What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question. On the one hand they have incentive to prop up the USD as they already hold so much US debt. On the other hand, the maxim ‘throwing good money after bad’ comes to mind.
If the rest of the world refuses to fund our Trillion $ stimulus package, what then? Supply/demand dynamics can only be delayed for so long, if their is no external demand for the huge bond issuance to come this year from the Gov’t, the yeild must rise to attract buyers. Ben the hellicopter man is more like the Wizard of Oz right now, and soon the curtain will be pulled back and he will be exposed, as will the AAA credit rating the US Gov’t enjoys.
‘Gov’t is the only entity that can take a valuable commodity like paper and render it worthless emrely by applying ink’ Ludwig Von Mises
“What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question.”
I agree completely- then and only then will the house of cards come crashing down. But until that day- which may be decades away or may be much sooner- it will be impossible for the US economy to truly collapse because it’s being subsidized on a massive scale by the countries that actually produce things.
Early indications are that China still wants to keep buying our debt, but with their slowing economy and domestic stimulus spending they won’t have as much money to do so with.
“What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question. On the one hand they have incentive to prop up the USD as they already hold so much US debt. On the other hand, the maxim ‘throwing good money after bad’ comes to mind.”
on the topic of debt, Donald Trump said something like: If I owe you a millions dollars I have a problem, if I owe you 100 million dollars, YOU have a problem. If the US goes bankrupt the Chinese will lose TRILLIONS. As much as they hate us they dont want that to happen.
That will be the tipping point...