Discussion in 'China' started by W.G.Ewald, Oct 15, 2013.
Watch what China does with US debt, not what it says – Telegraph Blogs
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.
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?
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.
what does it mean
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.
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.
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.
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.
You must mean interest rates?
my question is what if they default now(hypothetical)
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.
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
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
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.
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.
Why do you think all the emerging markets are pleading with the US not to taper off the QE?
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!!!.
don't know where you get the idea, US debt is 16 trilions, you think default that will ONLY affect economy a bit 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
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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