Despite US President Donald Trump’s best efforts to make nice with Russia, it seems the Kremlin is not putting all of its eggs in the détente basket. As a hedge against the success reproachment – and possible accompanying sactions relief – Moscow is reportedly dumping US government debt, and doing so fast.
“A US Treasury report this week appears to show Russia liquidating dollar assets at a record pace, selling four-fifths of its cache of US government debt, $81 billion worth, over a two-month period. It started in April, when the U.S. imposed the most onerous sanctions yet on allies of Putin,” Bloomberg reported Friday.
The move is “the obvious way to limit a country’s exposure to US sanctions,” according to Brad Setser, a former Treasury Department official who is now at the Council on Foreign Relations in New York.
“I would never underestimate the reach of US sanctions. That said, it would be a major step for the US to contemplate blocking a country’s dollar reserves as opposed to sanctioning a bank or a firm.”
Russia’s decision to drop US bonds begs the question: why not China? There has been widespread speculation, amid an escalating trade war and a ballooning US deficit, that China might consider doing it.
In response to an unconfirmed report in Bloomberg early this year that China was eyeing the move, there was a deluge of articles arguing that it wouldn’t be an effective way to challenge Washington in a trade war. But America’s massive deficit, which is set to expand under Trump’s tax cut, has led to increased speculation about the move.
“On the surface, it looks like the US is extraordinarily vulnerable,” Setser wrote in a recent blog post. “The stock of Treasuries that the market has to absorb to fund the rising US fiscal deficit is objectively quite large, as the US has ramped up issuance while the Fed is reducing its Treasury holdings…
“And if China started to sell, the amount of US paper that non-Chinese investors would need to absorb would be extremely large,” Setser went on.
us regime better not forgetting that next year another trillion or even more then that will be needed to raiseits debt ceiling. Let see how its lackeys will scrap anything to fund it debts when China decided not to buy more treasuries. us regime is the one on the losing side of this trade war.
Forgot your pill?
You do realize that us bonds are the safest investment around? Not just China buying them
also japan in dumping us treasuries https://www.reuters.com/article/us-japan-markets-treasuries/japanese-investors-dump-record-amount-of-u-s-bonds-in-february-idUSKBN1HG0C4
Evidently, you are a Chinese nationals as well as nationist – Cool! – by the way you exchanges with Yuri Ariefiadhi. I too am a Chinese. Though I wasn’t born in China but I am Chinese after all. Therefore, I am on the side of China with this onerous trade war that lying, forked tongue Trump started. I also believe this trade war is a good lesson for China and in the end China will come out as victor and stronger. But what does all this has to do with Tiawan? It has nothing to do her. So, I wish you would tone down your critiquing Taiwan. We all are Chinese. Let’s not hang all our dirty laundry out for others to see. You feel me? The issues between Taiwan and China is an internal matter. Let the two goverments settle this issue and we stay out of it. Cool? My man! 🙂 Thanks You.
Yuri
If there is no trade, China will not have trade surplus to buy the Treasury. Perfect excuse for China not to sell real stuff to the US for some "IOU"s.
Mr Young.. please write in chinese, we will better understand using free google translator ????????
Lol that holy mother cow indians…can v write in hindhu?
Ahmed Ismail I see smoke! Forget Hindi and forget “holy mother cow Indians”, learn Chinese.. faster you learn better it will be for you.. also learn Chinese anthem.. you will need it soon ???? .. Chinese will soon occupy your male/maldives
American here, and I’d like to see America find more rational means of supporting it’s spending habits than debt issues.
Prasad R Thakur ????????????
For long America has played the big bully. The earlier America realized the world has changed the better for it
Don’t think realism of being a bully is what us cares about now, rather how to deal with whomsoever is not yessing his dictates
Acording to the *Thucydides Trap Theory*, when a rising power threatens to displace the supremacy of an established power ___ is often the result.
Joseph Lee I hope both of them will be Humble at the end of this crissis.
They should of dumped like Russia. It’s like what the Russian Central Bank said, if they don’t dump they won’t get a chance to dump later.
If they dump, they can always buy it back later, at a cheaper price as well. Not only sending a message to America, but also make a profit in the process.
Frankly it makes very little sense holding IOUs from America when they’re hell bent on waging economic warfare on China.
They should of dumped like Russia. It’s like what the Russian Central Bank said, if they don’t dump they won’t get a chance to dump later.
If they dump, they can always buy it back later, at a cheaper price as well. Not only sending a message to America, but also make a profit in the process.
Frankly it makes very little sense holding IOUs from America when they’re hell bent on waging economic warfare on China.