3 ms·

If the Chinese dumped their bonds interest rates would spike and this would be a crisis for the USA. This guy doesn't seem to get that.

polymatter 13y ago
it would also be a crisis for China (and thereafter the rest of the world)
- a8da6b0c91d 13y ago
  The issue is that the global diet for treasuries artificially holds down interest rates. If purchases slowed or holdings were sold, interest rates would rise. Whether it would be a crisis or merely hurt is a marginal distinction. The government of the USA would go bankrupt in months if interest rates rose to 5%, which is an historically normal figure.
  - shamshiel 13y ago
    There's nothing artificial about it. That's normal economics at work. Interest rates will remain low as long as the economy remains weak. They will rise to 5% when the economy becomes stronger and inflation rises, reducing the level of existing debt to GDP.
dev1n 13y ago
Bonds aren't callable.
- a8da6b0c91d 13y ago
  You can sell bonds.
hannibal5 13y ago
That would be worse for China because the value of CNY would skyrocket stopping their exports. Value of USD would plummet helping US exports. Besides, China and foreigners are not anywhere near the biggest buyers of US debt. Fed is. Chinese and Japanese had actually five month net selling period earlier this year.
- a8da6b0c91d 13y ago
  It's rather tricky to predict how a Chinese decision to appreciate the rmb would play out in practice. Many export powerhouses have had very strong currencies for long periods. It's not as simple as saying US exports would go up and the Chinese economy would suffer. You have to consider that the Chinese have savings and would find themselves far richer in global commodities. You also have to consider the US economy's heavy dependence on freakishly low interest rates.
- aliston 13y ago
  It would be a crisis so long as China remains an export-driven manufacturing-based economy. But, as China becomes wealthier, knowledge-based economy, it won't be as big a deal. With 1/6th of the world's population, I would think there would be plenty of domestic buyers.
deleted 13y ago
[deleted]

polymatter 13y ago

it would also be a crisis for China (and thereafter the rest of the world)

a8da6b0c91d 13y ago
The issue is that the global diet for treasuries artificially holds down interest rates. If purchases slowed or holdings were sold, interest rates would rise. Whether it would be a crisis or merely hurt is a marginal distinction. The government of the USA would go bankrupt in months if interest rates rose to 5%, which is an historically normal figure.
- shamshiel 13y ago
  There's nothing artificial about it. That's normal economics at work. Interest rates will remain low as long as the economy remains weak. They will rise to 5% when the economy becomes stronger and inflation rises, reducing the level of existing debt to GDP.

dev1n 13y ago

Bonds aren't callable.

a8da6b0c91d 13y ago
You can sell bonds.

hannibal5 13y ago

That would be worse for China because the value of CNY would skyrocket stopping their exports. Value of USD would plummet helping US exports. Besides, China and foreigners are not anywhere near the biggest buyers of US debt. Fed is. Chinese and Japanese had actually five month net selling period earlier this year.

a8da6b0c91d 13y ago
It's rather tricky to predict how a Chinese decision to appreciate the rmb would play out in practice. Many export powerhouses have had very strong currencies for long periods. It's not as simple as saying US exports would go up and the Chinese economy would suffer. You have to consider that the Chinese have savings and would find themselves far richer in global commodities. You also have to consider the US economy's heavy dependence on freakishly low interest rates.
aliston 13y ago
It would be a crisis so long as China remains an export-driven manufacturing-based economy. But, as China becomes wealthier, knowledge-based economy, it won't be as big a deal. With 1/6th of the world's population, I would think there would be plenty of domestic buyers.

deleted 13y ago

[deleted]