What Is Going To Happen To The Us Economy When China Cashes In On Their Treasury Bonds For The Stimulus?
Posted by China Sourcing CommentatorOct 25
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China is putting together a 2 trillion dollar stimulus package for next year.
They will most likely finance this stimulus through selling off US Treasury Bonds and their massive reserves of US currency.
How will this, in your opinion, affect the US economy when we have to start paying them back for their taking on our IOU Treasury Bonds? Could it create RUNAWAY inflation?
I don’t know but I can only assume it will go over very badly with the new administration since we are currently trying to borrow money ourselves through the sale of treasury bonds to finance our own stimulus package worth about 1 trillion dollars.
It could turn into a complete disaster with the US’s trust being lost completely and countries not wanting to lend to us anymore because we are completely unreliable on paying back what we owe other countries.
Question asked on December 29, 2008
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I suspect that increasing US savings rates will take up much of the slack.
Don’t panic so much.
Your assumption is that bonds can be called in by the holders is false. there are callable bonds, in which the entity that lent the bond can repay early- and there are bonds that cannot be repaid early by the issuer – not callable.
Never heard of bonds that the bond holder is able to call.
Stop panicking so much.