Trade War with China

[tidalwave]

In terms of unit shipments, Apple ranked third in China in the first half, trailing Oppo's 38 million units and Vivo's 35.5 million units. But Apple was the top vendor in terms of sales value with revenue of $25.6billion

That's a lot of revenue in China alone.

Tax Apple 50% in profit will get China $6billion in cash.

 

[tidalwave]

You can improve my knowledge about the treasuries : )

Example explain it HOW can China damage US interest by dumping all of its holding onto the market.

And the reasoning has to go beyond that "because I support China and It has to be good outcome for her".

And it has to be logical as well : )

If no buyer followed to pick up China load dump, (japan already said it maxed out already in US treasuries)US government will unable to pay its bill, it will default and its credit rating will goto junk status that will prompt more countries to dump. Like a stock market sell off.

Nothing sophisticated here, just common sense

 

[tidalwave]

This trade war is actually an ideology battle. Before US media promotes democracy saying its good for chinese citizens but that's not going happen.
So, now US media says losing the trade war will be for Chinese citizens. So Chinese citizens can generations after generations make low end products for US consumption. Forever slave, hell yeah!
Trying to compete on high valued goods, will kick ur arse,

Please, Log in or Register to view URLs content!

 

[tidalwave]

Trump sanctions not only Chinese companies but also academic research institutes
Research institues 13.
Research Institutes 14.
Research institutes 38
Research Institutes 55

 

[Tam]

You can improve my knowledge about the treasuries : )

Example explain it HOW can China damage US interest by dumping all of its holding onto the market.

And the reasoning has to go beyond that "because I support China and It has to be good outcome for her".

And it has to be logical as well : )

If countries unload their Treasuries, that means the pool of Treasuries increased (supply up). New Treasuries being issued by the Treasury has to compete with old Treasuries so they can sell and that means they are forced to have higher interest to pay the investors more and make them more attractive. New Treasuries need to be issued by the Treasury to pay the yearly deficit which is $1 trillion a year now. Higher interest rates on Treasuries are passed on to the banks as higher borrowing interest, which raises the business expenses of companies.

Fed can buy up excess Treasuries through quantitative easing by printing money to buy up the Treasuries but something happens. This is uncharted territory when a central bank now holds over $4.5 trillion in debt.

Fed held treasuries have only two fates:

1. They are allowed to mature, which means the Treasury has to pay the Fed, and the only way to do that is to further increase the deficit --- which is used to pay for the maturing notes and their interest --- by issuing more Treasuries. Payment of these treasuries by maturation is part of the yearly deficit. So the hole only gets bigger. And to soak up more excess Treasuries, which means more QE, which means printing more money to use to buy these Treasuries, and printing more money will lead to inflation and devaluation of currency.

2. Sell the Treasuries to the market so that investors, like foreigners, buy them. This has the same effect as countries unloading their Treasuries, and you will be forced to raise the interest rates of your new Treasuries to compete with the older ones. This leads us back to the first paragraph.

For either, the result is a cyclical black hole because more debt is being made to pay off existing debt.

 

[ZeEa5KPul]

Fed held treasuries have only two fates:

There's a third fate that you haven't considered - it's one not many people consider; it's anathema to every politician and banker: the Fed can put the treasuries it holds in a pile and set them on fire. The constraint that debt must be repaid is a very interesting one. There's no law of economics, much less one of physics, that demands it. In the Fed/Treasury case it's a particularly silly charade anyway: one organ of government (the treasury) "owing" another organ (the central bank) money - this is as ridiculous as me saying my right pocket owes my left pocket money. Just print the money.

 

[Tam]

There's a third fate that you haven't considered - it's one not many people consider; it's anathema to every politician and banker: the Fed can put the treasuries it holds in a pile and set them on fire. The constraint that debt must be repaid is a very interesting one. There's no law of economics, much less one of physics, that demands it. In the Fed/Treasury case it's a particularly silly charade anyway: one organ of government (the treasury) "owing" another organ (the central bank) money - this is as ridiculous as me saying my right pocket owes my left pocket money. Just print the money.

Holding Treasuries is also a reserve wealth. Destroying Treasuries is like as good as burning wealth. This idea will lead to rampant inflation and devalued currency.

The Fed selling Treasuries and other debt it holds in measured proportions is a mechanism for destroying or "de-creating" money, which is essential for controlling inflation. You need that to clean up excess money supply. The Treasury can also use the excess money supply to pay off maturing Treasuries, which this cleans up the money supply. When a Treasury is paid off, it essentially means that the same amount of money equivalent to the Treasury has been "de-created" and taken off from the money supply.

 

[plawolf]

There's a third fate that you haven't considered - it's one not many people consider; it's anathema to every politician and banker: the Fed can put the treasuries it holds in a pile and set them on fire. The constraint that debt must be repaid is a very interesting one. There's no law of economics, much less one of physics, that demands it. In the Fed/Treasury case it's a particularly silly charade anyway: one organ of government (the treasury) "owing" another organ (the central bank) money - this is as ridiculous as me saying my right pocket owes my left pocket money. Just print the money.

Full credit for creative thinking, but the problem is that the whole concept underpinning the value of treasury bonds is the promise that they will be repaid.

The entire concept of modern money, which treasury bonds are a type of, depends on credibility. Money has no intrinsic value since the end of the gold standards, so it only have value because people think it has value.

For the government to break its promise and not repaid bonds, even to itself, would go dangerously close to shattering everyone else’s confidence that the government in question would repay any bonds they hold.

 

[antiterror13]

You can improve my knowledge about the treasuries : )

Example explain it HOW can China damage US interest by dumping all of its holding onto the market.

And the reasoning has to go beyond that "because I support China and It has to be good outcome for her".

And it has to be logical as well : )

I don't want to waste my time explaining or educating someone who doesn't want to learn new things.

The bigger question is whether you would learn ? from the discussion here, I highly doubt it .. I am glad if I was wrong though

 

[ZeEa5KPul]

Full credit for creative thinking, but the problem is that the whole concept underpinning the value of treasury bonds is the promise that they will be repaid.

The entire concept of modern money, which treasury bonds are a type of, depends on credibility. Money has no intrinsic value since the end of the gold standards, so it only have value because people think it has value.

For the government to break its promise and not repaid bonds, even to itself, would go dangerously close to shattering everyone else’s confidence that the government in question would repay any bonds they hold.

I've thought about the problem raised by breaking "the full faith and credit" and in the case of an economy like the United States at present and China in the future, I don't think it's as serious an issue as it may seem at first blush. Zimbabwe and Argentina certainly can't get away with this, but America? Suppose that a hypothetical investor sees America just blithely proclaim one day that it won't make any further payments on some set of bonds, what does he do after his initial panic? There's by and large nowhere else to go. The American bond market is without peer, so he'll just tell himself that this was a one-time thing or find some other rationalization.

The argument about loss of confidence assumes that there is some alternative investors can turn to if they lose their confidence. There is no alternative.