4 ms·

When China's makes the call on US debt, its going to be very bleak day.

panarky 2mo ago
It would be bleak because the US won't pay, and that would crater both the US and China. That's why China will never do this. Better for both nations to extend and pretend.
- ecommerceguy 2mo ago
  Are you saying the bond market would go without a bid?
  - panarky 2mo ago
    I'm saying bond prices would drop sharply if China tried to rapidly sell even 10% of its holdings. When bond prices drop, US interest rates go up, which hurts the real US economy. And when bond prices drop, that devalues the remaining 90% of China's holdings, hurting China too. The Fed could stabilize the bond market by printing dollars to buy the bonds itself, but that would devalue the dollar and drive up inflation in the US. When China tries to repatriate that wealth, they must sell dollars and buy yuan, which would drive up the value of the yuan, driving up the cost of Chinese exports, hurting their manufacturing sector. It's mutually assured destruction.
    - teravor 2mo ago
      > It's mutually assured destruction. it doesn't sound like it from what you said. China appears to have the option to destroy the US economy by forfeiting much of the value of the US dollars they have, they don't have to buy yuan with it.
      - panarky 2mo ago
        Both economies would suffer massive shockwaves, but the US has central bank tools to absorb the blow, while China destroys its own asset base with no way to recover the loss. They're not going to burn down their own house just to smoke out their neighbor.
        sscaryterry 2mo ago
        Never say never.
    - justin66 2mo ago
      Just Googling here: 10% of China's holdings would be $66B. Daily trading volume for US Treasuries is $1.2T. The most the Fed has ever held on its balance sheet is $5.8T. Maybe I missed a zero somewhere but China's sale of 10% of their holdings seems in isolation like an awfully manageable problem. A different discussion if there were a ton of other crazy stuff going on in the world economy and they just piled on, perhaps.
      - weakened_malloc 2mo ago
        As someone who's very well informed on that corner of financial markets.. you're absolutely right. 66bn might cause some minor moves in yields but it's far from a disaster. US 10y bond auctions are often >40bn in size, with shorter maturities well over that. The seller of this debt (China) wouldn't want to smash the market because they'd only be shooting themselves in the foot. Point being that it's an easily digestible amount of debt.
        panarky 2mo ago
        As someone who's very well informed on that corner of financial markets, you probably realize that China controls much more than $660 billion of US Treasury securities. I'm sure you also realize that when a large holder sells a significant stake of any asset, traders anticipate they will sell more in the future. Example 1: Berkshire Hathaway selling $47 million of BYD and the market price dropping 8% the next day, wiping out $10 billion of market value. Example 2: Musk selling 0.6% of his stake in Tesla, and the market price dropping 15% the next day, wiping out $187 billion in market value. Example 3: UK government announcing a planned sale of 0.3% of above-ground gold, and the global gold price plunging 10% before the first auction.
        sscaryterry 2mo ago
        Thank you, you've explained much better what I meant by "the call".
        justin66 2mo ago
        > As someone who's very well informed on that corner of financial markets, you probably realize that China controls much more than $660 billion of US Treasury securities. How much do they control? Please cite your sources. I can find some information about "shadow holdings" (exciting!) held in Luxembourg and Belgium [0] but I cannot imagine those treasuries would add up to a multiple of what's officially on the books and held by the Chinese government and Chinese companies. Interesting thought, though. [0] https://www.cnbc.com/2026/05/19/central-banks-offload-us-treasuries-china-holdings-at-18-year-low.html https://www.cnbc.com/2026/05/19/central-banks-offload-us-tre...
- sscaryterry 2mo ago
  Yes, you are right, but that doesn't mean China doesn't have an enormous amount of leverage and influence. With all the grandstanding of the "great" POTUS, I'm yet to see a material effect of his so called tariffs. All I'm seeing are home-goals.
  - andsoitis 2mo ago
    > that doesn't mean China doesn't have an enormous amount of leverage and influence. Explain?
TechDebtDevin 2mo ago
[dead]
notyourwork 2mo ago
How does that play out for them? China gets a lot of money from US spending.
- Johanx64 2mo ago
  US monopoly money has value mainly because of petro dollar. Once that wraps up, US money will be not much more than toiletpaper. And that is wrapping up because world has like ~60years of oil left at current consumption rates.
  - fragmede 2mo ago
    As the world moves over to electricity instead of fossil fuels, the petrodollar/yuan isn't going to matter as much anymore.
    - etempleton 2mo ago
      I once thought that this would be true, but wars are fought with oil burning machinery. And so countries with oil will always be able to play bully. A country with strong access to oil also has the most important resource in war. Batteries are simply less dense energy storage.
      - fragmede 2mo ago
        Wars are not always going to be fought with oil burning machinery. China, along with everyone else, is working real hard on that.
        etempleton 2mo ago
        I think you would be surprised, but yes, there will be a lot of battery tech on the field.
  - andsoitis 2mo ago
    > US monopoly money has value mainly because of petro dollar. A currency’s value reflects confidence in the economy issuing it. The dollar is backed implicitly by the size, productivity, and stability of the US economy.
rootusrootus 2mo ago
What are they going to buy instead? And how are they going to sell any significant amount of their holdings without taking a bath themselves?
spott 2mo ago
How would china “make the call on us debt”? That debt is all treasury securities bought on the open market. They can’t demand the US pays them back early any more than you can.
- maxerickson 2mo ago
  China doesn't hold all that much debt, so this doesn't apply But anyway, a large debt holder can bind up the borrower by announcing they think the debt they hold is worthless. The impact would depend on how much debt it was, with a large amount being dumped almost certainly increasing the cost of borrowing.
  - spott 2mo ago
    It depends on how that debt is owned. If I go to a bank, and I get a loan, then the terms of that loan allow the bank to do that. If I sell a bond, then I set the terms, and I say that you can’t do that. You buy the bond understanding the terms. China owns treasury bonds, they don’t have the ability to “bind up the borrower”. They can sell their bonds at market prices, but they can’t say “this debt is worthless, pay us now”. That’s not how bonds work.
    - maxerickson 2mo ago
      That's isn't what I am arguing. I'm arguing that a very large holder of bonds can potentially set the market price. If they move the market for the older bonds, they will move the market for new issues.
weakened_malloc 2mo ago
The Chinese (or anyone, for that matter) can't just 'call' US debt. They can either wait for it to mature or sell it to someone else.

It would be bleak because the US won't pay, and that would crater both the US and China. That's why China will never do this. Better for both nations to extend and pretend.

ecommerceguy 2mo ago
Are you saying the bond market would go without a bid?
- panarky 2mo ago
  I'm saying bond prices would drop sharply if China tried to rapidly sell even 10% of its holdings. When bond prices drop, US interest rates go up, which hurts the real US economy. And when bond prices drop, that devalues the remaining 90% of China's holdings, hurting China too. The Fed could stabilize the bond market by printing dollars to buy the bonds itself, but that would devalue the dollar and drive up inflation in the US. When China tries to repatriate that wealth, they must sell dollars and buy yuan, which would drive up the value of the yuan, driving up the cost of Chinese exports, hurting their manufacturing sector. It's mutually assured destruction.
  - teravor 2mo ago
    > It's mutually assured destruction. it doesn't sound like it from what you said. China appears to have the option to destroy the US economy by forfeiting much of the value of the US dollars they have, they don't have to buy yuan with it.
    - panarky 2mo ago
      Both economies would suffer massive shockwaves, but the US has central bank tools to absorb the blow, while China destroys its own asset base with no way to recover the loss. They're not going to burn down their own house just to smoke out their neighbor.
      - sscaryterry 2mo ago
        Never say never.
  - justin66 2mo ago
    Just Googling here: 10% of China's holdings would be $66B. Daily trading volume for US Treasuries is $1.2T. The most the Fed has ever held on its balance sheet is $5.8T. Maybe I missed a zero somewhere but China's sale of 10% of their holdings seems in isolation like an awfully manageable problem. A different discussion if there were a ton of other crazy stuff going on in the world economy and they just piled on, perhaps.
    - weakened_malloc 2mo ago
      As someone who's very well informed on that corner of financial markets.. you're absolutely right. 66bn might cause some minor moves in yields but it's far from a disaster. US 10y bond auctions are often >40bn in size, with shorter maturities well over that. The seller of this debt (China) wouldn't want to smash the market because they'd only be shooting themselves in the foot. Point being that it's an easily digestible amount of debt.
      - panarky 2mo ago
        As someone who's very well informed on that corner of financial markets, you probably realize that China controls much more than $660 billion of US Treasury securities. I'm sure you also realize that when a large holder sells a significant stake of any asset, traders anticipate they will sell more in the future. Example 1: Berkshire Hathaway selling $47 million of BYD and the market price dropping 8% the next day, wiping out $10 billion of market value. Example 2: Musk selling 0.6% of his stake in Tesla, and the market price dropping 15% the next day, wiping out $187 billion in market value. Example 3: UK government announcing a planned sale of 0.3% of above-ground gold, and the global gold price plunging 10% before the first auction.
        sscaryterry 2mo ago
        Thank you, you've explained much better what I meant by "the call".
        justin66 2mo ago
        > As someone who's very well informed on that corner of financial markets, you probably realize that China controls much more than $660 billion of US Treasury securities. How much do they control? Please cite your sources. I can find some information about "shadow holdings" (exciting!) held in Luxembourg and Belgium [0] but I cannot imagine those treasuries would add up to a multiple of what's officially on the books and held by the Chinese government and Chinese companies. Interesting thought, though. [0] https://www.cnbc.com/2026/05/19/central-banks-offload-us-treasuries-china-holdings-at-18-year-low.html https://www.cnbc.com/2026/05/19/central-banks-offload-us-tre...
sscaryterry 2mo ago
Yes, you are right, but that doesn't mean China doesn't have an enormous amount of leverage and influence. With all the grandstanding of the "great" POTUS, I'm yet to see a material effect of his so called tariffs. All I'm seeing are home-goals.
- andsoitis 2mo ago
  > that doesn't mean China doesn't have an enormous amount of leverage and influence. Explain?

TechDebtDevin 2mo ago

[dead]

notyourwork 2mo ago

How does that play out for them? China gets a lot of money from US spending.

Johanx64 2mo ago
US monopoly money has value mainly because of petro dollar. Once that wraps up, US money will be not much more than toiletpaper. And that is wrapping up because world has like ~60years of oil left at current consumption rates.
- fragmede 2mo ago
  As the world moves over to electricity instead of fossil fuels, the petrodollar/yuan isn't going to matter as much anymore.
  - etempleton 2mo ago
    I once thought that this would be true, but wars are fought with oil burning machinery. And so countries with oil will always be able to play bully. A country with strong access to oil also has the most important resource in war. Batteries are simply less dense energy storage.
    - fragmede 2mo ago
      Wars are not always going to be fought with oil burning machinery. China, along with everyone else, is working real hard on that.
      - etempleton 2mo ago
        I think you would be surprised, but yes, there will be a lot of battery tech on the field.
- andsoitis 2mo ago
  > US monopoly money has value mainly because of petro dollar. A currency’s value reflects confidence in the economy issuing it. The dollar is backed implicitly by the size, productivity, and stability of the US economy.

rootusrootus 2mo ago

What are they going to buy instead? And how are they going to sell any significant amount of their holdings without taking a bath themselves?

spott 2mo ago

How would china “make the call on us debt”? That debt is all treasury securities bought on the open market. They can’t demand the US pays them back early any more than you can.

maxerickson 2mo ago
China doesn't hold all that much debt, so this doesn't apply But anyway, a large debt holder can bind up the borrower by announcing they think the debt they hold is worthless. The impact would depend on how much debt it was, with a large amount being dumped almost certainly increasing the cost of borrowing.
- spott 2mo ago
  It depends on how that debt is owned. If I go to a bank, and I get a loan, then the terms of that loan allow the bank to do that. If I sell a bond, then I set the terms, and I say that you can’t do that. You buy the bond understanding the terms. China owns treasury bonds, they don’t have the ability to “bind up the borrower”. They can sell their bonds at market prices, but they can’t say “this debt is worthless, pay us now”. That’s not how bonds work.
  - maxerickson 2mo ago
    That's isn't what I am arguing. I'm arguing that a very large holder of bonds can potentially set the market price. If they move the market for the older bonds, they will move the market for new issues.

weakened_malloc 2mo ago

The Chinese (or anyone, for that matter) can't just 'call' US debt. They can either wait for it to mature or sell it to someone else.