Why China is Forced to Purchase US Treasuries

Quote: Pacomartin

China has in fact been slowly dumping US Treasuries for 7 years now (but especially since Trump was elected)

ironically you could hardly blame them [to use a figure of speech] if they dumped them all now since they pay next to nothing - yet better than anyone else oddly. Of course it would actually be something outrageous, short of an act of war I suppose

recent articles in financial media are saying that the traditional 60/40 asset allocation for stocks and bonds that has been a long-standing means of staying conservative yet effective in investing, is highly questionable now. The idea is to rebalance all the time, which when stocks go down it still works to buy some and sell some bonds, but the reverse when stocks go up, to sell some and *buy* bonds? not so much! Nobody in their right mind really wants to buy bonds, so what do you do?

Quote: AZDuffman

China is peaking if she has not peaked already. Demographic decline will hit her and potentially tear her apart like the USSR.

Not even close to peaking, and no demographic decline as their standard of living and quality of life surges..

China is an upper-middle income country. Their GDP will grow 1.6% this year, while the rest of the major economies are predicted to contract 5.2%

According to the World Bank, China’s share of global GDP will expand by 1.1 percentage points this year to 17.5% of global GDP. The US and Europe are expected to lose some of their share, while China tripled its advance in 2019.

They are fast building a self-sustaining economy, while ours survives on Congressional stimulus packages and digital currency injections by the Fed.

Voters always get the government they deserve.

Quote: Tanko

Not even close to peaking, and no demographic decline as their standard of living and quality of life surges..

China is an upper-middle income country. Their GDP will grow 1.6% this year, while the rest of the major economies are predicted to contract 5.2%

According to the World Bank, China’s share of global GDP will expand by 1.1 percentage points this year to 17.5% of global GDP. The US and Europe are expected to lose some of their share, while China tripled its advance in 2019.

They are fast building a self-sustaining economy, while ours survives on Congressional stimulus packages and digital currency injections by the Fed.

Voters always get the government they deserve.

China is aging and fast. It will soon get old before it gets wealthy. Remember, China has a 1st world coast and a 3rd world interior. Chinese banks make the 1980s S&L crisis look like a day at the park. She cannot keep up this rate of growth with her aging population. Without this rate of growth, zombie companies cannot make the cash flow to keep paying their loans.

In the 80s it was Japan, in the 90s it was the Tigers. These Asian "miracles" all eventually deflate to normal. Japan has had two lost decades in a row. S. Korea has a very dysfunctional population when you peek behind the curtain. China will soon join them.

Quote: odiousgambit

Nobody in their right mind really wants to buy bonds, so what do you do?

Especially since the Fed is buying corporate bonds and depressing interest rates.

I still like gold, silver and Amazon.

Gold fell a bit recently as central banks were forced to unload tons of it to cover costs related to the Covid shutdowns, which the WHO is now advising against. 12.3 tons in August alone.

Prior to that, they purchased 1500 tons between 2018 and early 2020, as they shifted away from the dollar, which continues to lose value.

Then again...

Biden says the capital gains tax ‘could go higher than 40%”, which will surely disincentivize investments for appreciation.

Imagine what that will do to mutual funds and 401K's.

Could the renminbi rise up as the world’s reserve currency through CBDC?

If [China] wants its currency to flow more freely outside of its own borders, it has the technological capability to do that. There's so much trade happening in the Belt and Road [Initiative], 60-plus cities, and there is not a universal currency. The U.S. dollar is still the currency that needs to be translated, most huge transactions need to flow through the U.S. dollar. So there is a case for the CBDC to become a universal payment instrument in emerging countries as part of the Belt and Road, then [maybe] it could rise up as the world's reserve currency for emerging countries. - fortune.com

Could you imagine one of the European currencies switching to a CBDC version of the renminbi? Turkey perhaps?

Euro
Pound sterling
Swiss franc
Russian ruble

Swedish krona
Norwegian krone
Danish krone
Icelandic króna: second króna

Bulgarian lev
Polish złoty
Romanian leu
Czech koruna
Croatian kuna
Hungarian forint

Albanian lek
Armenian dram
Azerbaijani manat
Bosnia and Herzegovina convertible mark
Belarusian ruble
Georgian lari
Moldovan leu
Second Macedonian denar
Serbian dinar
Ukrainian hryvnia
Turkish lira

I think the SDR is more likely.

Quote: Tanko

Especially since the Fed is buying corporate bonds and depressing interest rates.

“Fascism should more properly be called corporatism, since it is the merger of state and corporate power.” - Benito Mussolini

Quote: AZDuffman

In the 80s it was Japan, in the 90s it was the Tigers. These Asian "miracles" all eventually deflate to normal. Japan has had two lost decades in a row. S. Korea has a very dysfunctional population when you peek behind the curtain. China will soon join them.

None of those nations owned the supply chain as China does. We began shifting our supply chain and jobs overseas thirty years ago. The Chinese run their nation like a business, which is what Trump tried to do here. Nearly every product we purchase is made in China. In March, they threatened to cut off our medical supplies to fight Covid.. If their economy suffers a setback, they will restore it through manufacturing. The US has shifted from manufacturing, to a service economy, that is currently trying to survive on digital dollars. We have no safety net. China’s debt as percent of GDP is 63%,while ours is 110%. According to the Dept of Defense, their military has surpassed ours in Ships, Missiles and Air Defense. The 21st century belongs to China.

Quote: Tanko

None of those nations owned the supply chain as China does. We began shifting our supply chain and jobs overseas thirty years ago. The Chinese run their nation like a business, which is what Trump tried to do here. Nearly every product we purchase is made in China. In March, they threatened to cut off our medical supplies to fight Covid.. If their economy suffers a setback, they will restore it through manufacturing. The US has shifted from manufacturing, to a service economy, that is currently trying to survive on digital dollars. We have no safety net. China’s debt as percent of GDP is 63%,while ours is 110%. According to the Dept of Defense, their military has surpassed ours in Ships, Missiles and Air Defense. The 21st century belongs to China.

No matter if their navy is bigger, they do not have the 250 years of naval tradition the USA has. It will take two generations for them to catch up there. We have naval bases blocking them in, they must travel around the world to confront us. We are good as far as a navy goes.

I agree we have to bring our supply chain back. Please tell the Democrats who promise to "cancel the Trump tariffs on day one" of the problem.

My point is they are an aging population and a zombie banking system. Their cutting us off is a bit like Delphi cutting GM off. It is MAD.

Quote: AZDuffman

Remember, China has a 1st world coast and a 3rd world interior.

This never happened in the
US because we grew slowly
and had one common language.
We never had fabulous wealth
in one part and 3rd world
poverty in the rest like China
and the former Soviet Union.
They rushed everything and
paid the price. There's no
place you can go in the US
that doesn't basically look
like every other place. Same
gas stations, fast food joints,
chain stores, paved roads
and language. Not so in China
and Russia.