CNN website hacked: "China dumps all bonds"

China's holdings are significant - over $1.3tn or around 7.5% of all US government debt. If they were to dump all of it onto the market at once (a crazy idea which they would never do), the simple excess of supply over demand would cause Treasury prices to plunge and the USD would likely drop in the foreign exchange markets too.

As soon as someone at one of the big US investment banks realised what was going on, phone calls would start being made to wake people up in London and then New York (this assumes that the sell-off starts during Asian trading hours) and eventually someone would wake up Bill Dudley (head of the New York Fed). He, in turn, would wake up Bernanke and Lew, who would call the President (who'd probably already have been woken up by the IC/military).

By that point, the markets would be in turmoil. The combination of the sell-off with a big military move (i.e. declaring the South China Sea a closed zone) is interesting, because an increased likelihood of military conflict typically causes investors to sell riskier assets and buy less risky ones, like US Treasury bonds. So, stock markets would drop across the world - I'd say at least 3%, probably more like 5%. Buying gold and oil is like a bit of a kneejerk reaction in times of geopolitical turmoil, so those would probably rise.

I doubt the increased demand from investors for Treasuries would be enough to absorb $1.3tn worth of bonds so Treasury prices would be dropping through the floor. That introduces a new dynamic because Treasuries are commonly used as trading collateral, so you'd start seeing margin calls, just like we did during the credit crunch (which is what caused Lehman Brothers to collapse).

So, Dudley would almost certainly act to stabilise the market by instructing the Fed's trading desk to start buying Treasuries. I don't know what the practicalities are of the Fed buying $1.3tn at short notice (e.g. whether they can simply create that many dollars out of thin air and credit them to their counterparties' accounts) but, assuming they could, that would support the price of US Treasuries although yields would probably still end up jumping by at least 100 basis points, and the USD would probably drop significantly against the Euro.

So, all in all, I'd be inclined to disagree with the idea that China dumping US bonds would have absolutely no effect. :-)

Apparently you haven't taken enough college/graduate studies to unlearn common sense. Unfortunately, that disqualifies you from being an elite.

To get those kind of jobs, you need to be for example a phd 'expert' on the great depression such that you come as close as possible to repeating it (biggest national housing and credit bubbles ever).

"Possibly related" would be a much better phrasing. Though additional updates seem to support that it was SEA.

A crucial thing to remember in a fog-of-war scenario is that all information becomes suspect. Your best response is to take actions that reduce uncertainty, risk, and volatility. Not which increase them.

[0] http://www.cnn.com/2014/01/23/tech/cnn-accounts-hacked/

Most Turkish people are against the government's senseless war against Syria. In last few weeks the government was caught sending military equipment to the barbaric islamic syrian rebels many times.

I can only hope that a treaty over the use of online warfare gets made[1]. Until then, I will expect to see this happen more and more regularly.

[1] http://www.huffingtonpost.com/chris-weigant/we-need-a-geneva...

China dumping US money, would be an actively hostile thing to do... implying they wanted to do other hostile things as well... The world would likely become a very different place, real fast.

If/when USD looses its position as a reserve currency, the price of gold will skyrocket and China will be looking smug.