Clueless Bloomberg Headline: China Weighs Halting U.S. Bond Purchases
Mike (Mish) Shedlock | Jan 11, 2018 12:47AM ET
The amount of mistaken hype over the years on this subject has simply been staggering.
Here are some Tweets from today.
Historic Headline Not
Mathematical Certainty
The US runs a trade deficit. As a mathematical certainty nations who perpetually run surpluses with the US accumulate US assets. Foreign countries do not hold dollars they hold treasuries.
From time to time countries may use those dollars for things like halting capital flight to prop up the Renminbi.
Countries may also buy other US assets. China would probably love to buy Boeing (NYSE:BA) for example, but Congress would surely block such an attempt.
Meanwhile, as long as the US runs a deficit with China and Japan, China and Japan are going to keep buying US treasuries or other US assets. It's a mathematical certainty.
The Vise
Any alleged "vise" is a two-way street. The US gets cheap goods from China and China accumulates US treasuries. If, as some claim, "China is dumping below cost goods into the US", then as a matter of mathematical certainty the US consumer has benefited at the expense of China.
Some might argue that China will or should "dump treasuries". To whom? How? Let's see the math.
Someone must hold every treasury issued 100% of the time, and creditors mathematically must accumulate US assets of some sort as a result of trade surpluses.
For political purposes Chinese officials may make any statements they like. Bloomberg ought to point out the fallacies in them, but instead hypes them up and people retweet them as if they are accurate.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.