if China one day said, “Hey - we’re going to sell all your bonds,”

And so if China one day said, “Hey - we’re going to sell all your bonds,” and Uncle Sam replied “Hey okay, we’re going to stop selling grain on world markets,” guess who would win that little game of chicken?


The U.S. would have a monetization mess to deal with - and an inflationary or even quasi-hyperinflationary currency episode - but Americans would still have food to eat.

Meanwhile the cost of grains on world markets would quadruple or quintuple in price (due to withdrawal of U.S. supply), leading to riots in Chinese streets and burning pitchforks in Beijing, as domestic food bills went from 40% to triple digits, consuming local incomes twice and thrice over.

Such a scenario would never play out, of course, any more than a full-blown nuclear exchange would. (But then anything’s possible right?) Hypothetical point being though: When you are the world’s bread basket, you have a fairly strong negotiating position as far as debt extremes go.

cont. on link.

http://seekingalpha.com/article/247...?source=dashboard_recently_commented_articles

 

U.S. spent $5 trillion (last century's money) to contain USSR; It is more beneficial for China to use, not spend, $1 trillion to befriend U.S. and keeps U.S. from temptation of containing China, even that money devalued to half in next few decades.

 

One of China's highest national priorities, since founding of the People's Republic in 1949, has been self-sufficiency in grains. So, this example sucks.

Of course, this example also sucks because China would never say "hey, we're going to sell all your bonds". Sell them... for what in exchange?

 

That trillion is probability the wisest investment in human history. They call it financial nuclear option for a good reason. You can almost never press a real nuke button, because of the retaliation. Yet China can periodically press the financial "nuke" button, by selling a few billions of U.S. treasury and tell Obama to behave himself.

 

It would end in a World War. Punitive trade measures usually do.

 

if China one day said, “Hey - we’re going to sell all your bonds,”


Then the USA would say "Good luck finding someone with a financial IQ of 75 AND $3 trillion dollars to buy them."

 

we already have the money.
Let them make that threat.
Sell them.

It might even force our govt to stop borrowing.
Which might cause currency to get stronger.

 

1. This isn't going to happen because if China crushes the US economy they are crushing their own economy, and

2. Assuming this did happen all the Fed has to do is buy them. Problem solved.

 

Sell bonds and receive what in return ?

 

So when will this bond/dollar bubble finally collapse? I was just watching " Trader" with paul tudor jones from 87 and they were worried about the same inflation scenario as we are today except here we are still kicking.