"Defaults by Chinese borrowers have surged to a record high since the outbreak of the coronavirus pandemic, highlighting the depth of the country’s economic downturn and the obstacles to a full recovery,” the Financial Times reports.
"Defaults by Chinese borrowers have surged to a record high since the outbreak of the coronavirus pandemic, highlighting the depth of the country’s economic downturn and the obstacles to a full recovery,” the Financial Times reports.
What’s funny - and worrying - is that China holds about a trillion of US debt. Imagine if they would start demanding that money back, that’s the kind of thing that starts world wars.
I see this a lot online, but I have to ask - where are people even getting exposure to any lending with a full call at any time option by the lender? Like all my personal debt has defined payment terms, just cause the bank might like the money back sooner, they can’t come to me and demand a full repayment in any circumstances.
Why would people expect this for government debt? (this all ignores that the US didn’t go to China and ask for a loan, China bought treasuries on the open market - it’s like owning bonds, not being a bank).
its in US treasuries. if they try to sell them all at once the value would tank. they would have to sell in small pieces at a time to capture the value.
Look, why does everybody always assume people/business/countries to be rational actors in economics?
Haven’t the past 20 fucking years put that theory to bed? There are no rational actors in economics, and lots of humans make wild decisions based on emotion or ideology or what-have-you, but often it has very little economic background.
I’m in the fucking US and we have one political party that claims it is the “pro-business party” and the “law and order party” but in both instances, they promote ideology and law that would undermine successful business strategies and undermines law and order. Republicans would love to be able to choose winners and losers in the economy, and they’re too fuck-stupid (or they don’t give a damn) that these dumbass ideas would break the economy they spend every day sucking off.
So, don’t act like China selling them all at once isn’t something that could conceivably happen in humans-aren’t-fucking-rational-at-all reality.
im pretty sure that when economics talks about people acting rationally in aggregate, its like when physicists talk about horses as being spheres. its a workable approximation for the scale they want to trend. we all know someone who spent a ridiculous amount of money on a horrible purchase, like elon musk buying twitter. but overall in general it averages out.
its not the flawed rationality of buyers and sellers thats ruining the economy.
The “good” news is that our debt has a built in fuse breaker (and China knows it). Most of the country’s dept is owned by us because when you pay into Social Security, the excess funds are used to buy US debt (as its considered the most stable investment there is). So we can always repay any one foreign debt holder, no matter how large, if congress just passes a bill to starve a bunch of seniors and people on disability.
Yeah, but it’s theoretically good investment they have. It would be the last to go and not all at once.