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Investigating the Claim “Countries Trying to Get Out of Treasuries”

Summary:
Stuki5 hrsWhile someone has to hold everyone of them, and trade deficits do ensure someone will, how much others are willing to give up, in exchange for one of them, can very easily be reduced. Chinese producers previously willing to hand over three ventilators and a million N95 masks in exchange for given stack of treasuries, no longer being willing to hand over more than one of the former and a tenth of the latter, is till problematic. Much of the world have been willing to accept US IOUs, because they believed there was something, anything, of value backing those IOUs. IOW, they'd eventually be able to get something of real value in exchange for them. The more obvious it becomes that this belief was erroneous, the less real goods and services each IOU is able to command. Which does

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Stuki

While someone has to hold everyone of them, and trade deficits do ensure someone will, how much others are willing to give up, in exchange for one of them, can very easily be reduced.

Chinese producers previously willing to hand over three ventilators and a million N95 masks in exchange for given stack of treasuries, no longer being willing to hand over more than one of the former and a tenth of the latter, is till problematic.

Much of the world have been willing to accept US IOUs, because they believed there was something, anything, of value backing those IOUs. IOW, they'd eventually be able to get something of real value in exchange for them. The more obvious it becomes that this belief was erroneous, the less real goods and services each IOU is able to command. Which does effectively shrink the size of the treasury market, as log as you measure it in terms of anything other than nominal dollars (and other, dollar tracking, fiats).

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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