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0 pointsJumpCrisscross2y ago0 comments

> they aren’t buying a lot of new American bonds

Because they’re deficit spending.

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3 comments · 1 top-level

elzbardico2y ago· 2 in thread

This is irrelevant for this. They are deficit spending in their local currency. Their US dollars are going to a massive frenzy of commodities import. They are just diversifying their reserves, less US bonds, more physical goods like copper, coal, gold, etc.

JumpCrisscrossOP2y ago

> is irrelevant for this. They are deficit spending in their local currency

It's incredibly relevant for balance of payments [1]! This is international banking 101.

If they want a stable currency while deficit spending and maintaining monetary sovereignty, they need to sell assets and/or clamp down on capital flows [2].

If selling, it will mostly be dollars, because that's what folks want and what they have. That's what they're doing.

> They are just diversifying their reserves

No, their reserves are going down. They are also diversifying. But anything other than them net selling dollar assets would be incrediby weird.

[1] https://en.wikipedia.org/wiki/Balance_of_payments

[2] https://en.wikipedia.org/wiki/Impossible_trinity

lmm2y ago

Of course they're net reducing the dollar assets they hold. But you don't have to sell your bonds to do that. You can just let your current bonds mature and not roll them. That way there's no big selloff to spook the market.

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