Watch what China does with US debt, not what it says

Discussion in 'China' started by W.G.Ewald, Oct 15, 2013.

  1. W.G.Ewald

    W.G.Ewald Defence Professionals/ DFI member of 2 Defence Professionals

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    Watch what China does with US debt, not what it says – Telegraph Blogs
     
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  3. J20!

    J20! Senior Member Senior Member

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    o bear that in mind when you read the Xinhua claims that the US debt ceiling fight "has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonised."

    Well it has; hasn't it?

    A few right wing politicians are holding the barely recovering world economy ransom to get their way on a piece of legislation that has already been voted on and PASSED and confirmed by the supreme court.

    What Xinhua is "saying" is what the republicans are doing.
     
  4. drkrn

    drkrn Senior Member Senior Member

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    china is buying us bonds and lending loans to us so that usa will buy more goods from china.
    though very hard for the world to bear another economic depression,what would be the consequence with respect to china if usa defaults.what can china do to get its money from usa?
     
  5. sob

    sob Moderator Moderator

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    China has no option they have to keep on buying US T bills in order to keep the FX ratio at a comfortable level. Nor can they afford any drastic drop in the bond market otherwise their investment will turn to junk status.

    Once the US fed eases off the gas then we shall see who will be the big seller, the Japanese or the Chinese.
     
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  6. drkrn

    drkrn Senior Member Senior Member

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    what does it mean
     
  7. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    The US is not in danger of default, they are playing their usual political games. China is certainly in no position to be criticising on debt. :lol:
     
  8. no smoking

    no smoking Senior Member Senior Member

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    Well, if USA defaults its debt, american public will throw any president making this decision into an oven even before Chinese can say a word.

    You know why? Because 80% of US debts is hold by AMERICANS!
    Think about it:
    what will millions of americans do when they hear that their life savings are just turned to rubbish paper.
    what will those multi-national companies do when their investment on US federal bonds suddently disppear.
    what will wall street say when a large part of their mortage just gone.
     
  9. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    China cannot do anything if USA refuses to buy the debt, currently there is no market
    For US debt it is only paper.China is in no position to dictate any terms to USA.
    China is receiving. Half of one percent interest on us treasury, they should be
    Happy with it,without usa china has no economy.
     
  10. sob

    sob Moderator Moderator

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    The Bond Bull Market: Why it's Over, and What You Can Do About it.

    With the Federal bond buying programme of nearly US $85 billion a month starts to taper off the bond yields will start to go up and the prices of the bonds will start falling. china and Japan have huge amount of US T bonds and if the prices start falling then it impacts their portfolios.
     
  11. W.G.Ewald

    W.G.Ewald Defence Professionals/ DFI member of 2 Defence Professionals

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    You must mean interest rates?
     
  12. drkrn

    drkrn Senior Member Senior Member

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    my question is what if they default now(hypothetical)
     
  13. drkrn

    drkrn Senior Member Senior Member

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    afaik federal american government debts are 16 trillion $ china and japan accounts for near 7 trillion.which constitute near 50%.are you speaking of debts by local governments??pls post some links.
     
  14. drkrn

    drkrn Senior Member Senior Member

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    how come i know.
    i asked to learn the possibilities.

    looking at the current rate of debt growing for america,it surely isn't a good sign
     
  15. drkrn

    drkrn Senior Member Senior Member

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    inflation rate in america is 1.5% current year.
    if the interest provided on the federal bonds is not higher than the inflation technically it becomes a depreciating asset.a good thing for usa not for its lenders
     
  16. sob

    sob Moderator Moderator

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    I meant the bond rates will fall. They are always inverse of the Bond Yields.

    Also technically the interest rates should rise in the US once the Fed starts to taper the QE.

    The basic idea of the QE was to have lower interest rates to simulate the economy, get the people to spend more, and in turn have a slightly higher inflation. With a higher inflation the Dollar would have settled lower helping the American exporters.
     
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  17. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    A credit downgrade for sure but the US economy is not backed by faith and credit in its government, it is by and large a huge private equity of corporate bonds which would be unaffected In fact, much of the equity in government bonds would shift to these markets since EU and developing economies are bigger duds than the US corporate sector. The amount of trading from government dependent industries to the commercial dependent would be huge, probably the biggest week of trading the NYSE has ever seen and the largest capital formation on record. The value of the dollar would decline a bit, but that is exactly what QE does by purpose so they could achieve depreciation without cash injection. It would force the federal government to contract its budget and some economic output from government spending would be lost... Tea Party couldn't be happier.
     
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  18. sob

    sob Moderator Moderator

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    Why do you think all the emerging markets are pleading with the US not to taper off the QE?
     
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  19. s002wjh

    s002wjh Senior Member Senior Member

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    US won't default, anyone who actually do that is crazy, japan hold 1.4Trillion Tbond, china 1.2T, the rest is hold mostly by american company/citizen. ask any american's 401k/pension etc, those mutual funds are typical are in US cash/tbond/stock, and all are relate to us debt/economy etc. if government default guess what happen!!!.
     
  20. s002wjh

    s002wjh Senior Member Senior Member

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    don't know where you get the idea, US debt is 16 trilions, you think default that will ONLY affect economy a bit :laugh: do you know how many american hold Tbond via their 401k, retirment fund, goto fidelity and check. china and japan combine has less than 3 trillions US debt
     
  21. s002wjh

    s002wjh Senior Member Senior Member

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    default would meant funding would be stopped, thousands fed work potentially wont get payed, no more interest pay to the current debt holder, credit rating plumet, stock market plumet, the next great depression, thats what it is.
     

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