Frank said
The Wall Street Journal’s Greg Ip tried to make sense of it. Existing inflation “might be part of the explanation” for why capital is not fleeing to the traditional safety of U.S. bonds, but that fails to explain the apparent lack of faith in the Federal Reserve’s ability to come to the rescue. “Technical factors” like hedge funds shedding their bond holdings are similarly unsatisfying. “The more fundamental explanation is that global investors might be changing how they view the U.S,” he wrote. In cruder terms, our allies and partners abroad think we’ve lost our minds, and there are few indications that sanity will be restored anytime soon.
We’re not yet even talking about foreign adversaries like China, supposedly the target audience for our exercise in economic masochism. “There were recent fears that China might try to retaliate against Trump’s tariffs by selling some of its own bond holdings,” Ip noted. “There is no evidence that it has, but the possibility has highlighted the risks to the U.S. of a trade war morphing into financial war.”
You read that right: Not only has China held in reserve its own economic weapons in a global trade war that has so far primarily rattled America’s allies, but our deteriorating position also provides China with even more leverage over the administration than Beijing had just two weeks ago. That might explain why the Trump administration isn’t waiting around for Beijing to make the first overture in trade talks. Trump is asking Xi Jinping to request a phone call from the White House — presumably so the president can save as much face as possible as he engineers a retreat from the conflict on which he embarked wholly unprepared. (1)
For every seller of a treasury security there is a buyer. If they dump their securities, the buyers get a good deal because fund will obtain the PAR value and an increased yield. The Chinese dumping treasuries would be beautiful for people who wanted to earn a good interest rate on their capital by investing in American government bonds. The commenters making waves about the Chinese body politic selling their treasuries are selling pablum.
Convincing the American people that neither they nor their children deserve a good return on bonds and savings accounts is the worst thing about the about pablum economics lesson pushers. No American hurt from the tariffs because the money wasn’t even collected for them yet. The heavily capitalized funds tanked the stock market to terrify people. The Wall Street Journal is on the side of the outsourcers and always has been. It once was a great information source for those who wanted to be informed. It has turned into agitprop but still has useful headlines about CEO changes, lawsuits, and the like. It is turning into NPR for the literati.(2)