When China's makes the call on US debt, its going to be very bleak day.
That's why China will never do this.
Better for both nations to extend and pretend.
With all the grandstanding of the "great" POTUS, I'm yet to see a material effect of his so called tariffs. All I'm seeing are home-goals.
Explain?
When bond prices drop, US interest rates go up, which hurts the real US economy.
And when bond prices drop, that devalues the remaining 90% of China's holdings, hurting China too.
The Fed could stabilize the bond market by printing dollars to buy the bonds itself, but that would devalue the dollar and drive up inflation in the US. When China tries to repatriate that wealth, they must sell dollars and buy yuan, which would drive up the value of the yuan, driving up the cost of Chinese exports, hurting their manufacturing sector.
It's mutually assured destruction.
> It's mutually assured destruction.
The most the Fed has ever held on its balance sheet is $5.8T.
Maybe I missed a zero somewhere but China's sale of 10% of their holdings seems in isolation like an awfully manageable problem. A different discussion if there were a ton of other crazy stuff going on in the world economy and they just piled on, perhaps.
US 10y bond auctions are often >40bn in size, with shorter maturities well over that. The seller of this debt (China) wouldn't want to smash the market because they'd only be shooting themselves in the foot.
Point being that it's an easily digestible amount of debt.
I'm sure you also realize that when a large holder sells a significant stake of any asset, traders anticipate they will sell more in the future.
Example 1: Berkshire Hathaway selling $47 million of BYD and the market price dropping 8% the next day, wiping out $10 billion of market value.
Example 2: Musk selling 0.6% of his stake in Tesla, and the market price dropping 15% the next day, wiping out $187 billion in market value.
Example 3: UK government announcing a planned sale of 0.3% of above-ground gold, and the global gold price plunging 10% before the first auction.
How much do they control? Please cite your sources.
I can find some information about "shadow holdings" (exciting!) held in Luxembourg and Belgium [0] but I cannot imagine those treasuries would add up to a multiple of what's officially on the books and held by the Chinese government and Chinese companies. Interesting thought, though.
[0] https://www.cnbc.com/2026/05/19/central-banks-offload-us-tre...
That debt is all treasury securities bought on the open market.
They can’t demand the US pays them back early any more than you can.
But anyway, a large debt holder can bind up the borrower by announcing they think the debt they hold is worthless. The impact would depend on how much debt it was, with a large amount being dumped almost certainly increasing the cost of borrowing.
If I go to a bank, and I get a loan, then the terms of that loan allow the bank to do that.
If I sell a bond, then I set the terms, and I say that you can’t do that. You buy the bond understanding the terms.
China owns treasury bonds, they don’t have the ability to “bind up the borrower”. They can sell their bonds at market prices, but they can’t say “this debt is worthless, pay us now”. That’s not how bonds work.
Once that wraps up, US money will be not much more than toiletpaper.
And that is wrapping up because world has like ~60years of oil left at current consumption rates.
A currency’s value reflects confidence in the economy issuing it. The dollar is backed implicitly by the size, productivity, and stability of the US economy.
Lets say you're Germany, US imports make up only 6.9% of total import value(Netherlands is 7.1% and China 12.5% on top) closely followed by Poland with 5.9%.
Take most countries in Europe, US imports are a rather small very modest portion.
So it doesn't make that much sense that US dollar would be particularly valuable.
After all - you really don't actually even buy that much stuff from US, thus the need for the US dollar isn't particularly large, and why would it be?
On the other hand, if you want to buy oil however, you need the dollar. That is what makes the dollar valuable.
Now if you can buy oil from Iran, Russia or whatever in some other currencies, why would you need the stinking dollar?
I mean, you do import some US goods, but not that much really.
Why would you have confidence in an economy that regularly has insane trade deficit (1 trillion now)?
Once the petrodollar goes, thing will go tits up. And it will, because there's only 60years of oil left in the global oil reserves in the tank.