It gives us a “nuclear button” where we can threaten with massive sell-offs that could tank the value of US bonds. To counter it they would have to basically raise interest rates and/or print money. Sure it would hurt us too, but not before hurting them more. Now if you also place this in a context of coordination with other debt owners (Europeans, Chinese), we can really hurt them.
First question is, massive sell off to whom? Second, it’s obviously going to have a have a huge impact on our own economy. It’s not going to hurt them more because the US is a much bigger economy than us. Can you show me a historical instance of this sort of threat actually working in practice?
If this gave any actual leverage then China would be keeping their bonds instead of doing a fire sale right now. The only countries buying up US bonds are the ones that are under the US thumb right now.
Sure, if everybody started dumping US assets in a coordinated fashion that would hurt the US, we both know is not going to happen though. So, in reality Canada is simply making itself more dependent on the US. There’s no need to do mental gymnastics to pretend that this is some 4D chess.
It’s also worth thinking about what you hear as well. People say all kinds of things, and a lot of time it’s just nonsense. As I pointed out, if holding US debt gave any actual leverage, then China would be doing that instead of selling it off now.
No, I’m saying Canada should not have continued increasing investments, which is what we did, and we should have been dumping them instead. And the sooner we start doing that the less pain we will be in long term. Let me know if any of that is still unclear to you.
In what way, how could Canada practically threaten the US with this?
It gives us a “nuclear button” where we can threaten with massive sell-offs that could tank the value of US bonds. To counter it they would have to basically raise interest rates and/or print money. Sure it would hurt us too, but not before hurting them more. Now if you also place this in a context of coordination with other debt owners (Europeans, Chinese), we can really hurt them.
First question is, massive sell off to whom? Second, it’s obviously going to have a have a huge impact on our own economy. It’s not going to hurt them more because the US is a much bigger economy than us. Can you show me a historical instance of this sort of threat actually working in practice?
If this gave any actual leverage then China would be keeping their bonds instead of doing a fire sale right now. The only countries buying up US bonds are the ones that are under the US thumb right now.
Any bonds that are at their due date are required to be paid out by the US treasury.
Most holders of US bonds have a revolving collection of them, so some are coming due on a regular and continual basis.
Admittedly, that’s not a mass sell-off, but it still puts pressure on the US if everyone starts doing it .
Sure, if everybody started dumping US assets in a coordinated fashion that would hurt the US, we both know is not going to happen though. So, in reality Canada is simply making itself more dependent on the US. There’s no need to do mental gymnastics to pretend that this is some 4D chess.
I don’t pretend to know anything about international finance. I’m repeating what I’ve heard.
It’s also worth thinking about what you hear as well. People say all kinds of things, and a lot of time it’s just nonsense. As I pointed out, if holding US debt gave any actual leverage, then China would be doing that instead of selling it off now.
And doing so in a relatively carefully manner so as not to hurt ourselves unnecessarily.
Making ourselves more dependent on a hostile power is precisely what’s hurting us unnecessarily. Incredible that people can’t seem to understand this.
So what’s your point here?
IIT you are both arguing it’s bad Canada held onto these investments while saying Canada cannot actually dump them without hurting itself
No, I’m saying Canada should not have continued increasing investments, which is what we did, and we should have been dumping them instead. And the sooner we start doing that the less pain we will be in long term. Let me know if any of that is still unclear to you.