China dumps US treasuries, then bails out its bankrupt real estate industry with the proceeds.

Photo above - drone's eye view of vacant buildings in Nanjing, China earlier this week. The Chinese government is going to buy them . . . but then what?

There's a common misconception about Fed Funds rates. Some pundits focus on the how rate increases are intended to screw up the economy (suppress borrowing, hiring, and consumption) to stop inflation. All those goals are true. But we sometimes don't pay enough attention to the need for high T Bill yields to attract buyers to fund our $34 trillion national debt.

China just announced they're taking a step back from US Treasuries. In fact, the Chinese government SOLD $50 billion in T-Bills in the first 3 months of this year. And billions more last year. The news link below (“China sells”) also suggests the money is being used to buy gold. Which seems POSSIBLE, until we examine the actual price of gold. It didn't increase at all during the first 3 months of the year. Gold HAS risen since March 31st, so maybe China is selling more T-Bills? A lot more?

In any case, if existing T-Bill holders are heading for the exits, it's unlikely Jerome Powell can cut interest rates soon. China isn't showing up. And probably some others. So what did China REALLY do with the billions and billions they got from selling our unloved T-Bills? That's what the 2nd link is for.

China has a problem – too many empty buildings. Both apartment towers and office high rises. People can't afford the apartments, because they got laid off from their jobs. Because Americans are getting skittish about buying stuff from the nation which invented Covid 19, and ~which~ sends Uighurs to work camps to make export merchandise. (Temu . . . is that you?) You can google things like “trade balance” and “China recession” if you're unfamiliar with current events.

So, people really shouldn't blame The People's Republic of China for dumping our Treasury bills. As retaliations go, this one seems “proportionate.” China hasn't invaded Taiwan (yet). Or used its People's Army Hacking Brigade to shut off our electricity, water, air traffic control towers, and 5G cellular service.

When I look at the picture at top, I'm both envious and dismayed. What a clean, modern looking city! Like something made by CGI for a videogame. But on the other hand, this part of Nanjing looks quite antiseptic. No stores, stadiums, museums, or concert venues. Exactly how a communist city planner would imagine the world. Go directly from your home to your workplace, and then back again. Watch the China Broadcast System news hour when you get home.

It remains to be seen if China's 2024 real estate bailout will be as successful as America's 2007 real estate bailout. In any case, if the USA actually has a recession in 2024-2025-2026, imagine how much the national debt is going to grow. Politicians will pump up the economy to try and buy enough votes to get re-elected again. This could be WAAAY worse than the covid 19 stimulus deficits.

I'm just sayin' . . .

~China sells off record amount of dollar assets - Mehr News Agency~

~Housing market: China unveils sweeping measures to rescue its crisis-hit property sector | CNN Business~