"We Understand The Chinese Government Has Halted Purchases Of US Treasuries": SGH
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I disagree.
The Chinese government buys Ts because it sells the US goods and gets USDs in return. They want to earn a low risk return with the majority of the money it receives as payment. Besides, owning Ts is the equivalent of a savings account at the Fed. The Fed has a lot more negotiating power than the article acknowledges.
Furthermore, I believe that QE is unnecessary. On a daily basis, the Fed manipulates the overnight rate via open market operations. The Fed is a market manipulator via direct market manipulation and psychological manipulation. That is its purpose. That is what it does.
Instead of QE, why not just set a target rate for the entire curve? Traders would know that it would be a game of Whack-a-Mole above the target rate.
Many people will probably disagree with the following:
T yields are the most important benchmark rate in the world. Other than countries that are irrelevant, all rates are are directly or indirectly tied to Ts. Blowing up Ts is economic suicide by any country that would attempt it.
The Chinese government buys Ts because it sells the US goods and gets USDs in return. They want to earn a low risk return with the majority of the money it receives as payment. Besides, owning Ts is the equivalent of a savings account at the Fed. The Fed has a lot more negotiating power than the article acknowledges.
Furthermore, I believe that QE is unnecessary. On a daily basis, the Fed manipulates the overnight rate via open market operations. The Fed is a market manipulator via direct market manipulation and psychological manipulation. That is its purpose. That is what it does.
Instead of QE, why not just set a target rate for the entire curve? Traders would know that it would be a game of Whack-a-Mole above the target rate.
Many people will probably disagree with the following:
T yields are the most important benchmark rate in the world. Other than countries that are irrelevant, all rates are are directly or indirectly tied to Ts. Blowing up Ts is economic suicide by any country that would attempt it.
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any basis for that scenario?
Please elaborate.
"
WeToddDid2 said:
They want to earn a low risk return with the majority of the money it receives as payment."
proof of this statement?
Surely, they can even sell off their entire holdings but China economically would never be able to compete.
It’s political economics at play, and even if they decide to sell.... they do not control enough with regards to our big banks(nationally and internationally,) that would gladly pick up the sales.
Remember, the American dollar is the worlds reserve currency.
I don't understand why there is any proof needed. Seems self evident.
Can you provide proof that the Chinese government invest the majority of its money in high risk assests?
There you will find you answer.
Also, you should research money flows, how mechanically China pegs its currency, and trade deficits.
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Do you have a savings account at a bank? If yes, do you think that it is possible for that bank to hold onto your savings account and deny you access to your money?
What if there was someone at the bank with a serious case of fat finger and they accidentally deleted your account?
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