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That is a gain for the US, not a loss. No interest payments on the loans they've made, and no need to pay off the principal. Great!
The debt doesn't "go away", the countries sell it on the market, causing the price of us bonds to drop. That causes the yield (what it costs the us to service the debt) to go up. Borrowing becomes more expensive. Repaying debt or borrowing more to pay interest becomes even more expensive for the us.
Yes. This I agree. But the current administration has shown it is willing to ignore future consequences.
Higher yields are irrelevant if the project 2025 goal is to "Abolish the Federal Reserve" page 768
Those are not some remote future consequences, the downfall would be quite immediate
Less immediate than war with the EU or China.
You are forgetting one thing: no more possibility of selling US debt. And currently the US debt is above 100% GDP.
Yes. No new debt sold abroad. But also no need to raise debt to pay off existing debt.
Also rasing more debt is a future problem. Does this administration care about the long term? No.
I don't think you understand how inflation works...
Debt cancelling is a deflationary action. It reduces the money supply.
Dumping their bonds into the market isn't cancelling their debt. Its making all that debt available for OTHERS to buy. Supply goes up, value goes down.
In other words, if all of the US debt was out up for sale at the same time, is value of the US dollar would crater.
Supply is the same unless debt is cancelled. A weaker dollar makes it easier to pay interest.
"If you owe foreign banks $100, that's your problem. If you owe foreign banks $100 trillion that's the foreign bank's problem.”
That's not how markets work.
But you're clearly a troll just being intentionally obtuse for shits and giggles. It's on me for not having realised it earlier.
Have a good day.
If you think correcting someone's macro economic misunderstandings is trolling then you will be meeting many more trolls.
I'll trust the economists on this one. Honestly should have just done this from the beginning rather than trying to explain things.
source - https://www.investingdaily.com/137830/what-it-means-when-the-world-dumps-u-s-debt/
The number of bonds remains fixed (or reduces). Supply only increases if the US issues more bonds.
The quote is obvious bullshit. You can only have a surge in selling if there is an exactly equal surge in buying. One seller = one buyer.
Use your brain and don't just quote from random websites.
Care to provide a contradictory source? Or are you just going to say that anything that doesn't agree with you is "bullshit" without backing it up with actual economic sources?
Also, just to add another source that MAGA would find "legitimate", this is from Fox Business.
https://www.foxbusiness.com/politics/chinas-trade-war-weapons-rare-earth-ban-us-debt-dump-could-cripple-american-economy-defense
But hey...I'm going to wait for your sources beyond "trust me, bro".
How do you think selling works. If you sell something, someone buys it from you.
A mass selloff also means that there was a mass buying.
Is THAT what you're having a hard-time grasping?!!
You do know that people put things for sale BEFORE the buying happens, right? It's called THE MARKET.
If you're selling a house, you put it ON THE MARKET and wait for someone to make you an offer.
Now let's say you have a house on the market and you want 400,000 for it. But in your city, a lot of people are moving out and there are far more houses on the market than there are buyers. So you have to lower your asking price in order to entice a buyer to take yours instead of someone elses. You DEVALUE your house to make the sale; take less money than you originally wanted. Doing so devalues the other houses for sale since they have to do the same, and the entire market for "Houses in city X" drops.
If, alternatively, you're the only house that's for sale in your city and there are 10 families looking to buy it, your house's value RISES. Rarity equals Value.
The same rule applies to stocks and BONDS. The US takes loans from other countries by selling them bonds. Those bond's value is based on a few different criteria (stability of the country's currency, etc...) But the important one here for your understanding is that the value is partially based on it's rarity. If all of the US Treasury bonds get dumped into the market simultaeneously, they're not rare anymore, and thus the value drops. If the value of the US Bond drops, it ripples through the economy.
It's supply and demand. The more there is of a certain thing ON THE MARKET, the less valuable it becomes. That's the rule for everything, from stocks and bonds and real estate, to beanie babies and pokemon cards.
Nope. A bond is not a house or a pokemon. All bonds are the same. Only price matters. Not rarity.
A selloff is also a buyoff. Both seller and buyer think they have the better deal.
Not cancelling, selling.
A dollar bill is debt that the govt owes to you. A bond is similar, just a bit different.
The US will still owe, just to different entities, but its figurative credit score will plummet at the same time it's in a debt spiral.
But let's make it simpler. Most of the world's USD is not in the US, but in cash reserves abroad. They hold it like gold.
What happens if the big players sell? It's already happening a bit, look at EURUSD and gold prices.
Yes. This is Trumps goal. Make foreign goods super expensive for consumers and manufacturers. Exactly what a Tariff does.
They are isolationists. They don't want debt held overseas.
This would make all goods more expensive, as it would directly devalue the USD. It wouldn't make people buy local, it would just make them buy less.
It's not what a tariff does, because that only applies to foreign imports.
Under both, local products become cheaper than foreign.
Not really. If the USD loses value, your neighbour will sell their goods to me for EUR because it will be worth more.
It will be like everyone in the US got a pay cut. It's a demand side effect, not like a tariff, and it's uniform, not like a tariff.
It's inflation after all.