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What impact would a price drop of US government bonds have?
The effect of a sharp sell-off of US bonds on world stock-markets, real-estate and currency trading would be powerful and could even in some circumstances trigger world crises:
Stock markets respond negatively to rising interest rates because they make holding onto stocks less attractive to investors. In extreme cases, a sudden massive decline in the price of bonds (producing a surge in interest rates) could shock stock markets enough for a crash.
Real estate is influenced by the mortgage interest rate which derives directly from long-term interest rates in the capital markets. A rally in long-term interest rates would push mortgage rates up. With most real estate markets already at the end of a rally cycle, a further boost could cause a world real estate market collapse. (High mortgage rates would hit real estate sales and be extremely painful to holders of mortgages with floating interest rates.)
Mortgage companies are themselves active bond market players. A sharp bond sell-off would force them sell bonds, so adding fuel to the fire.
Currency markets like all markets, dislike uncertainty. An acute increase in US long term interest rates may temporarily stimulate a rally in dollar value. But a substantial crash of American bonds will in the long run weaken the dollar. The effect on these markets will be higher volatility.
World imbalance: Since the US government bond is a popular and staple asset held by most central banks and corporate and private portfolios - large and small, a steep sell-off may spawn a world financial crisis.
Originally posted by chinawhite
If american bonds start flooding the market it is going to cause a crisis in the american economy. That much money in one alrge sum dumped all at once is going to hurt.
Also what other country would want to collect cash reserves?
Its not how cheap the labour is(because a lot more people work cheaper than chinese workers.)
Its how eficent and how fast the goods are made and delivered. china took 26 years to build up this network of suppliers manufractures and delivery. The reason the west comes to china is not because of the cheap larbour but all those points up there
Other countries that could take chinas place doesn't have the infrastructure nor the resources to build this kind of thing.
China is a large country and was able to organize the funds and organisation to create the opportunities for these western companies.
And how can you be to certain of that?
These countries trade with america because of what the americans buy, but china is their largest trade market. No country in the world would give that up.
Also australia will not give up their trade. Outlined in a speech by our forigen minister.
Germany will Not.
South Korea- They already want you out of their country.
How big is american leverage in the following countries i just mentioned above.? From what i know it isn't very big.
Your just thinking the face value of that figure.
How much jobs are lost with 40bilion dollars of american exports. How many compaines are completly bankrupt after america doesn't trade with china.
The Vast majority of export compaines in china are western owned. Chinese brands mainly sell in the chinese market.
Not much chinese compaines will lose to much money after america has massive tariffs but mainly western.
Anyhow what american government can pull off something like that.? knowing the amount of jobs america will lose
You mean india.?
A couple of months before america signed that thing with india. china also signed something with india. Do you think the indians are stupid?
They play both sides.
Also i mentioned this before,
India is more a threat to america than china is. Indian workers go for the white collar jobs which employs the majority of americans. All the americans are doing now is passing laws protecting industries which died out long ago.
America is just building up another enemy. The indians wont just be american allies like the british or japan but want a equal share.
America cant stop all her future enemies, because the future world is not going to be based on one dominating power not even two.
Its going to be a multi-polar world. Or something like the the western powers before WW1.
The american government cant pass lsws which will harm american jobs.
and they dont have the leverage anymore to dictate what is going on.
Originally posted by The Middle Kingdom
"we chinese have many peole can't go to school because of no money . but you Americans have so less people but consumed so much resourse ,so no doubt that chinese will oppose you!"
A translation for you Westerners.
Originally posted by American Mad Man
If China drops all of their US bonds, they themselves will lose money. If they flood the market, they won't be able to get even returns on their investment.
Secondly, as I have explained before, the more China hurts US buying power, the more they hurt themselves. When your biggest buyer goes into a recession/depression, you in turn feel it.
This is partially true. There are many factors that go into why the west buys from China including the artificially low Yuan. That alone deserves it's own thread, and I don't really have the time to get into the specifics of it, but that is going to cause China problems as well.
You would be surprised by how many resources would be available when 20% of the world economy decides to do buisness with you. No doubt it would take time for things to be put in place, but once it is, China has no leverage. How would they prevent this from happening?
Actually, Nixon had more to do with the opertunities for the west in China then any one else.
Yes, they would, because they can replace China with another market. That's the point. China is expendable, as there are many nations in the world that can provide what China provides.
No one can replace 20% of the world economy.
Sorry, but if you really believe that Australia wouldn't take the first chance at crippling thier biggest threat to national security, you need to reevaluate your positions.
Yeah, that is why they beg us to stay every time we try to redeploy troops.
You mean besides having military bases in every single one of them?
Lots of jobs. Not close to the number China would lose.
Some. Like I said, this would be planned well in advance, and most big corporations would know about the shift well in advance.
How many jobs will China lose? You pointed that out about America losing 40 billion worth of trade. Imagine China losing it's largest customer.
Then there is always the well substantiated rumor of US bases opening in Indonesia, Malaysia, Bangladesh and India in the near future.
No, I don't think they are stupid. That is why it is clear that they are building strategic relations with the US. It is also why they would take all of that US trade away from China the second they had the chance.
I dissagree. India is not anywhere close the threat that China is - never mind the fact that they are on infinitely better terms with the US then China is.
Well, certainly I do not believe that the US can hold it's position for ever. However, I do believe that the US can hold it's current position for at least another centur or maybe even improve it - if we play our cards right.
20% of the worlds total economy
Originally posted by Opus
Ungrateful Selfish China seems for forget if it wasn’t for the West, Ungrateful Selfish China would still be a 3rd world country. Ungrateful selfish Chinas seems to forget as well that in the last century the greater majority of medicines which healed its people have come from the west (polio). Ungrateful selfish China has benefited greatly from its former colonials by receiving technologies like electricity, the train ext...
Even to this day Ungrateful Selfish China continues to benefit from western generosity, receiving aid and food to feed it teeming masses of poor. I ask how Ungrateful Selfish China repays this kindness. By spying and conspiring to destroy the western economies.
Oh the Three Rivers Dam what a great achievement for People’s Republic, oh wait, the engineering companies building this dam are from the west.
Yes indeed the Ungrateful Selfish dragon will one day devour the world. By this time the ecology of the planet will be destroyed. The ungrateful selfish dragon can than devour it self.
[edit on C:Tueocu10e10 by Opus]
[edit on C:Tueocu10e10 by Opus]
Originally posted by chinawhite
If china makes a one trillion dollar dump of US bonds at one time. How will the price of bonds dramaticly decrease? I understand what you are talking about but in one go it could be managed
While we dont want to repeat the japanese mistake in the plaza accord do we. America saw a challenge from japan and started barking.
Look at the results 20years later. the japanese economy has slowed and was in recession a couple of years back
And that 20% will be broken up into many small pieces.
There is no country in the whole with the popualtion combined with the resources to forfill world demand. But making small investments everywhere is no going to change little countries to chinas level of organisation and infrustruture
It was the americans that were blocking western funds into china. Nixon merely opened the gate
Replacing what china buys not what china sells
China imports 500billion + while america imports 1.4trilloin+.
That is a big difference. But chian is over 1/3 of the american buying power.
Excuse me, when did america decide who australias biggest threat was
I forgot to mention that south korea and china are each others biggest trade partners
I never knew you had bases in australia taiwan or HK?
And your planning to overthrow their governments with a little american garrison?.
The shift? they might know but what will they do? force countries to buy american?
heaps and heaps of jobs.
You keep on trying to compare figures, but that is a american thing not a chinese thing
We will see in the coming years which sides these countries will be on..
With money nothing is concrete
You should talk to some indians members to see if the agree with the american view.
really........the indian threat to america.
The question we must ask ourselves is if they see china or the US as a bigger enemy.
You might think its apparant that america will win but its not the case.
You invest in your long term interest and not your short term interest.
With all the talk about growing Indian-American relations it has become assumed by many that an alliance is both natural and inevitable. But this would not be an educated assumption.
India is committed to becoming the dominant naval power in the Indian Ocean. The US considers maintaining control of the waterways of the oil rich Persian gulf and the Indian Ocean to be one of their highest strategic goals.
While the Indian navy is still no match for the American Indian naval presence, this will change in time. Sometime before the Indian navy rivals the US presence, the pentagon will identify India as a threat to American interests.
An intense naval arms race in the Indian Ocean is unavoidable in the 2025-2050 timeframe. That is when Indian fighter and submarine technology will be a threat to US fleets and airbases. The US will overstretch itself trying to control the world's biggest oil artery from the perceived 'Indian threat' while also trying to safeguard Taiwan from the 'China Threat'.
If the US, aplomb with a self-view of omnipotence, will not recognize that it is unable to do both then this will be the end of America's reign as a superpower decades ahead of its time. By 2050, American simply can't afford a naval arms race with both India and China. The resulting economic implosion will parallel the demise of the Soviet Union.
If the US, awakened by a dose of realpolitik, decided it must make a choice then the question is this: control the oil or control Taiwan? Depending at what point America comes to this realization, the answer will favor one over the other.
For instance, if America had to choose between oil and Taiwan today the answer is simple: GoodBye Taiwan.
This will remain America's preference until at least 2035. After that, the Oil economy will begin to be phased out in favor of ITER fusion reactor techonology or the cleaner alternative: the newly tapped energy resources of the moon.
However the decision is complicated by two additional factors: 1) American defense analysts may correctly judge that by 2050 Taiwan will be impossible for the US to defend EVEN IF they abandoned the indian ocean arms race and focussed on China.
By that year, China will have more money to spend on a military budget.
Not to mention that Taiwan is in China's backyard and the US has other military obligations around the world.
Also, 2) Analysis of terran energy studies continue to converge on the prediction that all oil resources will be depleted by 2090. The premium on oil in 2050 for strategic military reserves will initiate a world-wide run on the market, sending prices through the roof. Both of these factors favor a naval arms race with India -at least until 2090. After that, India can have the whole ocean for all the US cares.
The big issue regarding oil will be the the single biggest transformation for all the World's militaries in the twentyfirst century. Either every military vehicle must convert to a new power source, abandoning the combustion engine, or oil will need to processed.
Originally posted by kshatreya_putrudu
As I gathered from your posts, Approx 90% of China is educated. If America pulls out their stuff from China and uses Africa, Brazil etc then China can make their own products and sell to the world. That way both the countries would be competing between their products.
Originally posted by The Middle Kingdom
American Mad Man, I shall repeat K4rupts question, what are you willing to trade millions of american lives for?
The difference between the UK and India is that UK relied upon America in WWII, India does not have the same ethical delima, India can pursue a national policy that can conflict with the US because they weren't "saved" in any way the Brittish were.
And finally China's export ecnomy is the acculimation of decades of quality control
and infastructure development, India does not have that, no other nation can immediatly become America MFN in terms of exports and investment, because quite frankly no other nation has both the population and a stable economy for it to be viable.
Your buisnesses CHOSE China because we're cheaper to invest in for a far higher yield no other nation can compete with that, your companies as well are too globalized for any similar shift in policy, they'll cry fowl and block any such move through their special interest groups in Congress, essentially your corporations will simply ignore any kind of tarif on American goods.
You threaten nuclear war if you don't get your way
Suddenly stoping trade with China would collapse your economy, and it would be comparable to building a dam to stop a flood but you build the dam with mud bricks.
Originally posted by The Middle Kingdom
Ok one or 2 of our Generals have threatened the US with nuclear war, but didn't MacArthur say same thing to China?
Next I am DEAD sure you mentioned utilizing nuclear weapons as a deterrent but I can't find it in your posts, I assume you edited it out but alas we can never be sure now.
So now you change your view that it will be done within 20 years?
we won't be dependent on the USA on exports anyways, we'ld made a conversion to a more service based economy probably.