4 ms·
Avalanches can start with a single stone. EU together with UK and Canada hold more Treasurys than the entire rest of the world combined, and if they dumped the
by stackghost 8mo ago
Avalanches can start with a single stone.
EU together with UK and Canada hold more Treasurys than the entire rest of the world combined, and if they dumped them all at once it would be significantly painful for the average American as interest rates would spike, as would inflation. The Dollar would decline against most other major currencies.
However dumping that much debt all at once would require the sellers to heavily discount a large portion of their bonds, earning them increasingly fewer, and paying in (depreciating) dollars.
It's exceedingly likely that de-dollarization accelerates from here, but it's also unlikely that even the Norwegian government sells it all at once. Rather than mass selling, expect EU entities to curtail or even cease buying US bonds altogether if the geopolitical situation doesn't improve.
- JanisErdmanis 8mo ago> However dumping that much debt all at once would require the sellers to heavily discount a large portion of their bonds, earning them increasingly fewer, and paying in (depreciating) dollars. I think all investors are now looking at this with this foresight. Being the first to dump seems to be the winning game here.
- stackghost 8mo ago>I think all investors are now looking at this with this foresight. Being the first to dump seems to be the winning game here. When you're talking about hundreds of billions of dollars worth of bonds you simply can't move that much in one go. That's an elephant-in-the-bathtub situation where your moves disturb the market because of their size. Even the first entity to dump would still have to discount a lot of their bonds. Nobody on the bond market is going to make a $200B snap purchase.
- jacquesm 8mo agoThat's exactly what will drive the sell-off. Speed is key. Being the last one to sell is going to leave you with the worst of it.
- arnonejoe 8mo agoThe fed would almost certainly intervene aggressively resuming large scale QE to buy up treasuries and stabilize yields.
- ViewTrick1002 8mo agoWhich would lead to inflation right? Leading to these bonds having even lower value? Showing that you don’t want to be the last one out since either the risk or inflation hits you.
- elenchev 8mo agowe've played this game before
- overfeed 8mo agoIn the past, the game was as played with the additional benefit of foreign bondholders and currency reserves slowing the overall velocity of money. The rest of the world has heen quietly blunting the inflationary effects of printing USD. Most Americans - this administration included - don't know how good they have had it, and are throwing it all away due to avarice.
- deadbabe 8mo agoWhat if the fed ceases to exist soon?
- exe34 8mo agoIt won't cease to exist, it will just answer to the orangefuhrer like most other US government agencies already do.
- willturman 8mo agodon't worry, because financial ouroboros
- stackghost 8mo ago>The fed would almost certainly intervene aggressively resuming large scale QE to buy up treasuries and stabilize yields. Indeed and QE is a major inflationary pressure.
- rishab178 8mo ago> EU together with UK and Canada hold more Treasurys than the entire rest of the world combined That is just not true? Out of the $38T, ~75% is held be US Domestic entities. Even of the remaining 25%, these 3 don’t combine together to form a majority. It’ll come out to something like $3.5T out of the $9.1T foreign holding (~38%). Or under 10% of the total debt. https://economicsinsider.com/top-15-largest-us-treasury-holders https://economicsinsider.com/top-15-largest-us-treasury-hold...