Keep your eyes on China

[Hessian]

While the rest of the world is holding its breath regarding fuel prices this Fall/winter...and Ukraine impacts a sizable foreign policy hand-wringing,

Evergrande has filed for Bankruptcy,...and another massive Chinese real-estate based bank...can't even pay interest on its bonds. Several US financial firms have downgraded the prospects of Chinese growth.
Growth for China was at .8% for April-May-June (1/3rd our rate)
Will China go for Taiwan...JUST to distract its people from their pending economic recession?
Will it's cloak/dagger secrecy hide its true financial status until a collapse is fully underway?

We are completely absent in regards to Chinese foreign policy under the 'leadership' of Ol' Lunchbucket.---That signals the Chinese to MOVE aggressively.(Especially since Chinese firms had handed millions to the Biden crime family)
Stay alert my friends...

 

[LightRoasted]

For your consideration ...

While the rest of the world is holding its breath regarding fuel prices this Fall/winter...and Ukraine impacts a sizable foreign policy hand-wringing,

Evergrande has filed for Bankruptcy,...and another massive Chinese real-estate based bank...can't even pay interest on its bonds. Several US financial firms have downgraded the prospects of Chinese growth.
Growth for China was at .8% for April-May-June (1/3rd our rate)
Will China go for Taiwan...JUST to distract its people from their pending economic recession?
Will it's cloak/dagger secrecy hide its true financial status until a collapse is fully underway?

We are completely absent in regards to Chinese foreign policy under the 'leadership' of Ol' Lunchbucket.---That signals the Chinese to MOVE aggressively.(Especially since Chinese firms had handed millions to the Biden crime family)
Stay alert my friends...

Not to worry. China has a sizable Sovereign Wealth Fund at its disposal which can, and is, being used to buy off/pay off, any US concerns by purchasing our businesses, lands, farms, etc., to alleviate such worrying things. In addition, they can basically hold us hostage with the treasures they hold. Of which, they could sell off all of it destroying our economy. Which they kinda have been doing incrementally of late. When "Ole Joe took office, China had about $1.092 Trillion in treasuries. That number is now down to less than $835 Billion. There's an old saying, "When negotiating, always negotiate from a position of strength". Currently, the US Government, is in a very weak position.

China cuts ‘increasingly political’ US Treasury holdings to 14-year low

China cut its holdings of US Treasuries for a third month in a row in June, reducing its stake by US$11.3 billion to US$835.4 billion amid an increasingly geopolitical environment.

www.scmp.com

 

[Clem72]

In addition, they can basically hold us hostage with the treasures they hold. Of which, they could sell off all of it destroying our economy. Which they kinda have been doing incrementally of late. When "Ole Joe took office, China had about $1.092 Trillion in treasuries. That number is now down to less than $835 Billion. There's an old saying, "When negotiating, always negotiate from a position of strength". Currently, the US Government, is in a very weak position.

Yeah, that's not a thing. Not even remotely. Social Security alone holds 2.7 Trillion and private (non-government) ownership is around 25 Trillion.

You know what happens when someone tries to sell a AAA (or maybe just AA+ since we were downgraded by one analyst) at a discount to face value? Someone buys it, immediately.

You could maybe kinda/sorta make the argument that if I could buy the same note from China for $0.90 to the dollar that I can from the USG, then the USG would need to raise it's rates in order to make themselves more appealing....except historical precedent says they wont.

The USG doesn't care about the secondary market. At all. Go spend as much time as you want researching this and you will find that the USG doesn't seem to react to or attempt to influence the secondary market because they only make money from direct sales, the overwhelming majority of which are to customers locked out of the secondary market.

Normal people own and buy the overwhelming majority of treasuries, and most do not have access to the secondary markets and couldn't buy in the quantities required even if they did. And this ignores the fact that if they wanted the USG could buy those same treasuries and immediately honor the note to themselves and then issue a new one for the full value. Yay free money.

And it doesn't matter because those 10% of buyers (institutions and governments primarily) that do buy on the secondary market would snap these up in a heartbeat. Effectively China will be transferring wealth to whomever buys the notes explicitly harming themselves while almost certainly having zero impact on the US governments ability to issue new debt.

 

[Hessian]

Quite a sharp anaylsis Clem....I can't follow that area of expertise---I never trained/studied it.
I am aware that the Chinese real estate market has utterly panicked millions of their citizens and the "Ghost" cities have come about at enormous cost.
THEN throw in the aging demographic...as aging workers leave the labor force,...younger workers have to pay for their care, and there is a demographic burden that can't carry that load.
NO idea how much Yuan China is throwing at their massive naval expansion & base in the Spratley's...only history will tell if that was a wise strategic decision compared to cost.

Hmmm, N Korea hasn't lit off any ICBMs recently...curious.

 

[LightRoasted]

For your consideration ...

Yeah, that's not a thing. Not even remotely. Social Security alone holds 2.7 Trillion and private (non-government) ownership is around 25 Trillion.

You know what happens when someone tries to sell a AAA (or maybe just AA+ since we were downgraded by one analyst) at a discount to face value? Someone buys it, immediately.

You could maybe kinda/sorta make the argument that if I could buy the same note from China for $0.90 to the dollar that I can from the USG, then the USG would need to raise it's rates in order to make themselves more appealing....except historical precedent says they wont.

The USG doesn't care about the secondary market. At all. Go spend as much time as you want researching this and you will find that the USG doesn't seem to react to or attempt to influence the secondary market because they only make money from direct sales, the overwhelming majority of which are to customers locked out of the secondary market.

Normal people own and buy the overwhelming majority of treasuries, and most do not have access to the secondary markets and couldn't buy in the quantities required even if they did. And this ignores the fact that if they wanted the USG could buy those same treasuries and immediately honor the note to themselves and then issue a new one for the full value. Yay free money.

And it doesn't matter because those 10% of buyers (institutions and governments primarily) that do buy on the secondary market would snap these up in a heartbeat. Effectively China will be transferring wealth to whomever buys the notes explicitly harming themselves while almost certainly having zero impact on the US governments ability to issue new debt.

The huge difference is that the Social Security Trust Fund is not gonna sell off all their Treasuries at once. At present total US debt held foreign countries is $7.4 trillion. If China, or any other country decided to sell off all their holdings, and other countries followed suit creating a domino effect, what do you think would happen? And now, with the BRICS countries, trading energy in other than US dollars, and not needing them any more, what do you think will happen if more countries join them? In addition, the USG is having an extremely hard time of late selling any Treasuries, many times finding no buyers.

And actually, the total outstanding Treasuries, which includes all owners, US based and foreign accounts, is $25.1 trillion, of which foreign ownership is $7.4 trillion in Treasuries — or roughly 24% of total US debt.

 

[Clem72]

For your consideration ...



The huge difference is that the Social Security Trust Fund is not gonna sell off all their Treasuries at once. At present total US debt held foreign countries is $7.4 trillion. If China, or any other country decided to sell off all their holdings, and other countries followed suit creating a domino effect, what do you think would happen? And now, with the BRICS countries, trading energy in other than US dollars, and not needing them any more, what do you think will happen if more countries join them? In addition, the USG is having an extremely hard time of late selling any Treasuries, many times finding no buyers.

And actually, the total outstanding Treasuries, which includes all owners, US based and foreign accounts, is $25.1 trillion, of which foreign ownership is $7.4 trillion in Treasuries — or roughly 24% of total US debt.

So you focused on one half of a sentence in my first paragraph that had nothing to do with my actual argument about how treasuries are sold on the secondary market?

I mean I know why you did it, because you can't argue against my real point.

All you have to do to prove me wrong is go buy some treasury notes on the secondary market. Even just one. Do it.

 

[LightRoasted]

For your consideration ...

So you focused on one half of a sentence in my first paragraph that had nothing to do with my actual argument about how treasuries are sold on the secondary market?

I mean I know why you did it, because you can't argue against my real point.

All you have to do to prove me wrong is go buy some treasury notes on the secondary market. Even just one. Do it.

I understand your argument. But really, who is going to buy, who has the money readily available and on hand, the hundred of billions, or trillions, of dollars of treasuries if some countries want to dump their holdings? Discounted or not?

 

[Clem72]

For your consideration ...



I understand your argument. But really, who is going to buy, who has the money readily available and on hand, the hundred of billions, or trillions, of dollars of treasuries if some countries want to dump their holdings? Discounted or not?

Like I said, many entities would do so. It's still the best bet security in the world. But if no one buys them that's actually the best case scenario.

But for sake of argument, let's say they decide to dump a trillion bucks worth all at once and no big institutions or countries want free money.

Do you know which quasi-governmental institution buys and sells huge amounts of treasuries ONLY on the secondary market, does so all of the time (usually around 80 billion per month, every month)? The Federal Reserve. It's literally their job. They would have zero trouble buying those discounted securities, primarily because they can do with with make believe funny money, and then immediately re-issuing them at face value. All that would do is reduce the national debt by the discount rate.

And were not talking about $1T of new debt here, unless you think China will sell them for free. Were talking a few percent at most. A few tens of millions of bucks, maybe a hundred if they go crazy.

 

[LightRoasted]

For your consideration ...

Like I said, many entities would do so. It's still the best bet security in the world. But if no one buys them that's actually the best case scenario.

But for sake of argument, let's say they decide to dump a trillion bucks worth all at once and no big institutions or countries want free money.

Do you know which quasi-governmental institution buys and sells huge amounts of treasuries ONLY on the secondary market, does so all of the time (usually around 80 billion per month, every month)? The Federal Reserve. It's literally their job. They would have zero trouble buying those discounted securities, primarily because they can do with with make believe funny money, and then immediately re-issuing them at face value. All that would do is reduce the national debt by the discount rate.

And were not talking about $1T of new debt here, unless you think China will sell them for free. Were talking a few percent at most. A few tens of millions of bucks, maybe a hundred if they go crazy.

Yeah. That's called monetizing the debt. Which of course is inflationary in and of itself. And in this scenario, if China, or others, dumped their holdings, and the Fed gave them newly created dollars for their billions in treasuries, then China could just use those new dollars to buy many things over here which will further drive inflation higher. Because they will, be able to, outbid all others for whatever asset class it is they want, which makes prices higher, aka inflation. It doesn't matter who buys them, China can still weaponize those dollars by spending all of them here.

"All that would do is reduce the national debt by the discount rate." Sure, it would reduce the national debt, in so far as cancelling, zeroing out, the outstanding treasury. But the holder of that treasury receives those new dollars, which just fills the coffers that bought those treasuries to begin with.

By the way, the Federal Reserve is not a "quasi-governmental institution". It is, and always has been, an internationally privately held banking business with 12 privately held member banks. As per Alan Greenspan ~ "If you deal with Presidents or senators or congressmen or any of the members within the Administration, the Federal Reserve has got a very simple card, which is, “You can’t force us to do anything.”"

 

[Clem72]

By the way, the Federal Reserve is not a "quasi-governmental institution". It is, and always has been, an internationally privately held banking business with 12 privately held member banks. As per Alan Greenspan ~ "If you deal with Presidents or senators or congressmen or any of the members within the Administration, the Federal Reserve has got a very simple card, which is, “You can’t force us to do anything.”"

The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years....

Board Members

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

That is why I said quasi-governmental.

 

[LightRoasted]

For your consideration ...

The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years....

Board Members

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

That is why I said quasi-governmental.

True. But that board is nothing but theater for the sheep. Short of ending the Federal Reserve Act, nothing any President, or any Senate or House member sitting on any committee, demands that the Fed do something, the Fed can just say go fly a kite.