Sunday, June 23, 2024

China Dumping U.S. Treasury as National Debt Spirals out of Control

'Nobody will lend to you after you default...'

(Ken Silva, Headline USA) China now holds less than $900 billion in U.S. treasury bonds, and continues to dump them as U.S. national debt spirals out of control.

China’s U.S. debt dump coincides with similar developments in Japan, and follows Russia shedding its roughly $100 billion in treasury holdings since the start of the war in Ukraine.

Typically holding around $1 trillion in U.S. debt apiece, China and Japan are the two largest foreign debt holders in the world. If they stop buying U.S. treasuries, the government will likely have to resort to massive tax hikes or money-printing to finance its out-of-control spending.

U.S. national debt is nearly $34 trillion—up by more than $2 trillion in the last year.

Skyrocketing interest rates have put further upwards pressure on the cost of financing the public debt. It now costs the U.S. government $1 trillion to merely pay for the interest on its skyrocketing national debt.

The Federal Reserve has indicated that it will continue to raise interest rates in an attempt to fight inflation. This has the U.S. government in a nasty spiral, whereby it must borrow even more just to finance its interest payments.

“There will be further increases to Treasury coupon auctions and T-bills outstanding going forward,” stated Bloomberg Intelligence strategists Ira Jersey and Will Hoffman earlier this month.

“Besides deficits of over $2 trillion in the foreseeable future, climbing maturities following the increase of issuance from March 2020 will also need to be refinanced.”

While mainstream economists continue to paint a rosy picture of the U.S. economy, skeptics worry that the crushing U.S. debt will soon cause the Federal Reserve to concede its fight against inflation and start purchasing treasuries in bulk again.

“Failing that, default also balances the budget. Because nobody will lend to you after you default,” economist Peter St. Onge wrote for the Mises Institute. “Of course, in the US case that would evaporate $34 trillion in paper wealth, which would wipe out thousands of banks, companies, and pension funds. It would be ugly.”

Ken Silva is a staff writer at Headline USA. Follow him at twitter.com/jd_cashless.

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