Where are those Ktalkers who were wondering what would happen if China sold off it’s US debt?
[SIZE=7]Russia dumped 84% of its American debt. [/SIZE]
What that means
Updated 1:28 PM EDT July 30, 2018 New York
Russia has rapidly sold off the vast majority of its stash of American debt.
Between March and May, Russia’s holdings of US Treasury bonds plummeted by $81 billion, representing 84% of its total US debt holdings.
The sudden debt dump may have contributed to a short-term spike in Treasury rates that spooked the market. 10-year Treasury yields topped 3% in April for the first time since 2014.
It also sparked a guessing game about Moscow’s motivations. Maybe Russia just wanted to diversify its portfolio, as the central bank stated. Or perhaps Russia was seeking revenge for Washington’s crippling sanctions on aluminum maker Rusal.
‘Not particularly alarming’
Either way, there’s little debate over the long-term impact. Russia’s selling has not hurt America’s ability to borrow money.
That’s because investors — particularly life insurers and pension funds that serve aging baby boomers — have a big appetite for fixed income. Treasury rates quickly descended back below 3% because demand for bonds continued to grow.
hahahaha a fart in the wind ndio mnasherehekea? Did anyone even notice Russia has left? What is a paltry $91 billion to an economy worth $93 trillion dollars!!
Yes read that again : $93 trillion DOLLARS!!
America’s national wealth against which she borrows is a whopping $93 trillion. Yaani national wealth ama net worth. Wacha gdp which is wealth generated per year or America’s annual paycheck. America’s annual paycheck is $21 trillion followed by china at $11 trillion.
To put it in perspective America owns a third of the earth’s total wealth or net worth which stands at $280 trillion. China is second at $27 trillion despite her huge population.
ati @vanadium unanyamba nyamba nini hapo?! Si watoe uone nothing AT ALL would happen. There’ll be alitttle noise then markets will adjust in a few days. America is governed by strict laws hawajauza nchi like a Kenyan president I know. They have maximum ceilings against which foreignors can buy or invest . hata tender huwezi pewa tu hivo. what is 1 trillion against 93 trillion? And 93 trillion is a what the govt. reports. It could be more since its a secret.
You don’t get it, do you? That is borrowed money that the USA owes to other nations that must be paid back with interest, it is akin to your credit limit being reduced by 81 billion. It is a gross but not uncommon fallacy by @patco to try and mislead others that borrowed money counts as a net gain to an economy. How did those trillions that Patco keeps touting work out during the last recession?
What is new about an investor cashing in on his investments? If buy bonds or treasury bills, I can wait for the maturity date or sell in the secondary market, what is strange about that?
You still engage hio nugu ya kulamba Donald Trump a$$ ndio asiwaste tissue? Banned him kitambo sana. His posts inaeza fanya ukue mjinga instead of adding knowledge like the rest
Like I said earlier National Wealth is critical when a govt is planning , budgeting and especially issuing bonds. As you can see the National Net Worth or National Wealth of the United States of America is $93 trillion dollars in 2017. A figure that fluctuates often. Nevertheless a very nice and very very fat figure to borrow or issue bonds against. If your networth is $93 trillion who wouldn’t want to do business with you?
Mr. @obienga the U.S. does not owe China any loans at least that I know off, and like you’ve been told by Ndume above, the U.S.[SIZE=5] issues bonds and securities and China buys those bonds. [/SIZE]
[SIZE=4]China like many other countries, organisations and even individuals purchases American bonds and securities for a variety of reasons. Chief among them is to devalue the Renminbi or what is known as currency manipulation. China exports a lot of products. Exports are her bloodline. If she held on to too much foreign reserves her currency would rise in price and her exports would become expensive and suffer. People would move on to cheaper export markets. So to devalue her currency she offloads the reserve dollars by buying U.S. bonds. Also if she kept too many dollars in her central bank or other banks they wouldn’t earn as much interests similar to dividends from the liquid American bonds.[/SIZE]
Also, U.S .bonds are very safe. They are a solid investment supported by a robust economy. Like I said in my earlier comment America haijauzwa kama vile Kenya inauzwa. You can’t just come in as a foreigner and buy American companies, assets or even tender for govt. projects willy nilly. America deals with Americans first. And China would really love to purchase American assets especially American tech companies but they cant. The law won’t let them. So what else do you buy that is American and is of high value and is readily available in large amounts? The answer is American debt. You buy bonds zikuzalie pole pole. China also hopes that by owning huge amounts of American debt they can one day leverage America to allow them to buy American tech giants so they can finally have unbridled access to American technology.
China also buys American debt because it is safer than buying American assets like American businesses, American buildings etcetera. In case there was a conflict between China and the U.S., the U.S. could very easily grab their assets back and tell China to go drying. But if China owns your bonds: $ 1trillion worth of bonds you are in trouble. America’s ability to borrow more is hindered. And there are many other more reasons why China buys American bonds e.g. American markets move fast.
@obienga there is a saying that goes if you owe the bank $100 you are in trouble but if you owe the bank $1 million dollars the bank is in trouble. Similarly America owes China a lot so China (the Bank) is in trouble. If China was to try and dump $1 trillion dollars in one go they would be quite fucked. Who on earth has 1 trillion dollars just sitting around? They would have to sell at a lose. A huge loss! It is said American interest rates would take a hit but America often stabilizes fast. Meanwhile many many other players would scramble to fill in China’s huge shoes by buying those highly desirable American bonds. So China isn’t too willing to dump just yet.
I suggest you learn what that does to the “full faith and credit” of the USA where the dollar is a FIAT currency when nations start dumping their holdings.
@patco your post is very long to respond to point by point at this time, but I suggest you study how the US Federal Reserve and US Financial System works with the influx of money from China and elsewhere, you will then understand why the USA economy operates on debt not wealth which is mostly in the hands of less than 5% of the population and some select foreigners. When nations start dumping those holdings, you have to be worried, otherwise why is the government paying interest on those holdings? When you buy a treasury, whoever issued it has an obligation to pay on presentation, so yes, the US government does owe China and Japan over US$ 2 trillion.
Now what are you trying to tell us whereas you couldn’t even tell whether America borrowed a loan OR offers bonds and securities?! Si you were talking about loans and interests?
@obienga in 2015 China dumped a whopping $180 billion U.S. bonds and the U.S. market barely shrugged.
To quote Bloomberg: “To get a sense of how robust demand is for U.S. Treasuries, consider that China has reduced its holdings by about $180 billion and the market barely reacted.”
China then dumped a further $66 billion in 2016 and U.S. markets again barely shrugged. Japan dumped $46 billion worth of their U.S. bonds in the same year according to CNN: