7 ms·

Go further with your reasoning... Why would anyone lend the US more...

georgeecollins 14d ago
I am not defending the US government but the reason why you hold treasuries is because if you want to buy something in two years, or ten years, etc. there is a good chance you will want to buy something with dollars. Oil, soy beans, New York real estate..
- anon84873628 14d ago
  Until you can buy oil without dollars. This was an explicit agreement called the Petrodollar system, which was premised on the US navy securing international trade. If the US navy proves unable to do that (and exhausts its arms and demonstrates unpreparedness for future conflicts) then the whole premise falls apart. You might also stop buying real estate if the government seems unstable and economy is poised to collapse. Good soybeans also depend on fuel prices and the continued flow of fertilizer...
  - disdegeneration 14d ago
    Until you find a more thrustworthy stewart of the international order. Everyone yells loudly about how bad the us is, but then you realize that the whole world voted with there feet that every other alternative is worse. The russians tried for years to write some replacement fiction into reality (BRICS) even though they would be the first to get shanked if the old great game returned. Its a absurd situation where empire cosplayers long for the times of "greatness" while struggling on even small "to real" acts ..
    - anon84873628 14d ago
      China is "trustworthy" in the sense that they have obvious, rational, consistent motivations and very stable government.
      - nradov 14d ago
        China's government is "very stable" until it's not. As a society, China has a long history but the central government has essentially collapsed or experienced violent revolution in 1976, 1969, 1949, 1927, 1911, 1850, 1796, 1644, etc. Perhaps we have reached "the end of history" and the Chinese Communist Party will now maintain stable control forever. Or maybe it will all fall apart again in a few decades due to resource shortages or factional power struggles or a foreign war.
        lumost 13d ago
        The loss of a succession strategy with an elderly leader at the helm seems like a major issue.
        tremon 13d ago
        That seems to be a recurring theme regardless of the country's economic system. We're two months away from seeing if the US still has a working succession strategy.
        disdegeneration 13d ago
        [dead]
        spwa4 13d ago
        ... for everyone, Chinese or not, except the elderly leader in question. Same for Russia.
    - k12sosse 14d ago
      Are we talking about Russia or the US in that last sentence, or is the ambiguity the point?
    - kergonath 13d ago
      > Everyone yells loudly about how bad the us is, but then you realize that the whole world voted with there feet that every other alternative is worse. The main problem right now is that the US are not the US for which we voted with our feet. They are a worse alternative to the US that created the status quo (to their advantage obviously, but much of the world also benefitted from free trade and the lack of other world wars).
  - fmajid 14d ago
    Or until you don't need to buy oil at all. China has reduced its consumption by 1.5M barrels/day this year alone.
    - anon84873628 14d ago
      To nitpick, much of that is probably due to halting refining for export and drawing down reserves. But of course the point stands that they are rapidly electrifying and expanding renewable generation.
      - rapind 14d ago
        Also tons and tons of coal. Hopefully just a stopgap.
        actionfromafar 14d ago
        Yeah, until they run out of coal.
        leonidasrup 13d ago
        China has large coal reserves, enough for many decades. "China, the world’s largest coal consumer, has domestic reserves of coal to last the next 50 years, according to annual reserves data from the Ministry of Natural Resources cited by Bloomberg. At current rates of domestic production, China also has crude oil reserves that could last for at least 18 more years, according to the ministry" https://oilprice.com/Latest-Energy-News/World-News/China-Says-Its-Coal-Reserves-Will-Last-For-50-Years.html https://oilprice.com/Latest-Energy-News/World-News/China-Say... https://www.mining.com/web/china-has-enough-coal-reserves-to-last-another-five-decades/ https://www.mining.com/web/china-has-enough-coal-reserves-to...
        rafterydj 13d ago
        Wow. Only enough reserves to be measured in decades? Once it's gone it's gone. Genuine Carboniferous coal, one day a thousand years from now, might be a rare museum item! I have a habit of thinking about history in very long terms, and that just does not sit right with me. That kind of thinking (oh we have enough for decades, let it rip!) happens, and the decades pass, and time inevitably is less kind to the descendants of such decision makers.
  - leonidasrup 13d ago
    "$20 Billion Oil Deals Paid in Chinese Yuan, US Dollar Left Out" https://watcher.guru/news/20-billion-oil-deals-paid-in-chinese-yuan-us-dollar-left-out https://watcher.guru/news/20-billion-oil-deals-paid-in-chine... "China and Saudi Arabia Settle First Oil Trade Using Digital Yuan" https://www.economywatch.com/china-and-saudi-arabia-settle-first-oil-trade-using-digital-yuan https://www.economywatch.com/china-and-saudi-arabia-settle-f...
  - kalx 13d ago
    This isn’t true. You can buy oil with other currencies. It’s just that dollars are liquid. No pun intended.
- strken 14d ago
  In a way, the bond market tracks international central banks' confidence that this will continue to be true. If they lose some of that confidence, their stock of bonds moves from USD to RMB/EUR/JPY/AUD/CAD/SGD/etc.
  - spwa4 13d ago
    True, except you're being way too easy on those other currencies. Currencies need to be issued by groups able to guarantee international trade, otherwise there's no point. RMB - maybe, but nobody sane trusts China to not immediately change priorities on a dime EUR - imho (much) less chance than RMB, but they're using a hack: of EUR is a massive entity and internally there's no choice. Literally not allowed (due to tax reasons) (exceptions of course made for favored entities) (I feel that those favored entities exist, and how big they are, should be a huge red flag for anyone considering using EUR) JPY - can't project force ... and doesn't even try AUD - no CAD - no SGD - no I don't understand why you're not listing GBP, as they have at least at some point done this. Of course they were a worse steward of international trade than the worst point of the US. Also, you consider AUD, but not CHF? So what choice is there, really? This is really a way to try to push the US to do more, for less "exorbitant privilege" (especially EUR). Of course, a great many people are very interested in doing just that. It strikes me as an extremely dangerous game to play. Yes, the odds of winning are good, but if you lose, you lose everything.
    - c0ndu17 13d ago
      Pretty confident it’s going to be EUR, note how they dealt with Trump tariff’s shenanigans. Took it slowly, and decidedly, sure let the countries say words and what not, but at the end of the day it’s decided by the EU. Just one persons opinion.
      - spwa4 13d ago
        And you're not terrified that's the situation? The beef the US has with the EUR is simple: the US is what's defending Europe militarily (nuclear and non-nuclear. The Pentagon is the reason Ukraine hasn't been nuked yet, or more likely, that Kiyv didn't surrender because they didn't have nukes). That was never given freely. It was politically impossible to get governments to actually pay for that, so it was decided to trade in USD (this was before petrodollar), giving the US "exorbitant privilege" (which roughly translates to that the US gets to tax most of global trade at something like 2 to 4% and use that for themselves). That the US got that was not an accident, but a policy decision. The Euro takes that away, but of course, no European country is willing to either now start paying, or to defend itself. To say nothing of France, the Netherlands or Denmark defending remote EU territories like Greenland, ABC islands or Polynesia (which would require, for starters, militarily controlling supply lines to those territories). Given the history of economic sanctions (what the EU is doing) ... of course people don't know that history, but the TLDR is that nearly always economic sanctions are a prelude to war. They don't just not work. In many cases they cause wars. WW1 was caused by economic sanctions (and the scale of EU economic sanctions is 100x bigger than what caused WW1), and often the economic sanctions on Germany after WW1 are generally thought to be the big reason for WW2. It makes sense from a game theory perspective: if a government, whose power is fundamentally based on force, lets economic sanctions convince them, they will be attacked by their own people. So they simply cannot give in, and historically that's what you indeed mostly see: when a country is targeted by economic sanctions, it's government usually decides to attack. The EUR is imposing very large scale sanctions on ... essentially everyone. Russia and China most obviously of course, but sanctions are so widely used by the EU you can literally say it's being used against everyone from Afghanistan to Zimbabwe, or geographically from Paraguay to North Korea. And why is the EU doing this? Exactly the reason Trump is doing it: sanctions are "power without needing parliament to approve the budget for anything". The fear is: the historically most likely outcome of what the EU is doing, what EUR is being used for, is another very large scale war.
wnc3141 14d ago
its mostly because the global economy is dollarized so there's a number of benefits store your wealth in dollars as a hedge or point of stability. If the dollar's dominance wanes, so too will be the appetite for US treasuries.
nradov 14d ago
There is no alternative.
- IshKebab 14d ago
  What? There's an almost limitless supply of other entities you can lend money to.
  - nradov 14d ago
    None that can absorb such enormous capital flows.
    - IshKebab 13d ago
      Nonsense. The USA is not bigger than the rest of the world.
      - nradov 13d ago
        US capital markets are the largest and most liquid in the world. It's not even close. There are of course a zillion other borrowers worldwide but they're all much smaller and suffer from a variety of other structural problems. If you need to deploy a huge amount of capital with low risk and high liquidity then US treasuries are still the only realistic option.
repeekad 14d ago
The real answer to your question is the US bond market is an auction, and rates are going up and up, with some sketchy tactics being employed to try and keep them down. What’s happening to US bonds has been compared to using a credit card to pay off your mortgage...
lenkite 13d ago
> Go further with your reasoning... Why would anyone lend the US more... Because if you don't, you are abducted or killed or "regime changed" or sanctioned to famine-level poverty - all for "freedom & democracy". Kindly remember that the Corporate States of America has the world's most powerful military... well I suppose it is nowadays in the top #3.
- idiotsecant 13d ago
  It's hard to twist the definition of the term in such a way that the US doesn't have the most powerful military.

I am not defending the US government but the reason why you hold treasuries is because if you want to buy something in two years, or ten years, etc. there is a good chance you will want to buy something with dollars. Oil, soy beans, New York real estate..

anon84873628 14d ago
Until you can buy oil without dollars. This was an explicit agreement called the Petrodollar system, which was premised on the US navy securing international trade. If the US navy proves unable to do that (and exhausts its arms and demonstrates unpreparedness for future conflicts) then the whole premise falls apart. You might also stop buying real estate if the government seems unstable and economy is poised to collapse. Good soybeans also depend on fuel prices and the continued flow of fertilizer...
- disdegeneration 14d ago
  Until you find a more thrustworthy stewart of the international order. Everyone yells loudly about how bad the us is, but then you realize that the whole world voted with there feet that every other alternative is worse. The russians tried for years to write some replacement fiction into reality (BRICS) even though they would be the first to get shanked if the old great game returned. Its a absurd situation where empire cosplayers long for the times of "greatness" while struggling on even small "to real" acts ..
  - anon84873628 14d ago
    China is "trustworthy" in the sense that they have obvious, rational, consistent motivations and very stable government.
    - nradov 14d ago
      China's government is "very stable" until it's not. As a society, China has a long history but the central government has essentially collapsed or experienced violent revolution in 1976, 1969, 1949, 1927, 1911, 1850, 1796, 1644, etc. Perhaps we have reached "the end of history" and the Chinese Communist Party will now maintain stable control forever. Or maybe it will all fall apart again in a few decades due to resource shortages or factional power struggles or a foreign war.
      - lumost 13d ago
        The loss of a succession strategy with an elderly leader at the helm seems like a major issue.
        tremon 13d ago
        That seems to be a recurring theme regardless of the country's economic system. We're two months away from seeing if the US still has a working succession strategy.
        disdegeneration 13d ago
        [dead]
        spwa4 13d ago
        ... for everyone, Chinese or not, except the elderly leader in question. Same for Russia.
  - k12sosse 14d ago
    Are we talking about Russia or the US in that last sentence, or is the ambiguity the point?
  - kergonath 13d ago
    > Everyone yells loudly about how bad the us is, but then you realize that the whole world voted with there feet that every other alternative is worse. The main problem right now is that the US are not the US for which we voted with our feet. They are a worse alternative to the US that created the status quo (to their advantage obviously, but much of the world also benefitted from free trade and the lack of other world wars).
- fmajid 14d ago
  Or until you don't need to buy oil at all. China has reduced its consumption by 1.5M barrels/day this year alone.
  - anon84873628 14d ago
    To nitpick, much of that is probably due to halting refining for export and drawing down reserves. But of course the point stands that they are rapidly electrifying and expanding renewable generation.
    - rapind 14d ago
      Also tons and tons of coal. Hopefully just a stopgap.
      - actionfromafar 14d ago
        Yeah, until they run out of coal.
        leonidasrup 13d ago
        China has large coal reserves, enough for many decades. "China, the world’s largest coal consumer, has domestic reserves of coal to last the next 50 years, according to annual reserves data from the Ministry of Natural Resources cited by Bloomberg. At current rates of domestic production, China also has crude oil reserves that could last for at least 18 more years, according to the ministry" https://oilprice.com/Latest-Energy-News/World-News/China-Says-Its-Coal-Reserves-Will-Last-For-50-Years.html https://oilprice.com/Latest-Energy-News/World-News/China-Say... https://www.mining.com/web/china-has-enough-coal-reserves-to-last-another-five-decades/ https://www.mining.com/web/china-has-enough-coal-reserves-to...
        rafterydj 13d ago
        Wow. Only enough reserves to be measured in decades? Once it's gone it's gone. Genuine Carboniferous coal, one day a thousand years from now, might be a rare museum item! I have a habit of thinking about history in very long terms, and that just does not sit right with me. That kind of thinking (oh we have enough for decades, let it rip!) happens, and the decades pass, and time inevitably is less kind to the descendants of such decision makers.
- leonidasrup 13d ago
  "$20 Billion Oil Deals Paid in Chinese Yuan, US Dollar Left Out" https://watcher.guru/news/20-billion-oil-deals-paid-in-chinese-yuan-us-dollar-left-out https://watcher.guru/news/20-billion-oil-deals-paid-in-chine... "China and Saudi Arabia Settle First Oil Trade Using Digital Yuan" https://www.economywatch.com/china-and-saudi-arabia-settle-first-oil-trade-using-digital-yuan https://www.economywatch.com/china-and-saudi-arabia-settle-f...
- kalx 13d ago
  This isn’t true. You can buy oil with other currencies. It’s just that dollars are liquid. No pun intended.
strken 14d ago
In a way, the bond market tracks international central banks' confidence that this will continue to be true. If they lose some of that confidence, their stock of bonds moves from USD to RMB/EUR/JPY/AUD/CAD/SGD/etc.
- spwa4 13d ago
  True, except you're being way too easy on those other currencies. Currencies need to be issued by groups able to guarantee international trade, otherwise there's no point. RMB - maybe, but nobody sane trusts China to not immediately change priorities on a dime EUR - imho (much) less chance than RMB, but they're using a hack: of EUR is a massive entity and internally there's no choice. Literally not allowed (due to tax reasons) (exceptions of course made for favored entities) (I feel that those favored entities exist, and how big they are, should be a huge red flag for anyone considering using EUR) JPY - can't project force ... and doesn't even try AUD - no CAD - no SGD - no I don't understand why you're not listing GBP, as they have at least at some point done this. Of course they were a worse steward of international trade than the worst point of the US. Also, you consider AUD, but not CHF? So what choice is there, really? This is really a way to try to push the US to do more, for less "exorbitant privilege" (especially EUR). Of course, a great many people are very interested in doing just that. It strikes me as an extremely dangerous game to play. Yes, the odds of winning are good, but if you lose, you lose everything.
  - c0ndu17 13d ago
    Pretty confident it’s going to be EUR, note how they dealt with Trump tariff’s shenanigans. Took it slowly, and decidedly, sure let the countries say words and what not, but at the end of the day it’s decided by the EU. Just one persons opinion.
    - spwa4 13d ago
      And you're not terrified that's the situation? The beef the US has with the EUR is simple: the US is what's defending Europe militarily (nuclear and non-nuclear. The Pentagon is the reason Ukraine hasn't been nuked yet, or more likely, that Kiyv didn't surrender because they didn't have nukes). That was never given freely. It was politically impossible to get governments to actually pay for that, so it was decided to trade in USD (this was before petrodollar), giving the US "exorbitant privilege" (which roughly translates to that the US gets to tax most of global trade at something like 2 to 4% and use that for themselves). That the US got that was not an accident, but a policy decision. The Euro takes that away, but of course, no European country is willing to either now start paying, or to defend itself. To say nothing of France, the Netherlands or Denmark defending remote EU territories like Greenland, ABC islands or Polynesia (which would require, for starters, militarily controlling supply lines to those territories). Given the history of economic sanctions (what the EU is doing) ... of course people don't know that history, but the TLDR is that nearly always economic sanctions are a prelude to war. They don't just not work. In many cases they cause wars. WW1 was caused by economic sanctions (and the scale of EU economic sanctions is 100x bigger than what caused WW1), and often the economic sanctions on Germany after WW1 are generally thought to be the big reason for WW2. It makes sense from a game theory perspective: if a government, whose power is fundamentally based on force, lets economic sanctions convince them, they will be attacked by their own people. So they simply cannot give in, and historically that's what you indeed mostly see: when a country is targeted by economic sanctions, it's government usually decides to attack. The EUR is imposing very large scale sanctions on ... essentially everyone. Russia and China most obviously of course, but sanctions are so widely used by the EU you can literally say it's being used against everyone from Afghanistan to Zimbabwe, or geographically from Paraguay to North Korea. And why is the EU doing this? Exactly the reason Trump is doing it: sanctions are "power without needing parliament to approve the budget for anything". The fear is: the historically most likely outcome of what the EU is doing, what EUR is being used for, is another very large scale war.

wnc3141 14d ago

its mostly because the global economy is dollarized so there's a number of benefits store your wealth in dollars as a hedge or point of stability. If the dollar's dominance wanes, so too will be the appetite for US treasuries.

nradov 14d ago

There is no alternative.

IshKebab 14d ago
What? There's an almost limitless supply of other entities you can lend money to.
- nradov 14d ago
  None that can absorb such enormous capital flows.
  - IshKebab 13d ago
    Nonsense. The USA is not bigger than the rest of the world.
    - nradov 13d ago
      US capital markets are the largest and most liquid in the world. It's not even close. There are of course a zillion other borrowers worldwide but they're all much smaller and suffer from a variety of other structural problems. If you need to deploy a huge amount of capital with low risk and high liquidity then US treasuries are still the only realistic option.

repeekad 14d ago

The real answer to your question is the US bond market is an auction, and rates are going up and up, with some sketchy tactics being employed to try and keep them down. What’s happening to US bonds has been compared to using a credit card to pay off your mortgage...

lenkite 13d ago

> Go further with your reasoning... Why would anyone lend the US more... Because if you don't, you are abducted or killed or "regime changed" or sanctioned to famine-level poverty - all for "freedom & democracy". Kindly remember that the Corporate States of America has the world's most powerful military... well I suppose it is nowadays in the top #3.

idiotsecant 13d ago
It's hard to twist the definition of the term in such a way that the US doesn't have the most powerful military.