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As the largest holder of US foreign debt China could call in that debt.

by nigerian1981 3y ago

timerol 3y ago
That's not how US debt works. It pays back on a schedule. China could stop buying new US debt, and will continue to receive payments on US debt it owns, but China can't call up the US and demand full repayment immediately.
- chihuahua 3y ago
  They can call and demand full repayment, but the only response would be laughter.
bequanna 3y ago
That isn’t how debt works. They could sell the debt that they currently hold, sure. The response would likely be a short term rise in interest rates followed by the Fed simply intervening and purchasing Treasurys.
MagicMoonlight 3y ago
They can’t because this isn’t make-believe world where there’s some sort of world police enforcing nonsense. If someone tries to destroy your country you just say no. “Sorry china, we aren’t paying lmao” And then they can’t do shit. Then you embargo them for being aggressive and destroy their country.
zrail 3y ago
I'm sure it's been explored before, but that's not how it works. If China started dumping their Treasuries lead to significant domestic inflation, which they definitely don't want. Also, minor point, Japan holds more Treasuries than China. https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp https://www.investopedia.com/articles/investing/040115/reaso...
MattGaiser 3y ago
Not how debt of virtually any kind works except from the mafia. Very few debts can be arbitrarily called.
balls187 3y ago
Japan owns more US debt than China does. [1] 1. https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalancemoney.com/who-owns-the-u-s-national-de...
JumpCrisscross 3y ago
> China could call in that debt And we could sanction the PBoC and freeze the accounts into which we repay the debt they hold. The China-owns-our-debt line ignores the realities of sovereign debt.

As the largest holder of US foreign debt China could call in that debt.

That's not how US debt works. It pays back on a schedule. China could stop buying new US debt, and will continue to receive payments on US debt it owns, but China can't call up the US and demand full repayment immediately.

chihuahua 3y ago
They can call and demand full repayment, but the only response would be laughter.

bequanna 3y ago

That isn’t how debt works. They could sell the debt that they currently hold, sure. The response would likely be a short term rise in interest rates followed by the Fed simply intervening and purchasing Treasurys.

MagicMoonlight 3y ago

They can’t because this isn’t make-believe world where there’s some sort of world police enforcing nonsense. If someone tries to destroy your country you just say no. “Sorry china, we aren’t paying lmao” And then they can’t do shit. Then you embargo them for being aggressive and destroy their country.

zrail 3y ago

I'm sure it's been explored before, but that's not how it works. If China started dumping their Treasuries lead to significant domestic inflation, which they definitely don't want. Also, minor point, Japan holds more Treasuries than China. https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp https://www.investopedia.com/articles/investing/040115/reaso...

MattGaiser 3y ago

Not how debt of virtually any kind works except from the mafia. Very few debts can be arbitrarily called.

balls187 3y ago

Japan owns more US debt than China does. [1] 1. https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalancemoney.com/who-owns-the-u-s-national-de...

JumpCrisscross 3y ago

> China could call in that debt And we could sanction the PBoC and freeze the accounts into which we repay the debt they hold. The China-owns-our-debt line ignores the realities of sovereign debt.