Bond market game theory

Seeking Alpha/Craig Hemke/3-23-2022

“So what’s going on here? Is this simply inflation pressure and the impact of the Fed finally ending its 2020 QE program? Maybe. That’s certainly what the mainstream financial media is telling you. But what if that chart above also reveals a steady selling pressure from sovereign holders of U.S. Treasuries now that the U.S. has openly displayed a willingness to use its reserve currency status as a weapon? Put it this way… If you’re China or some other country whose long-term interests may not entirely align with what the U.S. likes and wants, would you be willing to continue with the current status quo of holding dollars and Treasuries in your foreign currency reserves?”

USAGOLD note: For many years, economists have speculated on the impact of nation-states deciding to liquidate U.S. Treasuries en masse. Most of those discussions had to do with the dollar being unable to sustain its purchasing power. Now, with the steady rise in Treasury yields signaling perhaps the beginnings of such a liquidation, some, like Hemke, raise the prospect of the full-out event becoming a reality. For the most part, though, the selling thus far does not have to do so much with a decline of the dollar, as it does hedging the hard reality of a widening economic war.

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