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> Now if China initiated a mass sell-off of all of its US treasuries, there would be huge ramifications. But in its current form, this seems to just be one more

by exelius 11y ago

> Now if China initiated a mass sell-off of all of its US treasuries, there would be huge ramifications. But in its current form, this seems to just be one more way for China to slowly unravel its position in US treasuries while playing with the value of the RMB. Offloading foreign currency holdings in a mass sell-off is not something China would WANT to do -- it would end up destabilizing the Chinese economy more than the US economy. Not even as an economic warfare tactic: the global economy is dependent on cheap US money, and messing with that would set off a global recession that would hit an emerging superpower like China especially hard. I think you're right and China is just looking to rebalance its currency by drawing the dollar down a bit. That's not the worst idea in the world (either for China or for the US) and they're doing it right around the time the Fed was planning to raise rates anyway. I think the market is already spooked enough by the troubles in China that it would probably welcome a rate increase (for the reasons you listed above).

jsn117 11y ago
> I think you're right and China is just looking to rebalance its currency by drawing the dollar down a bit. In prep for having the Yuan as a global reserve currency.
- criley2 11y ago
  >In prep for having the Yuan as a global reserve currency. Actually, we just "denied" their request to be included in the IMF's SDR, and these responses are also interpreted by some as payback.
  - toomuchtodo 11y ago
    If this is payback, why were they kind enough to give us notice? They could've not given us notice and sold far more than they did.
    - criley2 11y ago
      >If this is payback, why were they kind enough to give us notice? They could've not given us notice and sold far more than they did. Because it's the kind of muted, minor payback that two economies that are linked at the hip give each other. China sells like $500B worth of goods to US every year. Rocking the US boat rocks their export boat which rocks the Chinese middle class. Creating economic instability in America would lead to political instability in China, methinks.
    - exelius 11y ago
      It's not payback; this doesn't hurt the US in the slightest. If anything, it devalues the dollar a little bit, which isn't really a terrible thing (the dollar is pretty highly valued right now which hurts US exports).
      - Asbostos 11y ago
        How does this make sense? I always want the currency I have to increase in value, not decrease. Does anyone actually like it when their savings lose value and they can no longer afford things they used to? Sure it helps exporters export more stuff, but they're getting paid with more worthless money so what's the point?
        Redoubts 11y ago
        It makes sense when you have debt instead of net savings. And it makes sense when your consumables are local, but you export internationally, so now your foreign customers can afford to buy more.
        DominikR 11y ago
        > It makes sense when you have debt instead of net savings. This is true for the US > And it makes sense when your consumables are local, but you export internationally, so now your foreign customers can afford to buy more. This certainly is not aside from financial products.
        11y ago
deleted 11y ago
[deleted]
macspoofing 11y ago
>the global economy is dependent on cheap US money Keep saying it and you may end up believing it.
DominikR 11y ago
> Offloading foreign currency holdings in a mass sell-off is not something China would WANT to do I'm sure China is not only guided by purely economic considerations here. They might already consider the possibility that China/Russia will soon be in a war with the US. It might make sense here to take an economic hit to bankrupt the US (or at least threaten it) to prevent an active military confrontation. > Not even as an economic warfare tactic: the global economy is dependent on cheap US money, and messing with that would set off a global recession that would hit an emerging superpower like China especially hard. People will suffer when countries engage in economic warfare and even more so if they engage in war. This has never held off a country escalating from economic tensions up to military actions. If China deems this is necessary because it is the best choice they have, they will certainly do it no matter what.

by exelius 11y ago

jsn117 11y ago

> I think you're right and China is just looking to rebalance its currency by drawing the dollar down a bit. In prep for having the Yuan as a global reserve currency.

criley2 11y ago
>In prep for having the Yuan as a global reserve currency. Actually, we just "denied" their request to be included in the IMF's SDR, and these responses are also interpreted by some as payback.
- toomuchtodo 11y ago
  If this is payback, why were they kind enough to give us notice? They could've not given us notice and sold far more than they did.
  - criley2 11y ago
    >If this is payback, why were they kind enough to give us notice? They could've not given us notice and sold far more than they did. Because it's the kind of muted, minor payback that two economies that are linked at the hip give each other. China sells like $500B worth of goods to US every year. Rocking the US boat rocks their export boat which rocks the Chinese middle class. Creating economic instability in America would lead to political instability in China, methinks.
  - exelius 11y ago
    It's not payback; this doesn't hurt the US in the slightest. If anything, it devalues the dollar a little bit, which isn't really a terrible thing (the dollar is pretty highly valued right now which hurts US exports).
    - Asbostos 11y ago
      How does this make sense? I always want the currency I have to increase in value, not decrease. Does anyone actually like it when their savings lose value and they can no longer afford things they used to? Sure it helps exporters export more stuff, but they're getting paid with more worthless money so what's the point?
      - Redoubts 11y ago
        It makes sense when you have debt instead of net savings. And it makes sense when your consumables are local, but you export internationally, so now your foreign customers can afford to buy more.
        DominikR 11y ago
        > It makes sense when you have debt instead of net savings. This is true for the US > And it makes sense when your consumables are local, but you export internationally, so now your foreign customers can afford to buy more. This certainly is not aside from financial products.
      - 11y ago

deleted 11y ago

[deleted]

macspoofing 11y ago

>the global economy is dependent on cheap US money Keep saying it and you may end up believing it.

DominikR 11y ago

> Offloading foreign currency holdings in a mass sell-off is not something China would WANT to do I'm sure China is not only guided by purely economic considerations here. They might already consider the possibility that China/Russia will soon be in a war with the US. It might make sense here to take an economic hit to bankrupt the US (or at least threaten it) to prevent an active military confrontation. > Not even as an economic warfare tactic: the global economy is dependent on cheap US money, and messing with that would set off a global recession that would hit an emerging superpower like China especially hard. People will suffer when countries engage in economic warfare and even more so if they engage in war. This has never held off a country escalating from economic tensions up to military actions. If China deems this is necessary because it is the best choice they have, they will certainly do it no matter what.