Except that there is no other supplier - not like the US, the deepest and most liquid treasury market BY FAR in the world. There is no ECB central bank bonds (it's all individual countries with their own idiosyncrasies), JCB is buying most of its countries bonds and they're practicing yield curve control, China has a very small, liquid b…
Except that there is no other supplier - not like the US, the deepest and most liquid treasury market BY FAR in the world. There is no ECB central bank bonds (it's all individual countries with their own idiosyncrasies), JCB is buying most of its countries bonds and they're practicing yield curve control, China has a very small, liquid bond market and capital controls. The whole entire system is built around the USD and USTs.
The entire global economy would seize up. UST are used for collateral for around 75% of the world's trade. They are considered risk-free. If everyone had to re-evaluate that risk given a default, it would be chaos. All global trade would immediately cease until pricing could be figured out. The USD, which typically moves in tenths of one percent per day might drop 20% overnight. Hundreds of thousands (millions?) of companies worldwide would instantly be insolvent.
It would be the equivalent of COVID by 5x or 10x, and there's not much the Fed could do about it. You can't pump USD into a system that doesn't trust the USD.
Sure but do we really want to risk it? By the way, there are bonds denominated in Euros. So we could finally create the straw that broke the camel's back. I worked for a US insurer who sold bonds denominated in Euros. Again - let't not think we are so unique.
Except that there is no other supplier - not like the US, the deepest and most liquid treasury market BY FAR in the world. There is no ECB central bank bonds (it's all individual countries with their own idiosyncrasies), JCB is buying most of its countries bonds and they're practicing yield curve control, China has a very small, liquid bond market and capital controls. The whole entire system is built around the USD and USTs.
The entire global economy would seize up. UST are used for collateral for around 75% of the world's trade. They are considered risk-free. If everyone had to re-evaluate that risk given a default, it would be chaos. All global trade would immediately cease until pricing could be figured out. The USD, which typically moves in tenths of one percent per day might drop 20% overnight. Hundreds of thousands (millions?) of companies worldwide would instantly be insolvent.
It would be the equivalent of COVID by 5x or 10x, and there's not much the Fed could do about it. You can't pump USD into a system that doesn't trust the USD.
Yeah, but there was that drag queen story hour, so what are ya' gonna' do. /s
Yeah, it won't be their fault. The Democrats made 'em do it. /s
Sure but do we really want to risk it? By the way, there are bonds denominated in Euros. So we could finally create the straw that broke the camel's back. I worked for a US insurer who sold bonds denominated in Euros. Again - let't not think we are so unique.
I'm saying we absolutely should NOT risk it.
And yes, there are all kinds of bonds denominated in EUR, but they are not generally used globally as collateral.