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What is it this catastrophic thing that's going to happen if the US offers bonds/treasuries/securities and nobody wants to buy them?
Except that South America has a track record of not paying back.
The "deal" that establishes that China's money will be kept in US Dollars, and that China can't convert that money in anything else other than spending such dollars.what "deal" are you talking about?
Why China isn't asking for their money in gold right now? It can't. It agreed not to.
nothing is stopping China from dumping US securities. That is why we cannot really enact any protectionist measures against them or even intervene in the Taiwan-China relations.
lol Ferraris
What is it this catastrophic thing that's going to happen if the US offers bonds/treasuries/securities and nobody wants to buy them?
Except that South America has a track record of not paying back.
The "deal" that establishes that China's money will be kept in US Dollars, and that China can't convert that money in anything else other than spending such dollars.
Why China isn't asking for their money in gold right now? It can't. It agreed not to.
lol Ferraris
do you have any links? with an explanation of this deal preferably from someone who actually knows what they are talking about?
Nobody has explained why China would want to dump the dollar when it is owed so many of them.
do you have any links? with an explanation of this deal preferably from someone who actually knows what they are talking about?
But if you want to hear it from an actual economist, suit yourself
BTW, there's no Ferraris in that small book.
[QUOTE=ElNono;5649088]What is it this catastrophic thing that's going to happen if the US offers bonds/treasuries/securities and nobody wants to buy them?
Damn...do you live under a rock? The day that we can't continue to roll debt into the future is the day the musical chairs stops.[/COLOR]
Except that South America has a track record of not paying back.
They aren't buying bonds...they are buying land and companies connected to commodities...seriously...who the are you? Are you some high school punk that doesn't get it because you are just ignorant? (I'm not calling you stupid yet...)
Why? What is it this catastrophic thing that's going to happen if the US offers bonds/treasuries/securities and nobody wants to buy them?
Is the country going "bankrupt"?
Are you going to answer the question or keep on spinning tires?
BTW, there's a reason not to do that, and but it has everything to do with inflation, as I pointed out earlier.
Like what? Investments in South America from the Chinese since 2005 amount to a meager $75 billion. Big money for South America, but a drop in the bucket for the Chinese (who made nearly $300 billion in trade with the US last year alone).
This isn't about me and I'm not going into name calling. If this is so easy and so clear, you shouldn't have a problem making your point in the first place.
china doesn't want that immediately, it buys us time to get moving in the right direction before they pull the rug out from under us. sure, they're making moves to ween themselves off of the dollar and prepare for that day, but it won't be anytime soon.
Frankly, if China would start spending those dollars in the US, there are some positive byproducts to that:
1) They would become less compe ive (their currency would stop being artificially pegged as low, since they wouldn't have the dollars to back it up)
2) Their investments would result putting money in people's pockets, which would work as an stimulus to our economy.
3) Depending on the volume of transactions, there could be some inflation creep, but it should also coincide with GDP growth and should be controllable through interest rates/taxing.
China can't just drop the securities. As soon as they start unloading, the value of our dollar will drop, making them worth less than they loaned us. Then, it will cost us more money to buy their goods, and they will sell less to us. I wish China would unload them. In the long run, I think it would be good for us.
^the value of the dollar wouldn't change much i dont think...thats totally determined by supply and demand in the world currency markets. it would jack up our interest rates next time we issued bonds to borrow money though.
i'm just not really grasping how china dumping securities would lower the value of hte dollar...demand for the dollar is responsible for its value, and people would still need to dollar to do business with the U.S. and buy oil...correct me if i'm wrong someone but I don't think this would devalue the dollar at all. it would just raise the interest rate on any new debt.
Correct. US Treasuries would just change hands. US Treasuries are not part of the currency markets (until they mature, at which point they stop being Treasuries).
didn't think so..just wanted to be sure. i'm not a master of finance or anything, just trying to wrap up my bba :P
It won't.
already answered my question
As pointed out earlier, the specific reason for China not to drop it's US Dollar backing has everything to do both with how they conduct trade and how they peg their currency to remain compe ive.
their currency is undervalued as right now, if you index it to where it should be according to prices in that country. we were looking at this the other day. it's just a cheap way for them to dump all their on us. china's "strong" economy is somewhat of a hoax, its actually pretty fragile and heavily dependent on ours. china feeds off our s basically.
http://www.bloomberg.com/news/2012-0...ince-2010.html
China, the largest foreign lender to the U.S., reduced its holdings of Treasuries in December to the least since June 2010 amid efforts to assist Europe in addressing its debt crisis.
The world’s second-largest economy decreased its U.S. debt securities by $31.9 billion from November, or 2.8 percent, to $1.11 trillion, according to Treasury Department data released yesterday. Its position in longer-term notes and bonds also fell $32.5 billion, or 2.8 percent, to $1.1 trillion, the least since June 2010. Japan, the second biggest buyer, increased its holding by $3.5 billion to $1.04 trillion.
“We continue to see Chinese Treasury holdings trending lower as they are acting on their desire for diversification and as they may get more involved in the situation in Europe,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut.
China’s policy makers have advocated diversification of the nation’s foreign exchange reserves away from U.S. assets. China may support Europe through channels such as the International Monetary Fund, the European Financial Stability Facility and the European Stability Mechanism, said People’s Bank of China Governor Zhou Xiaochuan.
European Assets
“China will always adhere to the principle of holding assets of EU sovereign debt,” Zhou said in Beijing yesterday. “We would participate in resolving the euro debt crisis,” he said.
Chinese Officials, including central bank adviser Li Daokui, have urged diversification of the nation’s foreign exchange reserves. The Asian nation will “seek diversification in the management of reserve assets, strengthen risk management, and minimize the negative impacts of the fluctuations in the international financial market on the Chinese economy,” Zhou said in August.
Foreign investors held 47.6 percent of outstanding public Treasury debt as of December, the smallest proportion since October 2006, Treasury data show.
Net buying of long-term equities, notes and bonds totaled $17.9 billion during the month compared with net purchases of $61.3 billion the previous month, the Treasury Department said. Including short-term securities such as stock swaps, foreigners bought a net $87.1 billion in December compared with net buying of $42.9 billion the previous month.
China increased its position in shorter-term bills by $600 million to $2.9 billion. The U.S. updated data on Feb. 28, 2011 to show China’s Treasury investments in October 2010 were a record $1.18 trillion, 30 percent more than the initial estimate of $906.8 billion.
“Overall flows were weak for the U.S. and the Chinese tactical selling reflected that as Treasuries were giving back very little,” said Aaron Kohli, an interest-rate strategist BNP Paribas SA in New York, one of 21 primary dealers that trade directly with the Federal Reserve. “As yields rise, look for China to buy Treasuries again.”
Treasuries have lost 0.1 percent this year after returning 9.8 percent last year, according to a Bank of America Merrill Lynch index.
To contact the reporter on this story: Cordell Eddings in New York at [email protected]; Daniel Kruger in New York at [email protected]
Last edited by CosmicCowboy; 02-16-2012 at 10:13 AM.
China would not dump its securities. But they could and nothing could stop them.
What we should reallly be worried about is if China stops buying our securities. Who's going to finance our debt then? That is exactly why some people call China our banker and why if we strain relations with them, we are in some deep sh...
Last edited by cheguevara; 02-16-2012 at 10:26 AM.
I believe China owns about 8% of our debt. Though it has been moving up since 2000, some on this board are grossly overestimating how much we rely on China in terms of financing our debt.
thought it was 20%+ but I agree.
this thread is about revenue vs. spending.
What is it this catastrophic thing that's going to happen if the US offers bonds/treasuries/securities and nobody wants to buy them?
No takers?
Pretty simple math. With a total debt of 15.4 trillion and China holding 1.18 trillion the percentage is 7.66%
Then somebody else would own the securities. So, instead of owing China, we would owe somebody else. So what's the problem?
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