3 ms·
Because if you're the US Government and you owe China a trillion dollars[0] you want those dollars to be worth as little as possible when it comes time to pay.
by nly 6y ago
Because if you're the US Government and you owe China a trillion dollars[0] you want those dollars to be worth as little as possible when it comes time to pay. This is why real treasury yields (yields adjusted for inflation) are negative[1].
The US runs a ~$300bn/year trade deficit with China, and historically the Chinese have been counteracting this by buying US debt and foreign assets.
[0] https://ticdata.treasury.gov/Publish/mfh.txt https://ticdata.treasury.gov/Publish/mfh.txt
[1] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield https://www.treasury.gov/resource-center/data-chart-center/i...
- nly 6y agoChina currently has $3T of foreign reserves. To see the trend click the max button on the graph: https://tradingeconomics.com/china/foreign-exchange-reserves https://tradingeconomics.com/china/foreign-exchange-reserves
- ac29 6y agoBut ~$21T of the total ~$28T of public debt is held domestically, so if the government wants that debt to be worth as little as possible when it pays it off, US individuals and institutions will be harmed much more than China or other foreign holders. https://www.treasurydirect.gov/govt/reports/pd/mspd/2020/opds122020.prn https://www.treasurydirect.gov/govt/reports/pd/mspd/2020/opd... (source for $28T total debt, your link shows total foreign holdings of ~$7T.)