A common thief can only rob one person at a time, whereas a politician can rob a country blind all at once!
The three decades long ponzi scheme, fueled with Chinese money, that is our national debt might at long last be coming to an end:
Traders Spooked as China Signals End to Three Decade Long, Debt Fueled, Bull Market
by Calvin Frieburger
The past year has been defined by upheaval of the status quo on numerous fronts both at home and abroad, and now comes word that another big change may be on the horizon.
Bloomberg reports that top government officials in China, which is the biggest foreign holder of US treasuries, are considering either a reduction or potentially a total halt of the nation’s purchase of those treasuries — which has bond traders preparing themselves for the potential end of bull market that has persisted for over thirty years.
China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted. The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they aren’t allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter […]
The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past. The strategies discussed in the review don’t concern daily purchases and sales, said the people. The officials recommended that the nation closely watch factors such as the outlook for supply of U.S. government debt, along with political developments including trade disputes between the world’s two biggest economies when deciding whether to cut some Treasury holdings, the people said […]
Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen.
“With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” Commerzbank AG strategist Michael Leister said. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.”
Meanwhile, the US Treasury Department’s Under Secretary for International Affairs, David Malpass, is attempting to calm tensions, saying that “The U.S. Treasury market is a deep, robust market within the world and so we are confident that our economy, with the economy strengthening, that it will remain a deep, robust market.”
Even so, CNBC added that treasury prices, the dollar, and US equities have also fallen, while gold rose.
What do you think about all of this? What’s going to happen next, and how should US policymakers respond? Does this news affect any of your own financial decisions? Let us know in the comments below!