Japan’s Waning Appetite for Treasurys Fuels Anxiety on Wall Street

[ipatent]

Japan’s Waning Appetite for Treasurys Fuels Anxiety on Wall Street

Japan has been one of the world’s biggest buyers of U.S. Treasurys for years, helping to hold down borrowing costs for American businesses and consumers. Now that is changing.

Signs are mounting that Japan’s government is selling short-term U.S. bonds, part of an effort to prop up its currency. At the same time, some Japanese institutional investors are racing to reduce their foreign bondholdings, including Treasurys.

The shift is another example of inflation and rising rates altering investors’ long-held assumptions. The Federal Reserve’s interest-rate increases have weakened the yen and made it costlier for Japanese investors to hedge against currency fluctuations when buying U.S. assets. As a result, instead of counting on Japanese investors’ demand for Treasurys, investors have become increasingly concerned about a potentially destabilizing shift in global capital flows.

 

[David's faith]

If China commits to selling too (and their currency will soon deliver reasons to do so like Japan because of their real estate crisis) the US might lose its capability to spend over budget.. no more army, no more sociql security and that means anarchy.

 

[countryBoy641]

If China commits to selling too (and their currency will soon deliver reasons to do so like Japan because of their real estate crisis) the US might lose its capability to spend over budget.. no more army, no more sociql security and that means anarchy.

As traders (of any kind) we all struggle for maximum self control.
That entails taking responsibility for every aspect of all winning + losing trades.
The FED and Congress have a responsibility to do the same ($31 Trillion debt).
But they won't.
And they are collectively called "Our Leaders"

 

[David's faith]

As traders (of any kind) we all struggle for maximum self control.
That entails taking responsibility for every aspect of all winning + losing trades.
The FED and Congress have a responsibility to do the same ($31 Trillion debt).
But they won't.
And they are collectively called "Our Leaders"

Debt is not the biggest concern, cashflow is.This time the Fed can't buy Treasuries. So the gov would rely on tax income alone

 

[SoyUnGanador]

Debt is not the biggest concern, cashflow is.This time the Fed can't buy Treasuries. So the gov would rely on tax income alone

The problem is, I think you'll agree, that Congress is not going to stop spending even though the Fed ain't buying, which will mean interest rates go through the roof (rates have to increase given the drop off in demand so as to still be able to sell the bonds). Its going to get ugly.

 

[piezoe]

You will all see this from a different perspective once you realize that the U.S. does not borrow even though Treasury bonds do represent Government liabilities just as U.S. Currency does. Treasuries serve an entirely different purpose than that of borrowing. To the extent that the U.S. dollar is used as a reserve currency there will be a fairly robust demand for Treasuries.

 

[SoyUnGanador]

You will all see this from a different perspective once you realize that the U.S. does not borrow even though Treasury bonds do represent Government liabilities just as U.S. Currency does. Treasuries serve an entirely different purpose than that of borrowing. To the extent that the U.S. dollar is used as a reserve currency there will be a fairly robust demand for Treasuries.

I get what you are saying piezoe, e.g. other countries that sell goods to U.S. buy Treasuries to prevent their currencies from appreciating versus the dollar, that sort of thing, but make no mistake, it is borrowing, pure and simple. The U.S. government is spending more than it takes in, and borrows via the issuance of the Treasuries. The U.S. government has a hard obligation to repay those Treasuries, plus interest. That is a debt. The U.S. is borrowing.

 

[piezoe]

I get what you are saying piezoe, e.g. other countries that sell goods to U.S. buy Treasuries to prevent their currencies from appreciating versus the dollar, that sort of thing, but make no mistake, it is borrowing, pure and simple. The U.S. government is spending more than it takes in, and borrows via the issuance of the Treasuries. The U.S. government has a hard obligation to repay those Treasuries, plus interest. That is a debt. The U.S. is borrowing.

The U.S. prints the principle and spends it into the economy before it issues the bond.* In other words, the U.S. doesn't borrow money from the economy and replace it with a bond as it would be doing in conventional borrowing. Actually, no country that does not issue bonds denominated in another nations currency has acquired real debt in the classical sense, simply because it can print it's own currency.

But of course the U.S. creates a new liability when it prints money. Then when it later issues a bond linked to the money it has already printed it is exchanging the liability of the bond's principle for the liability of the money it printed and spent into the economy. MMT economists see this as simply the exchange of one form of money, bank reserves, for another, the bond. There is an smaller additional liability associated with this overall operation, and that is the liability associated with future interest payments. This interest will become part of the non-discretionary budget and may also be printed, depending on revenue.

________
*This is why MMT economists say, "the government always money finances its deficit spending." Deficits determine how much new money will be created. This is determined by Congress. Although the Central bank accommodates Congress by "printing" new money in the amount of its deficits, the Central bank has nothing to do with determining how much new money will be created. Of course the Treasury would have the option of borrowing from the economy the money it needs to engage in deficit sending. However if it were to do that the amount of base money, or what economists call outside money, in the economy would decrease. Doing this to excess would soon starve the economy for money and cause a recession, in the same way that running repetitive surpluses would put the economy into recession. At the moment the Fed is attempting to reduce the amount of "inside money", i.e., the temporary money created by fractional reserve banking, this can have a similar effect, and therefore is also capable of creating a recession.

 

[murray t turtle]

If China commits to selling too (and their currency will soon deliver reasons to do so like Japan because of their real estate crisis) the US might lose its capability to spend over budget.. no more army, no more sociql security and that means............

%%
Maybe right
but no SS + no Armed forces is so unlikley. Especially since SS has been paid in for decades+ US armed forces kept working last gov shutdowns.
NOT likely\ anyone forgot S&P downgrade of US debt [US debt downgraded @much smaller levels]
Official piechart of US income + outgo[IRS 1040 magazine]shows its more than ''Us income tax alone'' IF the chicoms sell to much, to fast \they shoot themselves in the foot so to speak

 

[AKUMATOTENSHI]

Debt is not the biggest concern, cashflow is.This time the Fed can't buy Treasuries. So the gov would rely on tax income alone

And then everyone with half a head moves assets off shore. Squeeze the middle until it is no more. Tax base has been waning for some time now. Most international conglomerates can move HQ at will.

Akuma

Akuma