Ah so now logic is important yeah?
US treasury secretary begs Europe not to call in debt. Get a load of this guy.
It’s like the Microsoft CEO saying “find a use for our useless product so we don’t go bankrupt.”
What is with these out-of-touch billionaires and their delusions of grandeur?
It’s not the world’s responsibility to make sure you’re never inconvenienced!
They can’t comprehend that we don’t have any reason to support them.
It’s like the story of Linus Torvalds meeting with Steve Jobs. They could not comprehend he was not interested in making Apple better.
They’re so used to telling people what to do and them doing it, it boggles their minds when someone tells them “no.”
Like, “You’re not paying my salary, fucker. Give me $100k per year plus healthcare and retirement benefits, PTO and sick leave, and then I’ll use your stupid LLMs five days a week. Otherwise, fuck off!”
There’s nothing more logical than to finance the army that will invade you /s.
Can you elaborate on that? How does Europe finance the US by holding government bonds?
Bonds are US debt, debt that the US uses to pay for stuff like military equipment.
And to add to this, while the secondary market doesn’t affect existing debt it can completely wreck a government’s ability to contract new debt, as anyone affected by the Euro Area Crisis in 2009 can tell.
So European investors can leverage existing bonds to make things much worse than simply not loaning more money.
Sure. But what effect does selling the bonds have on this US debt? The money has probably long since been spent. The government won’t give the money back. If I understand correctly, the sale only changes who gets the interest, no?
If everyone sells their bonds, supply outpaces demand, making the bonds less valuable.
The US relies on borrowing to pay off the interest of the debt it already has. If no one wants to buy any more US bonds, then the US can’t make interest payments; let alone principle.
Say you get a mortgage from the bank, which you use to buy a house. Then someone builds a stink factory next to your house, lowering its value. You now owe the bank more than the house is worth; you’re in a deficit, and if you can’t make payments then you default on the loan. You can’t even sell the house to pay off the mortgage at that point.
I’m not sure what the example with the house is supposed to mean, but the difference between me and a country is that the country issues its own currency. Even if supply ever exceeded demand for US bonds, the Federal Reserve could simply step in as a buyer. It is unrealistic that selling government bonds could put the US in a position where it can no longer take on new debt.
A mortgage and a treasury bond are both types of loans, although they do function somewhat differently.
When you mortgage a home, the bank loans you money which you use to buy a house. The loan is then secured against the equity of the house, which still belongs to the lender until you pay it back. As long as the house remains as valuable or more valuable than the amount of principle you have left on the loan, the mortgage remains solvent.
When you buy a treasury bond, you loan the treasury money which is secured against the bond itself: a sheet of paper with no real value except that the treasury promises to pay it back, plus interest. Typically the treasury pays back the principle and interest on its bonds by issuing new bonds, creating a repeating cycle of ever-widening debt. A circular pattern of using new borrowing to pay off debt. It’s been an untenable situation for decades, stacking a jenga tower higher every year along the way, and the only reason it hasn’t collapsed is because people continue to buy new treasury bonds, often by automatically rolling over the ones that complete their term into new bonds, thus enabling the US to continue borrowing.
If countries cease to buy new bonds, or sell-off their existing bonds on the secondary market, those bonds lose value. The interest gained is fixed, of course, so no one would buy a bond for more than it’s worth at the completion of its cycle, but if the value dips below the rate it was purchased at then the seller is at a loss. If bonds are worth less then their original value, no one will buy new ones.
If the US treasury can’t issue new bonds, it can’t borrow new money to pay off the principle and interest on its older debts. It’s as if your house, which is securing your mortgage, lost value, and is no longer worth enough to pay off your remaining debts. It becomes insolvent, and if the debt is recalled, your only option is to default.
If the US can no longer afford the principle and interest on its debts, then US treasury bonds become worthless, because the promise that the US will pay them back becomes no good. Thus completing the cycle of the devaluation of US treasury bonds.
Even if the Federal Reserve tries to mitigate this by buying US treasury bonds, it’s not an infinite pool of money, and this circular lending “borrowing from yourself to pay your debts” is likewise untenable and only further complicates the house of cards without actually securing the flimsy foundations. Plus, the more money the Federal Reserve releases into circulation, the more watered-down the value of the USD becomes, driving the US economy further from credible stability and its place as the global reserve currency.
It is a highly complex situation, and the mortgage analogy is somewhat simplistic relatively speaking, but that’s the point of an analogy: to make a complex topic simpler, even at the expense of some accuracy, to make it easier to understand.
While selling off treasury bonds wouldn’t cause a collapse of the US economy overnight, it has the potential to precipitate a catastrophic collapse and thus even a small movement in that direction can gain a lot of leverage for other countries.
In short, the US is in no place to make claims on other nations’ sovereign territories, especially nations that are allied with its biggest collection of creditors. And that’s what this is all about.
Well it dilutes the demand for new bonds to have those old ones resold. But yes whomever holds those bonds gets paid, no one can call in us debt, it’s due when it’s due.
But if all of europe quit buying US bonds and sold what they have, the US might not be able to raise the next round of trillions of borrowed dollars first chance the administration gets.
Is it plausible to assume that the US will no longer be able to sell its bonds? In the worst case scenario, it will raise interest rates by 0.1 percent. Or the Fed will step in, as it did in 2008 and 2021.
Just read that sentence back to yourself.
The fact that this is in public mainstream discourse is a good thing.
“Yes, we’ve contemplated military force but to hit us where it hurts? That’s just rude!”
Right? These fascists are saying shit like “We can do whatever we want because the world is governed by strength alone,” and then they cry the minute someone else goes “Well fuck you then!”
Or “I’ll tariff you 200% if you don’t join my extortion lobby. Nooo, don’t suddenly remember about all that money I owe you!”
While threatening NATO partners is a logical action.
They want to bully everyone without ever seeing any consequences…
The real solution is to use less USD and more Euros. This is especially important in international trade.
It has the same effect as it will force the US to further devalue their currency making it less attractive to do trade in US Dollar.
The difference is that selling off bonds happens once and only once. Not using USD is long term damage.
Selling old bonds destroys the market for new bonds, which forces the US to do quantitative easing, which does far more damage to the US Dollar than a few countries trying to avoid trading in US Dollar.
The sale of bonds is a good lever, and even if it doesn’t work it is good to get rid of these likely soon to be toxic assets now while there is still a chance of getting something for it.
And in general, how do you propose to stop using Dollar? It is either US products you want to buy or oil/gas that is bought in US Dollar. And the latter will not switch anytime soon because of a long list of reasons among which is the threat of US invasion for the sellers of oil/gas.
Trade based in USD, creates demand for the currency. So as long as you trade in it, selling off bonds will only create a one time inflation event. However if you stop trading in it, demand for the USD goes down and prevents the Fed from doing QE. It actually is even worse for the US. The main reason to hold treauries is to have a near cash equivalent, which has at least some return. That is something you need, when you trade in dollars. In other words less trade in dollars means a de facto sell off in US treausries.
You didn’t understand my comment it seems.
You can’t just stop trading in US dollars, at best you can very slowly look for other suppliers for vital commodities that you currently have to buy in US dollars. That is a decade long process and will not do anything to deter the US from doing what it wants right now.
Selling off bonds on the other hand has a direct effect on the finances of the US government which is constantly issuing new bonds to finance its deficit. This effect is somewhat limited by the fact that they can also do quantitative easing (“printing money”), but that usually has a direct effect on the value of the dollar and is much more likely to make others to reconsider their trade in US Dollars than a few European states slowly diversifying their supply chain over the course of a decade or so.
So you are saying that this would be a proportional response, right?
is logic what the trump admin is runnin on?
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He’s right. Dumping is would be dumb. You need to quietly hedge the dollar devaluation first.
On a serious note, it probably wouldn’t have the desired impact.
https://www.reuters.com/markets/us/who-owns-us-debt-2025-02-10/
Even if the whole world ex-US dumped, the US holds the most
Don’t underestimate what a couple percent can do to the economy. On surface level, it might seem to be a small amount in comparison to the total, but if it makes it just a bit harder for the US to borrow money, it can trigger a domino effect. The countries and investors that are still interested in buying their debt could easily realize that if they hold back as well, they can demand higher interest rates. Economies have crashed over less.
Europe would probably do it over a long term by simply not rolling treasuries or slow sell off.
I think this is a long game to play
Anything any of these people say is beyond worthless.Their position depends on them just parroting what the supreme leader wants.
Who started to defy logic?
Idiot.
