Snore

China To Stop Buying US Treas Paper

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Things are about to get wierd.  Ok weirder.  

 

US is pressuring China on PRNK. As US continues to increase pressure, China’s trade is being impacted. Today’s NY Times has an article on how Market is reacting to China’s change in investment policy.  If interest rates go up, growth goes down and market adjusts  

 

Thoughts on how this plays out??

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It's already been clear that they don't want to buy our trash anymore.

It will affect new bond sales.  The interest rates will rise but the bonds will still get sold.  China holds a bit over a trillion of current bonds.

If they don't buy any more they will just be able to invest it in the new silk road.

The fed will print more money to make up the difference.  Wait, that's so 20th century.  They will do some digital book entries instead.

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If the Fed cranks up the printing presses M1 increases and inflation comes back. 

Add that to increased cost of funds and the economy gets ugly

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11 minutes ago, Snore said:

If the Fed cranks up the printing presses M1 increases and inflation comes back. 

Add that to increased cost of funds and the economy gets ugly

They've been doing a bit of 'Quantitive Easing' for a while now.

Since treasuries are discounted (sold at less than face value) , the pain comes when you need to borrow again to cover the full value.

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It’s supply/demand. I’ve read that the Chinese haven’t been buying USTreasuries in awhile anyway, so it might not be much at all. Also, where they used to hold 20% of available treasuries, if that $1t is current, that’s only 5% of the outstanding.

Impact therefore will be minor unless they decide to liquidate all at once, and they won’t do that.

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Just now, Raz'r said:

It’s supply/demand. I’ve read that the Chinese haven’t been buying USTreasuries in awhile anyway, so it might not be much at all. Also, where they used to hold 20% of available treasuries, if that $1t is current, that’s only 5% of the outstanding.

Impact therefore will be minor unless they decide to liquidate all at once, and they won’t do that.

If they liquidate, it won't be the treasury buying the bonds, they will just be on the open market.

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2 hours ago, Raz'r said:

It’s supply/demand. I’ve read that the Chinese haven’t been buying USTreasuries in awhile anyway, so it might not be much at all. Also, where they used to hold 20% of available treasuries, if that $1t is current, that’s only 5% of the outstanding.

Impact therefore will be minor unless they decide to liquidate all at once, and they won’t do that.

   I agree, but I worry about how it affects the recovery from the next bubble-burst. Having foreign buyers of our debt appears to have been a big factor in weathering the last storm. At some point it is to be expected much of the world will view our debt/asset ratio as too big a risk.  The plan should be run up the debt in the bad times and pay it back in the good, but we've been running it up in the good bigly under GW Bush and now Trump.  

 

 That said, China is still very interested in our markets for the stuff they make. I would guess this latest comment is intended to be a very subtle shot across the bow of Trump, intended to get some of his banker friends to preemtively bend his ear, prevent him from doing something stupid impulsively. The Chinese seem very sophisticated in their approach to Trump in general, btw. Praise is all you will hear from them, criticism and warnings of retaliation will be non-verbal to a fault.

 

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On 1/11/2018 at 5:06 PM, Mark K said:

   I agree, but I worry about how it affects the recovery from the next bubble-burst. Having foreign buyers of our debt appears to have been a big factor in weathering the last storm. At some point it is to be expected much of the world will view our debt/asset ratio as too big a risk.  The plan should be run up the debt in the bad times and pay it back in the good, but we've been running it up in the good bigly under GW Bush and now Trump.  

 

 That said, China is still very interested in our markets for the stuff they make. I would guess this latest comment is intended to be a very subtle shot across the bow of Trump, intended to get some of his banker friends to preemtively bend his ear, prevent him from doing something stupid impulsively. The Chinese seem very sophisticated in their approach to Trump in general, btw. Praise is all you will hear from them, criticism and warnings of retaliation will be non-verbal to a fault.

 

Diplomacy. I remember when we had some.

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The USA has never really had much of what most people would regard as diplomacy.

Previously your bullying was a whole lot more polite though.

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35 minutes ago, SloopJonB said:

The USA has never really had much of what most people would regard as diplomacy.

Previously your bullying was a whole lot more polite though.

Yeah unlike the British when they were building their empire.  They just swaggered in and anounced that they were in control now.  Rapacious bastards.

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1 hour ago, SloopJonB said:

The USA has never really had much of what most people would regard as diplomacy.

Previously your bullying was a whole lot more polite though.

No. We've had immensely skilled diplomacy, sometimes.

 I would suggest an HBO series that was done as a comedy, but I know they used one of our best, Pickering, as a consultant. "The Brink". It is loosely based on the outrageous behavior and outrageous efficacy of Richard Holbrooke. A back-handed tribute, to be sure. Holbrooke drove everybody nuts at State, but he got-r-done in a bunch of all but impossible situations. His manic drive no doubt ended his live early. I think the lion's share of the credit for US diplomatic successes goes to the big batch of pros nobody knows because they never made the news...because what they did worked.

 

 I suspect that is the root cause of Bannon and Trump's decision to gut our State Dept, when they are doing their job right it isn't easily noticeable. Seems to be a giant waste...Jared can do all that by himself...certainly! 

   

 

  

   

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On 1/11/2018 at 12:53 PM, Saorsa said:

It's already been clear that they don't want to buy our trash anymore.

It will affect new bond sales.  The interest rates will rise but the bonds will still get sold.  China holds a bit over a trillion of current bonds.

If they don't buy any more they will just be able to invest it in the new silk road.

The fed will print more money to make up the difference.  Wait, that's so 20th century.  They will do some digital book entries instead.

goddamn this post should be gilded it's so full of crap.

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4 hours ago, Ed Lada said:

Yeah unlike the British when they were building their empire.  They just swaggered in and anounced that they were in control now.  Rapacious bastards.

Did they even announce it?

Most of the people in the shitholes that Britain took over were illiterate so why bother?

For that matter, most of the people doing the taking over were illiterate as well.

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