Marc Abear: Thinking about the US debt to China

To The Daily Sun,

What if Beijing decides to weaponize the $760 billion U.S. debt it holds? That massive stake gives China real leverage. America is on shaky ground after years of runaway spending, inflation and foreign policy confusion. China, by holding our IOUs, is holding a financial weapon on us.

What are the effects if they open fire? What happens if China backs away, slowly sells off Treasuries month by month? Investors will notice, interest rates creep higher. Soon 30-year mortgages will cost 8% not 6.5%. Auto loans and credit card interest will go up, too. Businesses will cut back, growth slows and readers will feel it every time they buy something.

What happens if China does a full-blown dump of our debt? The worst-case is China dumping a huge portion of its Treasuries overnight spooking the bond markets, spiking bond yields. The dollar would drop like a rock as the Fed scrambles, too late, to contain the fallout. Interest rates skyrocket, inflation goes up. The government has to pay more just to stay afloat. Welcome to the Chinese made recession.

What happens if China decides to run a bluff(s)? China doesn’t have to sell to create market instability. All they have to do is threaten to sell to cause market tremors. They’d whisper it in backroom talks negotiating trade, Taiwan, or military tensions.

The truth is we’re vulnerable. China’s Treasury holdings are just one piece of their larger strategy to weaken America from the inside. The attack isn’t with bullets; it’s with bonds, rare earths, and global leverage. Many of our politicians are bought and paid for.

We are more exposed than ever because of our past policies. We printed trillions, indulged the green energy pipe dreams and outsourced manufacturing to adversaries. That’s beyond naïve, “You can’t fix stupid.” — Ron White.

Marc Abear

Meredith