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They can do that, although they would lose an incredible amount of money with that dumping. Further, this must be considered an act of warfare executed through

They can do that, although they would lose an incredible amount of money with that dumping. Further, this must be considered an act of warfare executed through financial means. What makes you think the following will be true? 1) The Fed won't simply buy them all up, then unwind their position over the next few years. 2) China won't be subject to extraordinary DPRK-like secondary sanctions, minimizing China's ability to trade with those dollars and thus limiting the inflationary effect of those newly-printed proceeds. 3) The US will not retaliate with other coercive measures, like sector-wide sanctions on strategic Chinese market sectors, elimination of MFN status, removal from WTO, military pressure in the South China Sea, etc., which combined are likely more than enough to dissuade China.

slededit 8y ago
We're already in a new cold war. If hacking power plants and publicly releasing government secrets to sway elections aren't acts of war, legal market activities like selling treasuries won't be either. It would certainly be an escalation and the US would respond but its pernicious in its attack of the free market values of the US. Any response would be tacit admission that there are flaws in the capitalist system and as a result it would be more subdued than otherwise. Any attack would not be motivated by money. It would be a striking blow at a weak US to knock it down from its super power perch.
- kyboren 8y ago
  I'm not sure it would have that effect. Such an action from China would almost certainly result in solidarity and coordinated action from basically the entire West. If others don't act, they're next. I also don't see how a US response is somehow an attack on free market values. Dumping $1.2T of Treasuries onto the open market is not normal market activity. It's an attempt to manipulate and distort the market. China wants to surpass the US, but while such a stunt might harm the US, it would do immense damage to China. I think it would be more like a striking blow alienating China from much of the global economy and financial system for a long time to come. That is surely not the route to surpassing the US as the preeminent world power.

slededit 8y ago

We're already in a new cold war. If hacking power plants and publicly releasing government secrets to sway elections aren't acts of war, legal market activities like selling treasuries won't be either. It would certainly be an escalation and the US would respond but its pernicious in its attack of the free market values of the US. Any response would be tacit admission that there are flaws in the capitalist system and as a result it would be more subdued than otherwise. Any attack would not be motivated by money. It would be a striking blow at a weak US to knock it down from its super power perch.

kyboren 8y ago
I'm not sure it would have that effect. Such an action from China would almost certainly result in solidarity and coordinated action from basically the entire West. If others don't act, they're next. I also don't see how a US response is somehow an attack on free market values. Dumping $1.2T of Treasuries onto the open market is not normal market activity. It's an attempt to manipulate and distort the market. China wants to surpass the US, but while such a stunt might harm the US, it would do immense damage to China. I think it would be more like a striking blow alienating China from much of the global economy and financial system for a long time to come. That is surely not the route to surpassing the US as the preeminent world power.