to be made, and just in the nick of time…as Japan is the next one on the chopping block, maybe we will withstand their US debt dumping, maybe not?
Interesting times.
Buy back the debt with inflated dollars.
They do it every time....................
Ever since COVID, China has been selling Treasuries and other assets to cover its bad internal debts and subsidize employment.
If Japan dumps U.S. debt, Trump could face a treasury market meltdown that sends yields surging sky-high
Japan is the next nation to fall from a debt crisis,( already in motion) then the EU. China is selling off US debt because they do not want the US to confiscate / steal their funds like they did to Russia ( as are many others).
Note: ALL nation’s currencies are rapidly declining, massive losses of purchasing power. Hopefully Trump will undo what senile Joe did to us. His Gold backed ( redeemable) 50 year Bonds may entice countries to re invest in the U.S.
Judy Shelton has spoken about the new Gold backed Treasuries, unveiling slated for July 2026.
So, an effect on treasuries? Yes. A death knell to treasuries? Far from it.
I don’t know what they are going to use to control their currency. Without US$ their currency will increase in value and their export economy will be finished.
In the past, people in 3rd world countries could get US dollars only by permission of their local banks (ie. under central government control), or by smuggling them.
Now the average 3rd world citizen can have access to US dollars (or a close derivative) by having an account with a crypto-exchange, based anywhere in the world, and using their cellphone.
Tether is already a top-ten holder of US Treasuries, greater than most governments or investment funds.
So this is all a very interesting scheme to extend the reach of the US dollar and increase demand for US Treasuries.
So we can also expect continued, growing huge Fed.gov deficits.
China's financial regulators just bailed out major Hong Kong banks by putting their bad loans into workout and leaving the otherwise impaired banks with clean balance sheets. This is the best solution to a bad set of problems that continue to fester throughout the entire Chinese financial system.
Eventually, China will have to use their stock of foreign earnings to recapitalize their financial system. As a practical matter, that will take masses of dollars. Nothing else will do.
Buy back the debt with inflated dollars.
They do it every time
———
Most don’t understand the US Debt Ponzi scheme….if we can no longer find buyers for our massive debt, we must print away into oblivion.
At least President Trump found a novel way to stem the bleeding. The only problem is these Stable Coins are linked to the USD ( many), a USD crisis will crash them overnight.
So this is all a very interesting scheme to extend the reach of the US dollar and increase demand for US Treasuries.
———-
Bingo! If this crypto scheme fails, Plan B, US Gold backed 50 year Treasury notes redeemable in Gold may stop the bleeding.
Judy Shelton has numerous interviews about this. The only problem with these? We will need to audit our Gold Resetves, ( still waiting on that promise)…Shelton last week stated she is sure we have the 8,000 tons….and if not we would have to buy Gold from the market….strange remark.
signed, Martin Armstrong
“Bingo! If this crypto scheme fails”
My ponzi scheme failed. Got me eleven years in the federal pen.
Signed, Marty
So Armstrong is lamenting China not wanting to buy US debt? Isn’t better not to be in debt to an adversary? You can find that advice in Proverbs.
I would think this reinforces the concept of increasing domestic energy, mining and manufacturing capacity as a means of enhancing national security and strengthening the US economy by encouraging investments in the US. All that economic activity should strengthen the dollar, US markets and improve US government balance sheet.
To put it bluntly, China doesn't have nearly enough internal demand to fund its economy including the debt and it has subsidized overproduction to the extent that even its vast trade surpluses can't supply enough product demand keep the industries it has subsidized afloat.
As far as Russia goes, freezing foreign assets in a conflict is not new. It just seems shocking because many had thought we had entered the era of perpetual peace and global "free trade."
All that economic activity should strengthen the dollar, US markets and improve US government balance sheet.
———-
Correct. Key word “ Should”, I believe it will, but as President Trump has three years left, who knows what comes after him? At least he has a plan, and the grit to make it happen.
All that said, the world’s debt is now over 380 trillion and growing. The global debt crisis has begun, we may be able weather it out under Trump.
They need the cash and are using it to buy more in the rising U.S. equities (stock) market, period. Reading more than that into it is oure innuendo trying to support themes not supported by facts.
What will the US do when no one is willing to buy its debt?
We witnessed a major world power go bankrupt in our lifetime.
The results of that were:
1) destruction of centralized corrupt govt
2) Movement of power back to the satellite nations
3) freedom from all the regulations and bureaucracy.
WE ARE IN THE PROCESS NOW, THANKS TO TRUMP’S LEADERSHIP.
Review
A genius move to find another source to buy our unprecedented Debt?.
Agree China needs cash it’s war machine and expanding to other countries takes huge amounts of cash.
Trump is ahead of the game.
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