Why does China buying USA bonds therefore peg the yuan to dollar exchange rate as low and stabilise the ER ?
awindsor200 asked:
I am not an economist. If the USA runs up debt serviced by bonds, at present China buys the debt as bonds, gilts etc. This sounds ominous. This encourages US debt and keeps bond yields low, as they can easily find a buyer at present ? Surely it can all go horribly wrong if China, amongst others, stop buying ? My real question is why do they buy up US debt? What is the advantage for China in terms of dollar yuan exchange rates ?
high interest rates
I am not an economist. If the USA runs up debt serviced by bonds, at present China buys the debt as bonds, gilts etc. This sounds ominous. This encourages US debt and keeps bond yields low, as they can easily find a buyer at present ? Surely it can all go horribly wrong if China, amongst others, stop buying ? My real question is why do they buy up US debt? What is the advantage for China in terms of dollar yuan exchange rates ?
high interest rates
Categories: Economics | 
Tags: Bond Yields, Dollar Rate, Economist | 
7 Comments »
high yield program
China gives loans to USA so that USA can buy Chinese exports.At the same time they keep US dollar high ,this means a low Yuan, this in turn fuels Chinese exports.If China stops buying US debt the green painted paper would plummet as fast as a rock and the Yuan would skyrocket this not only would brake Chinese exports but would also spark unrest among Chinese peasants because Chinese farming would become not competitive ( it would be easier for China to import food).
We , Bolsheviks,love all this mess in the World.The door for us is again open.Our activists are right now fermenting unrest all over the World ,we know that this one is an unstoppable world crisis.
We are very happy, our forecast was correct “The United States of America is epicenter of the world crisis”,as you can understand we need to make correct forecasts , that is how we can make our political plans.
Everything is going on as previously forecasted.
Btw, we also know that capitalist economists are of inferior quality,they have no clue about what to do on this crisis.That day when Lehman Brothers was not bailed out, we danced on the street, because it was a mistake , a nice mistake….a beautiful mistake.The mistake we needed, it was how the markets panicked.
Mistakes are useful.
growth funds
The advantage for China is that it keeps exports high, keeping the economy growing and the people happy.
They have a lot of US dollars from the export business, so they invest in US dollar assets. They keep thier reserves of US dollars high to keep thier currency peg in place.
If China stopped buying what would happen? I suspect that the US dollar would loose value, and imports to the US decrease, exports increase, a bit inflationary for the US, and might push up interest rates a bit, increasing the savings rate at home, would not be a bad thing. I doubt it would spell any sort of catastrophy.
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