Trumps Next Crisis Could Be With His Asian Bankers-people who hold U.S. debt are..nervous

Last edited Fri Apr 13, 2018, 07:11 AM - Edit history (1)

Man, we are in big trouble!




Trump’s Next Crisis Could Be With His Asian Bankers



America is about to go another $1 trillion in the hole. The people who hold U.S. debt are starting to get nervous.

https://www.politico.com/magazine/story/2018/04/12/trump-next-crisis-asian-bankers-debt-217991

By WILLIAM PESEK

April 12, 2018

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With money you can buy a house, but not necessarily a home. President Xi Jinping can surely relate to this Chinese adage as he considers the dubious mortgage Beijing holds at the moment.

The U.S. may have built a giant, vibrant economic house on the proverbial hill, but bankers in China, Japan and elsewhere in Asia possess the deed. Together, 10 Asian economies hold more than $3 trillion of U.S. Treasuries—nearly 15 percent of the total national debt—as Washington borrows with abandon. That’s leverage over Donald Trump’s White House, and don’t doubt for a minute that Communist Party bigwigs in Beijing know it.

With the U.S. deficit set to soar past $1 trillion, threatening to send the U.S. debt-to-GDP ratio to a level not seen since the 1940s, Xi’s government is dropping not-so-subtle hints about calling its $1.2 trillion of loans to Washington. The first shot across Trump’s bow came from Cui Tiankai, China’s ambassador to the U.S. In a March 23 Bloomberg interview, he hinted Beijing might scale back U.S. debt purchases, a step that would send shock waves through global markets. “We are looking at all options,” Cui said.

More recently, a top adviser to China’s central bank, Fan Gang, said it’s time to diversify. “We are a low-income country, but we are a high-wealth country,” Fan said April 9 in a speech at the annual Boao Forum. “We should make better use of capital. Rather than investing in U.S. government debt, it’s better to invest in some real assets.”

These aren’t idle threats. Xi has zero reason to think China—and its vast state wealth—has found a home with the “America First” president. It would be complacent, too, to conclude Xi’s soothing words on April 10 (“dialogue rather than confrontation”) will ease tensions. Trump won the White House claiming China is “raping” American workers. A few vague pledges by Xi to open markets, cut auto tariffs and protect intellectual property rights won’t persuade Trump to drop a core belief—and Xi knows that..........................

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