Senator Graham Wants to Default on $1 Trillion Debt Owed to China

[Nilgiri]

If they dump dollars, wouldn't that raise their currency visa vis dollar? Isn't it counter productive to their export economy?

Bingo. All bets are off (even if they found buyers for these instruments this year or even next year for sake of argument) once you open that floodgate (of artificial low CNY).

It was the main reason to build up this stockpile in first place. Think of it as a grand subsidy towards Chinese employment.

I'm not sure the US can just "cancel" a range of US Dollars just because they're held by China, which is said to be over $3 TRILLION. This is a fiat currency we're talking about with nothing tangible to back it up (e.g. no gold, silver, diamonds, oil, etc.) If the US pulls something like that the USD would become completely worthless overnight and Americans would set the Fed building on fire.

The US sure can. These are also T-bonds rather than dollars directly (given China wanted to leverage on it and gain a better return). If it was cash, the task would be near impossible. But T-bonds are specific in this regard as they are large store value and carry paperwork for transfer.

The US would need to coordinate with ECB, BoJ and other large world banks to get a good strike rate (if want to improve further past its own ledger on what it sold to Chinese), but nothing really stopping it if it wants to do this move.

As for it being worthless fiat currency, well more importantly its worthless fiat currency China saw the need to buy into (asking is it really so worthless if everyone buys into it and trusts the "institutional/soft" backing)....and even gain a clear decades long policy+development result out of it.

China after all simply could have bought 0 of it and let its currency appreciate more naturally and have a much smaller stockpile (and thus liability for situation such as this one). China made this decision, no oen forced it to, so it (USD) can't be all that worthless a currency indeed....back then or now.

 

[Aspen]

I have been hearing that since '09 when I was invited here. In every claim of 'dumping', China always come out ahead. Not just China, but also Venezuela and Russia. And yet, if what you say is technically true, then what happened? Why not, like Nike said: Just do it? ?China WILL win, no?

China is waiting until their economy overtakes US economy. How hard is this to understand?

 

[gambit]

China is waiting until their economy overtakes US economy. How hard is this to understand?

But if the US collapse because of 'dumping' China will come out even better. Why bother to wait? Break the runner's leg while he is running, right? Or is it that you really do not know what you are talking about?

Looky here...Your ignorant argument is safe because our community college economics professor will not correct you. As long as he made his point that Americans are stupid, any stupid shit anyone else say about the US will be ignored no matter how invalid it is.

 

[Aspen]

Bingo. All bets are off (even if they found buyers for these instruments this year or even next year for sake of argument) once you open that floodgate (of artificial low CNY).

It was the main reason to build up this stockpile in first place. Think of it as a grand subsidy towards Chinese employment.



The US sure can. These are also T-bonds rather than dollars directly (given China wanted to leverage on it and gain a better return). If it was cash, the task would be near impossible. But T-bonds are specific in this regard as they are large store value and carry paperwork for transfer.

The US would need to coordinate with ECB, BoJ and other large world banks to get a good strike rate (if want to improve further past its own ledger on what it sold to Chinese), but nothing really stopping it if it wants to do this move.

As for it being worthless fiat currency, well more importantly its worthless fiat currency China saw the need to buy into (asking is it really so worthless if everyone buys into it and trusts the "institutional/soft" backing)....and even gain a clear decades long policy+development result out of it.

China after all simply could have bought 0 of it and let its currency appreciate more naturally and have a much smaller stockpile (and thus liability for situation such as this one). China made this decision, no oen forced it to, so it (USD) can't be all that worthless a currency indeed....back then or now.

How do you think China bought T-bonds in the first place? They bought it with dollars. T-bonds may have large store value and paperwork but this only slows down the sellback process, it does not stop it. If China wants to dump the dollar, it will shock the US economy to an extent that it will never be able to overtake China again. If China wants to sell those T-bonds, US will have to buy it, they don't have any other option. Refusing to buy back China's T-bonds or canceling dollar in China will make dollar a worthless piece of paper overnight. ECB or anyone else is not going to be able to fill China's void. China buying into dollar is the reason the dollar is even worth anything in the first place. If China dumps the dollar, the universality of the dollar in the global economy will go in the dustbin and dollar will be no better better than the Pound or Euro.

 

[Pax Ottomana]

Bingo. All bets are off (even if they found buyers for these instruments this year or even next year for sake of argument) once you open that floodgate (of artificial low CNY).

It was the main reason to build up this stockpile in first place. Think of it as a grand subsidy towards Chinese employment.



The US sure can. These are also T-bonds rather than dollars directly (given China wanted to leverage on it and gain a better return). If it was cash, the task would be near impossible. But T-bonds are specific in this regard as they are large store value and carry paperwork for transfer.

The US would need to coordinate with ECB, BoJ and other large world banks to get a good strike rate (if want to improve further past its own ledger on what it sold to Chinese), but nothing really stopping it if it wants to do this move.

As for it being worthless fiat currency, well more importantly its worthless fiat currency China saw the need to buy into (asking is it really so worthless if everyone buys into it and trusts the "institutional/soft" backing)....and even gain a clear decades long policy+development result out of it.

China after all simply could have bought 0 of it and let its currency appreciate more naturally and have a much smaller stockpile (and thus liability for situation such as this one). China made this decision, no oen forced it to, so it (USD) can't be all that worthless a currency indeed....back then or now.

Okay, that makes sense. Would it be an option for China to sell these bonds to 3rd countries interested in increasing their USD reserves? At a loss, if necessary. That might dump some of the risk for China.

 

[Aspen]

But if the US collapse because of 'dumping' China will come out even better. Why bother to wait? Break the runner's leg while he is running, right? Or is it that you really do not know what you are talking about?

Completely stupid argument. The larger the gap between China and US grows, the more destructive it will be to US economy when dollar is dumped. It is better to dump dollar when Chinese economy has a major lead over US economy than the other way around. Time favors China.

 

[gambit]

Completely stupid argument. The larger the gap between China and US grows, the more destructive it will be to US economy when dollar is dumped. It is better to dump dollar when Chinese economy has a major lead over US economy than the other way around. Time favors China.

Time favors China. Yeah...Since '09...And remember, Venezuela and Russia are allies in this venture...

 

[CIA Mole]

You guys are uneducated in this matter, institutions keep currency reserves for many reasons.

Also, US and China need each other despite all the 3rd parties (India, Vietnam, Russia ...) trying to get them to fight.

This pandemic just shows that US cannot rely on anyone but itself and China for production. China also needs US consumerism and technologies.

Everyone else is falling apart except rest of East Asia and Germany.


Also, the notion that selling bonds will necessarily make Chinese less competitive for exports is wrong. Go study on your own why this is the case.

 

[Pax Ottomana]

Chinese gold reserves (in tonnes) in the last 20 years. There are some major jumps in the last few years.

https://tradingeconomics.com/china/gold-reserves

Compare this to US' gold reserve trends for the same period.

https://tradingeconomics.com/united-states/gold-reserves

 

[Vikram.veda]

How do you think China bought T-bonds in the first place? They bought it with dollars. T-bonds may have large store value and paperwork but this only slows down the sellback process, it does not stop it. If China wants to dump the dollar, it will shock the US economy to an extent that it will never be able to overtake China again. If China wants to sell those T-bonds, US will have to buy it, they don't have any other option. Refusing to buy back China's T-bonds or canceling dollar in China will make dollar a worthless piece of paper overnight. ECB or anyone else is not going to be able to fill China's void. China buying into dollar is the reason the dollar is even worth anything in the first place. If China dumps the dollar, the universality of the dollar in the global economy will go in the dustbin and dollar will be no better better than the Pound or Euro.

Not unless US takes the world into confidence like @Nilgiri explained.

 

[Aspen]

Okay, that makes sense. Would it be an option for China to sell these bonds to 3rd countries interested in increasing their USD reserves? At a loss, if necessary. That might dump some of the risk for China.

I don't think that actually reduces much risk. It's like robbing Peter to pay Paul.

The countries China would sell T-bond to would probably be countries in Asia. If China dumps dollar, these are the same countries that they would want to also dump the dollar and if China sold them T-bonds, it complicates that. It would be a better move for China to sell its T-Bonds back directly to US where it will have maximum impact because then Asian countries would not have the burden of T-bonds to stop them from switching to Yuan and US will be hit much harder if it loses collective demand for dollar directly to increase in Yuan than isolated increase in some other random 3rd currencies. Selling T-bonds directly back to US while China is largest owner of debt in US will result in the largest possible decrease of dollar which is what China should aim for. China can force US into buying back all its T-bonds by blackmailing US since a refusal to buy back T-bonds will make dollar a piece of paper overnight.

 

[PakFactor]

We will have to wait for our community college economics professor to explain that part.

You mad, while their are some good people, US has produced morons of the Lindsey Graham caliber to lead this nation, what else you expect me to say? Half the morons born in this country voted for a f*ucking moron who encouraged consumption of Bleach and Lysol and you had idiots who followed through.

https://www.google.com/amp/s/slate....on-control-centers-increase-trump-remarks.amp

For others who are arguing about China dropping dollars to hit the US. It will make no difference if they dump it as the majority of the Debt is held by US citizens itself. Out of the 6.7T held by foreign countries China is only 1.2T. They’ll need to hold this in-order to trade; if they do dump it theirs more than enough liquidity in the market to pick it up.

• Foreign: $6.78 trillion (in Febuary 2020, Japan owned $1.27 trillion and China owned $1.09 trillion of U.S. debt, which is more than a third of foreign holdings)4
• Federal Reserve: $8 trillion
• Mutual funds: $2.17 trillion
• State and local governments, including their pension funds: $1 trillion
• Private pension funds: $727.5 billion
• Insurance companies: $208.2 billion
• U.S. savings bonds: $152.3 billion
• Other holders such as individuals, government-sponsored enterprises, brokers and dealers, banks, bank personal trusts and estates, corporate and non-corporate businesses, and other investors: $3.68 trillion5

 

[Aspen]

Not unless US takes the world into confidence like @Nilgiri explained.

Highly unlikely after US decided to weaponize the dollar

 

[Vikram.veda]

Highly unlikely after US decided to weaponize the dollar

Let's see how things will unfold from here on.

 

[gambit]

For others who are arguing about China dropping dollars to hit the US. It will make no difference if they dump it as the majority of the Debt is held by US citizens itself. Out of the 6.7T held by foreign countries China is only 1.2T. They’ll need to hold this in-order to trade; if they do dump it theirs more than enough liquidity in the market to pick it up.

I just find it amusing that you replied to me about this rather than correcting those who made such silly 'dumping' claims. Further, the Americans on this forum pointed out YEARS AGO that the majority of US debt is owned by the Americans themselves, like you said, that means posts like no. 43 are more for personal jerk-off satisfaction than it is about understanding economics. I just think it is hilarious that you made more effort at insulting Americans than it is to technically correct others when they are clearly wrong from ignorance.

And by the way, professor, it is "there's", not "theirs". Am not a perfessor.