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all I know is they raise interest rates, it absorbs up the money supply in circulation due to the attractive yields on the Ts also the whole trope about 'China
by appsonify 8y ago
all I know is they raise interest rates, it absorbs up the money supply in circulation due to the attractive yields on the Ts
also the whole trope about 'China owning most of US T-bills' is actually false, there is apparently T-bills that are specifically sold to foreign nations, and then there are the real T-bills that not many countries own. The other one is an IOU and may not be honored, say during wartime.
- deleted 8y ago[deleted]
- sbov 8y agoThis seems to break down who owns what: https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalance.com/who-owns-the-u-s-national-debt-33... The single largest holder of government debt is the Social Security Trust Fund.
- pas 8y agoThey raise the rates indirectly, by selling T-bills on the secondary market, which simply sucks money out of the circulation. (Which makes simply makes debt more expensive, and that leads to T-rate increase.) > also the whole trope about 'China owning most of US T-bills' is actually false, They are just the largest foreign holder, and it was noteworthy because of the rapid rise in the distribution of foreign debt holders. Anyway, my thought process was that even if the US money supply drops, it should not influence T-bill auctions, because the whole world likes it (due to being the least risky investment). But it's very likely that the T-rate was low because banks and other investors exploited the low FFR. Now that's gone, the system settled in a higher equilibrium (as foreign and other investors had no real reason to change their behavior).