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> weaken the dollar and lower US borrowing costs I found this confusing as weakening the dollar and lowering borrowing costs would seem to be at odds. Apparent
by wahern 1y ago
> weaken the dollar and lower US borrowing costs
I found this confusing as weakening the dollar and lowering borrowing costs would seem to be at odds. Apparently the "deal" involves central banks which hold US Treasuries swapping some large share of them for near-zero interest ultra-long Treasury bonds (50-100 years), to prevent yields on typical Treasury bonds spiking when rolling over debt. See https://www.cfr.org/article/mar-lago-accord-not-recipe-success https://www.cfr.org/article/mar-lago-accord-not-recipe-succe...
I'm still not sure how that's supposed to work to actually lower borrowing costs rather than blunt the increase. Maybe it's like the Laffer Curve where they rely on some very specific hypothetical conditions to make the numbers work?
- slt2021 1y agoChina calls 100 year zero coupon bonds basically Technical Default on foreign debt, and rejected it. If you think about, it really is a default, because US borrowers are being forced to exchange their cash into trust-me-bro letters. Technically USD has been a trust me bro paper ever since Bretton Woods, but today the trust in the system is really at very low level, unlike before
- mcv 1y agoThat's the real damage Trump is causing. The US has traded on trust for the past 80 years, but they had that trust. Trump squanders that trust and then wants a new trust-based deal? That ship has sailed, and he's the one who sent it off.