The Dollar Shortage & China’s Bond Selling Are About To Corner the Fed
Earlier this week – news went by relatively unnoticed by the ‘mainstream’ financial media (CNCB and such) that Beijing’s started selling their U.S. debt holdings.
Putting it another way – they’re dumping U.S. bonds. . .
“China’s ownership of U.S. bonds, bills and notes slipped to $1.17 trillion, the lowest level since January and down from $1.18 trillion in June.”
Remember – dumping U.S. debt is China’s nuclear option (which I wrote about back in April – click here to read if you missed it).
And although they’re starting to sell U.S. bonds – expect it to be at a slow and steady pace. They don’t want to risk hurting themselves over this.
I believe China may be selling just enough to get the attention of Trump and the Treasury. A soft warning for them not to take things too far with tariffs and trade.
Yet already just as news hit the wire that China was selling bonds a few days ago – U.S. yields spiked above 3%. . .
Don’t forget that China’s the U.S.’s largest foreign creditor. And this is an asset for them.
And although them selling is worrisome – the real problems started months ago. . .
Over the last few months, my macro research and articles are all finally coming together. This thesis we had is finally taking shape in the real world.
I wrote in a detailed piece a few months back that foreigners just aren’t lending to the U.S. as much anymore (you can read that here).
I called this the ‘silent problem’. . .
Long story short: the U.S. is running huge deficits. They haven’t been this big since the Great Financial Recession of 08.
And it shouldn’t come as a surprise to many.
Because of Trump’s tax cuts, there’s less government revenue coming in. And that means the increased military spending and other Federal spending has to be paid for on someone else’s tab.
…click on the above link to read the rest of the article…
