What is keeping China from asking for deb owed?

I see Putin buying gold at an alarming rate and China doesn't even have to disclose how much gold they buy.

Will somebody with more expertise than me explain what is keeping Russia/China from buying as much gold as possible, collapse the petrol dollar and be sitting on the gold?

Russia is the #1 producer of oil in the world...

I realize that was really two questions. So what is keeping china from cashing in on our debt?

China wants the U.S. economy to prosper so that they can keep exporting their goods here.

Sagiv Lapkin - 


China wants the U.S. economy to prosper so that they can keep exporting their goods here.



This. People who think other countries wish to wreck the US are ignorant of reality. They would wreck their own economies if they wrecked ours.

Sagiv Lapkin - 


China wants the U.S. economy to prosper so that they can keep exporting their goods here.



This, the US is the number one importer of Chinese shit. If they tank our economy they tank theirs as well.

Shakes head on the lack of education on this topic..... Phone Post 3.0

We are their largest market, we buy all the shit they make. That gives us some power, if we can't afford to buy their products, and the lion share of their production comes to the USA, it becomes a slippery slope for them.

However, we are on pretty thin ice. The fact we borrow from China to then give amnesty to illegal aliens, no matter how noble of an attempt, is frustrating.

VinnyTheChin - Shakes head on the lack of education on this topic..... Phone Post 3.0

And should I just stay uneducated about it? God forbid I ask a economic question on a off topic forum.

While having gold is good you would not want to bet everything on gold, the gold market fluctuates just like any other market and gold can loose value.

So a country wants gold, silver, and foreign reserves mostly of Euros and USD (or treasury bills aka debt what is equivalent).

If China/Russia stopped buying USD other people would (banks, other countries, individuals)

Also China does not want the US economy to crash, our economies are so interlinked we have a sort of MADD thing going on.

China and the USA could never go to war, both our economies would be destroyed.

In for EY troll takeover Phone Post 3.0

How many Deb's do we owe China, could we not just give them our least attractive Deb's or is there a stipulation that the majority have to be above average? Phone Post 3.0

This:

http://i.imgur.com/veCKRbb.gif

http://i.imgur.com/7erQSDH.gif

Sagiv Lapkin - 


China wants the U.S. economy to prosper so that they can keep exporting their goods here.


This, they need us as much as we need them right now

China cannot simply call in the American debt it owns, for the reasons given above.

What it could do is diversify its holdings away from US denominated debt, but that's problematic for a number of reasons:

US debt yields 2.28% currently (according to Bloomberg) while German Euro denominated debt yields .76%. Italy, for comparison is equal with American debt at 2.28%. Which is a higher default risk, Italy or the developed world's strongest economy?

Secondly, currency usage.

The US dollar is by far and away the most used currency in international transactions. A quick look here:
https://www.wto.org/english/res_e/reser_e/ersd201210_e.pdf
shows that in 2011 US dollars were used in 85% of international transactions (compared with 39% euros and 19% yen). Holding US dollar denominated debt, as well as conducting trade with the USA, is important because it yields US dollars with are the basis for so much of international trade.
Working with businessmen in Taiwan, it's apparent to me right now that, although the renminbi is becoming more important, it's still very much a local currency and a lot of the action in the RMB is Chinese turning it into foreign currencies that can secure assets outside of China.

Finally, the trade with the US is important. China has a history of artificially weakening its currency vis-a-vis the US dollar to make its exports cheaper. Although, in recent years the gap between what people think the "intrisic" price of the RMB is and the real price has shrunk or disappeared, being able to control the value of the RMB relative to the US dollar is an important policy tool of the Chinese government.

Therefore, the most that we can see is that China may readjust its holdings of US debt in relation to a host of macro-economic and political factors that I can profess to only vaguely understand, rather than wholesale selling off its US dollar positions and refusing to buy more.

...they may take our lives, but they'll never take...

OUR DEB!

gasper oliver son - 


China can't demand early debt repayment.  They buy bonds which return on a schedule.  That would be like the bank demanding you pay off your entire mortgage tomorrow, which would violate the terms of the agreement.  Russia can't afford that much gold, they are hemorrhage right now and are sinking.  They are also completely reliant on petro dollars.  China could buy gold, but what good is that beyond a certain point?  Gold is only worth what people will pay for it and if China buys all the gold in the world then gold becomes worthless because there is no longer a reason to have it.  That is the extreme example, but what it illustrates is that at a point, it is no longer a good idea to keep buying gold.  Diversification is extremely important and China currently sees itself invested elsewhere more profitable.


This is correct, each bond has a specific maturity and coupon schedule. The closest they could do is to sell all the bonds, but puking that much into the market would mean they would make billions and billions of dollars in losses, then they'd miss out on billions in coupon payments as they hold the next best safe asset (probably cash). There's no incentive for them to do this.

LittleC -
VinnyTheChin - Shakes head on the lack of education on this topic..... Phone Post 3.0

And should I just stay uneducated about it? God forbid I ask a economic question on a off topic forum.
Voted up.

There have been plenty of erroneous threads on this topic, that's all. If you want to educate yourself, Google the topic and read the recent articles of Wall Street Journal, Financial Times or reputable investors. I believe Buffett has even weighed in. You will learn that China doesn't own as much as you think, nor do they have any power outside the covenants of the treasury bonds they own to call in the debt. That they can try to sell the bonds but to be successful they need buyers. And those buyers, knowing China is dumping, will wait for excellent prices to buy. China, therefore, will most likely sell at a loss. Do you think they would do that? If China were to sell I believe it would be similar to 3-4 days typical volume of the treasury market. Not such a big deal. Phone Post 3.0

JonnyW -
Sagiv Lapkin - 


China wants the U.S. economy to prosper so that they can keep exporting their goods here.



This, the US is the number one importer of Chinese shit. If they tank our economy they tank theirs as well.

I read an analogy years ago.


The United States and China are like two drunks walking down the road holding each other up. If one drunk falls both of the drunks fall. Phone Post 3.0