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China holds more than a trillion dollars in United States debt, and an escalating trade war could tempt it to wield that debt in a way that has long been unthinkable. It is often called the nuclear option. In the trade war between the United States and China, economists and investors have long tried to game out how both sides might use their clout. In virtually all the predictions, at least until recently, they revolved around a tit-for-tat tariff war. Even in the gloomiest of doomsday scenarios, there is one weapon that has long been considered unthinkable: the Chinese, the biggest holder of United States foreign debt with more than $1 trillion, publicly taking a step back from buying United States Treasuries — or worse, dumping what they own in the open market. The very idea is typically dismissed as a waste of time to even consider, and the reason is a sort of mutually assured destruction. It would be wildly irrational in economic terms, the thinking goes. China selling Treasuries would send interest rates up and hurt the United States, but it would simultaneously severely damage the value of China’s own Treasury holdings. As the industrialist J. Paul Getty famously said, “If you owe the bank $100, that’s your problem; if you owe the bank $100 million, that’s the bank’s problem.” In the United States-China relationship, China is very clearly the bank. Still, critics who dismiss the possibility of China trying to upend the United States Treasury market say that China’s own economy is too fragile to risk doing anything that would cause instability. https://www.nytimes.com/2018/10/09/business/dealbook/china-trade-war-nuclear-option.html _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com