Quote:
Originally Posted by Nebe
Right. That is one way that we fund our national debt. What happens when they want to cash them in?
Posted from my iPhone/Mobile device
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Treasury bond prices will drop sharply (on the selling pressure), driving bond yields (the percentage discount to maturity) sharply up.
As these notes are denominated in U.S. dollars, the massive flood of U.S. government bond selling will weaken the dollar (even though yields/interest rates are going up).
We will have a double whammy of high interest rates (which will choke off borrowing and therefore slow the economy down) and massive inflation on whatever we have to import, like oil.
So, imagine getting a mortgage at 30%, or a credit card at 50% APR.
Then, paying $20 a gallon for gas, and God knows what for food and healthcare.
It will be a disaster of epic proportions, and we have our government and ourselves to blame for this.
Unless we swap California for our outstanding debts. LOL.
You might be interested to know that China is already trying to sell or trade its U.S. bond holdings for tangible assets (like oilfields and shipping companies).