The US economically illiterate nutcases are out this weekend led by Senator Graham.
The Senator proposes a Pandemic Tariff including cancelling all debt owed to China.
Anger in political circles, particularly in the Republican Party, has manifested itself in legislative proposals seeking to allow U.S citizens to sue China in American courts for the pandemic, calling for sanctions on Chinese officials
Former US ambassador to the UN and former South Carolina governor, Indian-American Nikki Haley, widely seen as a prospective last-minute vice-presidential nominee for a Trump second term, is among those pressing for action against Beijing. “China’s Communist government needs to be held accountable for their role in lying about the Coronavirus pandemic, and the US Congress needs to respond – now,” Haley said in a STOP Communist China petition that received rousing endorsement in Republican circles this week.
Other US lawmakers want to go even further. In a precipitate suggestion, Haley’s fellow South Carolinian, Senator Lindsey Graham, who has President Trump’s ear, called for cancelling the more than $1 trillion in U.S treasury securities that China holds.
A US default would be economic suicide, collapse the US dollar, collapse the stock market and throw the entire global currency system into chaos.
But it would do wonders for gold.
Mish
got to say that many people have said that it was only a matter of time
before this happened (and from the US perspective that it was about time too).
unfortunately, i also feel that the Chinese have probably also
figured this kind of response and have already accounted for it in their calculations
of future possible US actions.
so if US does this, what will be their response (and, more importantly the response from the rest of the World.)
“Americans should think long and hard before defaulting on U.S. government debt and consider the consequences if we open a door to claims against sovereign nations for past sins.” – Pat Buchanan (no friend of China)
What would we have done without Covid-19? Someone has to take the blame for the massive deficits, over-dependency on china, over-dependency on the godvernment class to enrich themselves and pretend to redistribute to the poor!
the combination of increasing longevity (and the impact on social security, medicare, etc. in most countries) and the already massive deficits of virtually every nation assures that government borrowings will never be repaid. Thus, we are approaching a global, simultaneous write down of sovereign debt. It will happen. China, as a creditor nation, will be hit hardest, if the write down occurs “now”. Assume a 50% write down. The ensuing back up in sovereign debt yields will not offset the 50%. But, corporate bond yields should invert to USTs since corporate debt gets rated based upon the corporation’s ability to service its debt. Fiat debt will be properly viewed as junk since once Pandora’s box has been opened (write downs) …
There’s always a catch, however. When does one put this trade on? certainly not now when we are within shouting distance of negative yields. My guess is to wait until the write down occurs–and don’t hesitate for a second!
Start with Spanish flu which started in usa. Then h1n1. The then financial crisis 2008 with lehmann brothers collapse. All
these disasters started in usa. Proven. The USA owe the world a million trillions. And interest in accumulating for a century now. Only way to cure Americans disease is, CLOROX. Lol.
I would think if the US defaults on the Chinese they will simply nationalise all US firms, their products and intellectual property. They will then continue to manufacture said items and sell them around the world and at home while embargoing the US.
If China embargoed the US it would come as a very nasty shock to the US.
How can the nastiest bloke be shocked? And look at how indifferent they responded to their presidential invite to drink up CLOROX. The gringo can not be shocked.
I bet you five bucks that American hedge funds will start buying US T-Bills from China at 20c in the dollar and selling them back at par to the US government…even better yet the Europeans can buy the US debt at a discount from the Chinese…
You can’t use ventilators without sedatives. Now the US is running out of those, too. https://www.vox.com/2020/4/6/21209589/coronavirus-medicine-ventilators-drug-shortage-sedatives-covid-19
We are watching $USD Global Reserve Currency status go down the drain in real time.
Graham and his supporters need to inject large dose of Lysol into themselves, bc they are clearly very sick
….Even a broken clock…
Leave the nonsensical special casing of “China” out of it, and we’re talking downright greatness.
“A US default would be economic suicide,”
No it wouldn’t. Debt dependence is not some form of “economic” benefit. What’s economically suicidal, is dependence on credit rackets and the preeminence of rent seeking in all relations, which such dependence entails. Ending that nonsense, is suicide prevention as pertains to the economy. A bit late perhaps, but better late than never.
“…. collapse the US dollar, collapse the stock market and throw the entire global currency system into chaos.”
All of which are fully, 100%, in each and all and every way, purely positive developments. It’s not as f any of those undifferentiated theft rackets serve any positive economic purpose, after all.
“…But it would do wonders for gold.”
Which is another benefit.
Ergo, a win-win-win…..
Only downside is the idiotic “China” limitation. But we’re talking Lindsey here. Not some economic (nor otherwise) brainiac. Go easy on the kid. At least he’s improving.
My bet is you’ll love paying $500 for a loaf of bread
Wheat must no doubt decide to just stop growing in the Midwest based on arbitrarily cooked up documents in Washington, in your world.
In the one the rest of us live in, wheat will keep growing. And farmers won’t forget how to harvest it. Keeping bread cheap. Cheaper in fact, once neither farmers, bakers nor stores are forced to, at gunpoint, hand over an ever increasing share of their output to leeching “bond holders”, in exchange for exactly nothing.
But if you believe there are genuine benefits from being forced to work ever harder to pay down “debt” taken out by a bunch of Washington idiots in order to allow them preen around playing World Police and Fashionably Socialist, I suppose there’s not much I, nor anyone else, can do for you.
Well said.
Funny how everyone has been conditioned to think that all productive action will just stop being done because government loses the power to take productive capacity from one and give it to another.
Some pproductive action will decrease – but only in those areas where it was previously artificially boosted. However, in areas where it is needed most, productive action will increase.
LOL,yeah right.What happens if China decides to boycott the US,what’s Dollar General,Walmart,Home Depot,Lowes,Amazon,Boeing,GM,Walgreens,virtually all suppliers to DOD…well everything how long will they survive?Everyone of these companies will in be Chpt 7 in a month (week)!
Let’s not forget about all the pharma drugs that come from China too.
….a RESET that ‘s what the Sapiens Ape’s make believe, global financial economic model needs !….But first of all we need a much stronger virus…
A volcanic eruption will do the trick, too. Once everybody is back in the garden sweating it instead of sweating in the beaches, the reset can happen.
The Chubby Militia will attack!
The charge of the wheelchair brigade.
Who are they going to sell the cheap junk to then? No one buys up that crap like US does.
I not sure Mish, what premise you are basing your thesis of “economic suicide”, as you don’t expand on that idea. I would respectfully say there may be more depth to the idea of a default. If the rest of the world viewed a default as China specific, and “contained”, it may actually serve as some remedy for China’s ethical and financial malfeasance, esp. around the Wuhan virus. The rest of financial world might secretly view this as a “net positive”.
“Weaponizing” the UST holdings of ANY foreign governement when the country is $25 TRILLION in debt (and exploding higher) might not be such a good idea. Especially when the newly issued ones barely pay any interest at all.
Why is the US still messing up Iraq with no consequences? That’s just one grave example. I don’t see you standing up to that. US leads the world in ethical and financial malfeasance overall. Remember Boeing? Without the Chinese grounding the 747 planes, we would still be flying on those death traps. Don’t see you talking about that too.
Back during the early 2000s, the US sold those junk (rated A or above by US firms) mortgage bonds to the rest of the world, causing a global financial crisis. Where’s the penalty for that.
And don’t tell me to leave this country. The US took this country by force. That’s numero uno malfeasance.
Also trade works through confidence. Defaulting “selectively” means you can always make up a situation next time to default again. If the European countries later on want to get closer to Russia, would the US default as well?
Contained? The world’s economy is interconnected. There are derivatives contracts everywhere which we are not seeing. It could be that there are Chinese entities owing huge amounts of money to US banks through subsidiaries, etc that we don’t know. Those Treasury bonds might have been put up as collaterals, etc.
Morons should just shut up. ROFL.
“Morons should just shut up.” Yes, you should.
The US national debt is now larger then US GDP, which most economics would regard as “bankruptcy of a country”. If you default on China, where are you going to get more finances from? US based financing seems inpossible unless you rpint more money, which will accelerate inflation.
And before you know it, besides morally, you will also financially be a third world country
I for one have no problem allowing our courts to compensate those businesses that lost so much from suing china and allowing them to collect via treasuries held by china
…corrupt American hating globalists…
You mean the multi/trans-national corporations who outsourced production in the search for lower worker pay and higher executive pay and increased share values?
You sound like a socialist !
The means of production belongs to the people!
Property is theft!
“You mean the multi/trans-national corporations who outsourced production in the search for lower worker pay and higher executive pay and increased share values..”
…then finance the purchase by society of the resulting foreign produce by inflating domestic asset values to exorbitant levels by facilitating high private debt, and creating unproductive service work, increasingly manipulating the price and meaning of money to do so while building national debt to extraordinary levels to help cushion those that are finding their own economy no longer needs them …
Right on, socialism is capitalism and theft is property.
“Property is theft!”
In central bank dominated fiat regimes, that statement is true.
First, just a little. Then, as in America by now, darned near 100%.
This is what happens when you have a guy at the top who habitually screwed lenders and subcontractors—the faithful minions pick up those habits.
All that does is increase borrowing costs and subcontractors add 30% on the price for the screwing at the end of the job.
What it takes is thinking of what can happen in response. Which these fools seem incapable of doing.
that guy’s one fart smeller, errr smart feller..
If I owe you $10,000 I have a problem.
If I owe you $1,000,000,000,000 you have a problem.
China bought US treasuries for the same reason everybody else did, but also to keep the US happy spending (in a functioning financial system, it kept the rates low).
Now that arrangement has outlived it’s usefulness.
If the US can print a few trillion, then China can write off one trillion if it makes the US look like a deadbeat borrower.
It will ALL eventually be defaulted on, one way or another.
Probably so as long as governments think that constantly borrowing money is the solution to all their problems.
And the quicker the better.
Clearly finances are now weapons. Senator Graham is “projecting force”. As the world’s largest debtor, the US has the advantage of a larger stockpile of financial weapons. Of course other nations would retaliate to a shot from a financial weapon. China, in particular would shut down all manufactured goods destined to the US. In that respect, the US should on-shore manufacturing before making any threats using any type of weapon.
With a national debt that is now greater then GDP, I would not be so sure
Even the despicable Geithner knew that the casino must always pay up, hence the AIG bailout and payoff of speculators’ bets. But look, folks, without a comorbidity, the risk of death from COVID-19, even in the 75 and older population, is just extremely, extremely low. https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/
Whoa, nice find! Oregon doesn’t have data like this about presence of comorbidities by age group, but I have found this:
Reported COVID deaths in Oregon: 73% aged 70+, 47% aged 80+, 57% were in nursing homes or other congregate living settings.
A lot of countries would start to get nervous if we behaved like that.
They are already plenty nervous.
It is obvious that our so-called “leadership” are all completely insane.
“Nervous”? You have quite a gift for understatement.
Someone needs to bone up on the constitution.
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
“including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion” and by their omission, excluding everything else such as trade imbalances incurred long after the Civil War…
That said, Senator Lindsay Graham has a habit of making explosive political statements that most people ignore.
duhhhh, as if Republicans in 2020 give a **** about the Constitution
Good lord, you see what happens when a person is forced to spend all their mental currency on staying in the closet?
I know eventually we will transition from FRN’s to some form of real money, but for the moment we have reserve currency status. That is a priceless benefit to the nation and we should keep it as long as we can, while also preparing for the day when we are forced to give it up. And we do need to prepare because even the best case scenario makes losing that status a really painful adjustment. Unprepared, the transition could end the US.
Selectively defaulting on China out of a desire to get back at them for the CV19 pandemic would be an outrage to the world and all creditors, it would cost us our global position. If it could be proven that this virus was lab created and intentionally released then a punitive judgement could be entered that allowed for a fine against the Chinese in the trillions and that would justify a first step of cancelling our debt to them as a down payment, but, it would have to be a globally agreed punishment for a international crime in which there is zero doubt that China intentionally inflicted this on the world. Anything short of that means shut up and stop making false accusations.
I agree, but I don’t think it was a deliberate release of the virus, most likely accidental. However, the best way to retaliate agains China is to join with the rest of the civilized world in disengaging economically with China. Try to move all of our manufacturing out of China and slowly engage in a cold war like we did with Russia. Anyway by economic retaliation their predatory trade and political actions will eventually undermine the CCP leading to political collapse.
No proof of engineering and releasing the virus is needed. The US “found” weapons of mass destruction, and used that as a pretense to invade Iraq a second time.
Why precede your thoughtful comments with a homophobic attack? Distracts from what you have to say and diminishes you.
It is not a homophobic attack NvI and almost everyone here already knows I am a gay man, but for those that do not know I despise closeted people who want all the fun of being gay and benefits we who fought for our rights have given them without them ever lifting a finger to help. All that said it is widely known in the upper echelons of DC that Miss Linsey is a deeply closeted old queen. While someone straight may not say such things without being accused of bigotry I can, because I have fought and stayed bedside with dying frinds during another epidemic in which the president would not even mention it’s name the first seven years of his term of office. The worst enemies of the gay rights battle are the closeted who expect others to fight their battles for them, and yes, there are still many battles left to fight.
It is also worth mentioning that only a closet case in the gay community can be blackmailed into votes on the senate floor he otherwise does not agree with. You do understand that Graham was a never Trumper right? Till the orange spy got enough dirt on him to bend the senator’s vote to his will and now there is no other senator with his head further up Trump’s ass.
Fair enough. But there are plenty of Never Trumper hypocrites out there who are not gay. And if everyone in the upper echelons knows he’s an “old queen” as you say, hard to believe outing him would be a successful way to blackmail him. I agree that plenty of closeted folks have done great damage hiding behind a hetero-mask, but there are also some who are entitled to their privacy. If you feel comfortable making that call . . . .
The manners of the old south, and much older people in general, were that it was never spoken of. Oscar Wilde would have been fine had he kept a low enough profile. It was for a very long time how they enforced keeping people in the closet. You could be as gay as a box of birds as long as you were discreet and never EVER uppity about it. Once it was spoken about it had to be dealt with and nobody wanted to deal with it, so the dealt with it harshly when they had to act. That is still the norm for people his age in the still very bigoted south. Of course everyone KNOWS he is gay, but as long as nobody mentions it they can pretend otherwise. In his mind he is blackmailable because his enemies can smear him with it even though it is well known.
USA and forward planning is an oxymoron.
If they default on the Tr$1 they owe China, that would free up sideline cash so the Treasury can buy stocks to support the market to support the economy to support every day Americans. So there. We could soften the deal by force feeding them our oil, supporting the oil industry. What a lot of wins.
We wished several trillion into existence recently. Why roilthe global financial system over one more?
“Des·per·ate times call for des·per·ate mea·sures”
Regardless how looney they are, we have already and will get to see loads of them coming in the near future.
Wonder when Alice will climb out of the rabbit hole.
And this warmonger fool is a long serving Senator…more evidence of a culture in terminal decline.
Wouldn’t a total breakdown in trade relations between the USA and China achieve this selloff in treasures, albeit at a slower pace? My understanding is that China accumulates only as far as a trade deficit exists
And still no hyperinflation at this point right?
Supposedly the EU was to release a statement criticising China but under pressure of losing Chinese business for their exporters the EU is rewording it.
Welcome to the world of Chinese control.
Welcome to Spain, where children under 14 are allowed out of home for the first time in 40 days, as long as they are with parents, for an hour but curfew at night, where if parents take advantage by meeting friends on their walk, or simply stop to talk to others, the fine is to 1400 e . Older children cannot go out except to the supermarket with parents. They have gone from applauding care workers to caceroladas recently, at protest of government handling. The government keeps talking vaguely of some kind of new normal, the summer with beaches surveyed and partitioned, hotels with endless sanitation control, etc. Does not make sense, because they swing from mass feminist street demonstrations just before, to kids in pyjamas waiting at the door for their first walk in a month. Psychopaths are probably in control, as usual. Spain will be amongst the harshest in terms of owning and managing public activity in future. Here is some on the caceroladas
If the EU-krauts rewrite the document, it will be a move in the right direction. It won’t have legal standing, nor practical value.
Now, if they poured ashes on their heads for being complicit (or just too dumb and hedonistic) in China’s market manipulation to steal market and technology, instead of spending it on population development, that would make sense.
Will China sell Treasuries with the threat overhanging them?
No
Besides, an idiot mumbling is not a threat
You’re probably right. However, it does seem to emphasise the view of some people within the USA that they can do whatever they like if a country or someone upsets them, and there’s little they believe anyone can do about it. So as things get tough, any excuse will result in calls to fine, add tariffs, withhold access to systems etc.
Idiots rule the country now. Anything can happen.
Whatever amount China threatens to sell, the Federal Reserve would just step in and buy.
Checkmate.
Probably true, but they’d also probably
sell the USD proceeds.
What if they did Scooot? How much US debt do they hold? Last I saw they had it down to about $900 billion. Given the way the Fed is printing money that would be a rounding error these days. And China would not do it anyway because the US treasury paper they hold is the only way they can get away with their currency manipulations as they do. If they dump US debt their renminbi would appreciate in ways incompatable with their mercantilist jihad on the rest of the world.
Hi Herkie, they wouldn’t sell USD for their own currency, maybe Gold, or other commodities? However, I did agree they are unlikely to sell Treasuries & therefore dollars, on the back of the Senator’s comments.
No, they will not, they dont have to sell any treasuries, the treasuries are not specific for china, it has no bearer name on it, its stupid that Sentor proposes a default, it means Us should default all Us treasurys abroad, it means collapse of currency, besides if they block China selling their treasuries, China can use them to pay anything they import like oil. It is an absurd claim by the senator, it proves he has half brain.
As I said in my response to Mish on another thread, it doesnt help to try and interpret the market in terms of 2007. Will other countries turn to China after what’s happen ? China is trying to deflect blame but it isnt working.