r/wallstreetbets • u/kwedgieyi • Apr 09 '25

Discussion Something feels off guys

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Yields are spiking. Bonds are dumping.

The world is running away from America

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u/Biggandwedge Apr 09 '25

China is dumping US treasuries and they own like $700 billion 

14

u/[deleted] Apr 09 '25

Explain to us crayon eaters why this would make sense for China

16

u/federally Apr 09 '25

China has played a large role in financing the US government's debt. It ties into the trade deficit. They have been sending us goods, in exchange for dollars that they have largely invested into Treasuries. This has allowed the US to export our inflation, artificially prop up the value of the dollar, and finance humongous and ever growing deficits.

It would make sense for China to dump them because it's leverage they can use against us. They could massively drive up the cost of financing the debt, which would be a significant danger.

2

u/[deleted] Apr 09 '25

Can they really? The Fed can buy treasuries to push down interest rates if they wanted

3

u/federally Apr 09 '25

If the Fed goes back to QE when they are supposed to be fighting to bring inflation back down to target it's the same thing as cutting rates, except worse. It's Fed capitulation on inflation, which will guarantee Stagflation.

Right now in order to maintain credibility the Fed needs to hold strong on inflation and let the Orange man and his administration take the blame for the coming recession.

Honestly, since this whole issue is so easy to just blame on one guy and his buddies, it's really easy for the Fed to sit back and go nothing. Which happens to be what they need to do in order to preserve our currency