Could our Interest rates sky rocket on the back of China

See attached article

If this potential scenario (although hopefully unlikely)

China’s $1 trillion economic weapon against US

Could this send Aust % rates through the roof??

 

Potentially...

 

It will never happen

 

Possible, but so is pretty much everything.

 

Not a chance. US treasury yields are a massive outlier on the international scale. They're coming down even as that article said China is selling bonds. I reckon they could sell them all and it wouldn't do anything. When people are willing to buy 10 year Greek bonds for 2% getting 1.7% on US bonds is a great comparative yield.

 

Yes, we are a small open economy - very vulnerable to OS shocks

 

This is funny right?

China has a huge trade surplus with USA, and uses the $ trillion of surplus to buy US Debt.

Gotta Love the Money-Go-Round, Mr Trump!

 

Thanks for the link,but there has been talk about this for years..
China vs USA both know whats called a stop loss--a predetermined rapid exit point ,sort of like what used to be called a xxxxxx stocktake where someone burns the business down with petrol only it blows up in their face as they run for the exit..

 

China can sell down their Treasury holdings , problem is who is going to be able to buy a trillion worth on short notice?

 

Not happening

 

@Keentolearn77

Not sure directly dumping treasuries is such a good idea,
they have better options to play trump's tariff-tariff game.

• Devaluing yuan
• Slowing future treasury purchase (the 1.5 trillion trump tax cut still has to be funded and is due soon)

This whole idea of nitpicking who exports us more and punish them is very short sighted I think because US's biggest exports are not its product but rather USD itself (only US can print usd),
This US$ weapon-isation is putting off very many nations and risks the future of US$ as reserve currency.
A reserve currency backed by nothing is just a confidence game EOD

 

That’s the game of brinkmanship that Trump plays well...

There is no alternative to USD as reserve currency so they have that confidence of retaining capital inflows... China however.... USA can cause to lose a bit now if it gives China the wobbles..

If it comes down to capitalism vs communism. History is pretty strong

 

One is batting for free trade, the other for trade tariff,
So Who is who?

 

That doesn’t necessarily indicate much.

One believes in individual freedom and expression and one doesn’t...

An oft overlooked fact is the USA does spend a hell of a lot of money to protect western capitalist democracies.... when push comes to shove... this is another reason supporting their status as reserve currency...

 

The US Feds can just buy an equivalent amount of bonds from the market just like what they did during QE.

Not a big deal.

 

Just rinse and repeat ad finitum?

 

Of Course.

The financial market is a Money-Go-Round Zero-Sum Game.

 

Nice quote from Phil Lowe today:

Dr Lowe admitted the bank had already followed other banks by shifting towards using a form of "forward guidance" or more "transparency" by pledging "interest rates to stay low for a very long period of time".

One day people will look back at this point in history and say - wow, how easy did people have it back in the 2020s, would have been a great time to load up!

 

So many amateur economists on here with no idea of history... deflationary environment is very bad for Property... with the exception of Agricultural land perhaps

 

Ever think about why rates may be so low... or just stuck in small minded Australian property investor mindset of rates low are good, rates high are bad..

They’ll look back on the aftermath of GFC2 / global recession and think Thank **** I did not buy property in 2020!