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China can start selling their U.S. treasury bonds, no?

by tareqak 7y ago

khuey 7y ago
That would raise the value of their currency and make their exports less competitive.
- tareqak 7y ago
  It would, but China might be close to the point where it wants to start to transition to a more service-based economy. In that case, they can use the stronger currency to buy the resources they require and establish favourable trade agreements with nations other than the United States.
- Fjolsvith 7y ago
  It would literally reduce the trade deficit between the US and China: "But Trump’s obsession with interest rates stems from a larger concern — boosting economic growth. He only wants the Fed to lower rates so U.S. banks will put some of their $1.4 trillion in reserves to work in the economy. A huge sale of U.S. Treasuries by China would have a similar effect: As interest rates on Treasuries began to rise, banks would use some of their reserves to buy more Treasuries. That spending would put more cash into the wider U.S. economy and stimulate growth. There is a second, somewhat related, effect of a sale of Chinese bonds: It would drive down the value of the dollar. When China sells U.S. bonds, it receives dollars in exchange. The Chinese could use those dollars to buy other U.S. assets, but the whole point of selling Treasuries is for China to divest from all U.S. assets. That means the Chinese would need to exchange their dollars for some other currency — euros, pounds or even the yuan. Putting so many dollars on the foreign-exchange market would weaken the value of the dollar. The effect would be to drive up the price of foreign imports for U.S. consumers and drive down the price of U.S. exports." [1] 1. https://www.bloomberg.com/opinion/articles/2019-05-13/u-s-china-trade-war-how-a-china-bond-selloff-will-help-trump https://www.bloomberg.com/opinion/articles/2019-05-13/u-s-ch...
  - Fjolsvith 7y ago
    I've been thinking about this and I've come to the conclusion that Trump doesn't really want to work out a trade deal with China at this time. What I think he's trying to do is to prod China into dumping their Treasuries. From above: "The effect would be to drive up the price of foreign imports for U.S. consumers and drive down the price of U.S. exports." What would this do? It would make Americans buy American products. It would make the world buy American products. It would make American companies invest in US manufacturing, rather than overseas. What does massive economic growth do for the US? Pays down the national debt fast.
deleted 7y ago
[deleted]

China can start selling their U.S. treasury bonds, no?

khuey 7y ago

That would raise the value of their currency and make their exports less competitive.

tareqak 7y ago
It would, but China might be close to the point where it wants to start to transition to a more service-based economy. In that case, they can use the stronger currency to buy the resources they require and establish favourable trade agreements with nations other than the United States.
Fjolsvith 7y ago
It would literally reduce the trade deficit between the US and China: "But Trump’s obsession with interest rates stems from a larger concern — boosting economic growth. He only wants the Fed to lower rates so U.S. banks will put some of their $1.4 trillion in reserves to work in the economy. A huge sale of U.S. Treasuries by China would have a similar effect: As interest rates on Treasuries began to rise, banks would use some of their reserves to buy more Treasuries. That spending would put more cash into the wider U.S. economy and stimulate growth. There is a second, somewhat related, effect of a sale of Chinese bonds: It would drive down the value of the dollar. When China sells U.S. bonds, it receives dollars in exchange. The Chinese could use those dollars to buy other U.S. assets, but the whole point of selling Treasuries is for China to divest from all U.S. assets. That means the Chinese would need to exchange their dollars for some other currency — euros, pounds or even the yuan. Putting so many dollars on the foreign-exchange market would weaken the value of the dollar. The effect would be to drive up the price of foreign imports for U.S. consumers and drive down the price of U.S. exports." [1] 1. https://www.bloomberg.com/opinion/articles/2019-05-13/u-s-china-trade-war-how-a-china-bond-selloff-will-help-trump https://www.bloomberg.com/opinion/articles/2019-05-13/u-s-ch...
- Fjolsvith 7y ago
  I've been thinking about this and I've come to the conclusion that Trump doesn't really want to work out a trade deal with China at this time. What I think he's trying to do is to prod China into dumping their Treasuries. From above: "The effect would be to drive up the price of foreign imports for U.S. consumers and drive down the price of U.S. exports." What would this do? It would make Americans buy American products. It would make the world buy American products. It would make American companies invest in US manufacturing, rather than overseas. What does massive economic growth do for the US? Pays down the national debt fast.

deleted 7y ago

[deleted]