Our financial system is crumbling this week.

[CardsofSTL]

I ain't too worried about it.

[mikechamp]

I'm no expert, so maybe this is nothing, but I hope this doesn't start a trend:

Danish pension fund says it's selling all its U.S. Treasuries

A Danish pension fund is planning to sell its entire holdings of U.S. Treasuries — about $100 million — over concerns about the U.S. government's financial stability.

AkademikerPension confirmed to CBS News that it is exiting U.S. Treasuries by the end of this month and that it will instead turn to the U.S. dollar and short-duration debt. "The decision is rooted in the poor U.S. government finances, which make us think that we need to make an effort to find an alternative way of conducting our liquidity and risk management," Anders Schelde, chief investment officer of AkademikerPension, told CBS News in a statement.

The U.S. relies on foreign investment to help finance its debt. According to Deutsche Bank Research, European countries own $8 billion worth of U.S. bonds and equities, nearly double the amount of the rest of the world combined. Some of the largest foreign holders of U.S. debt include Japan, the U.K. and China, according to the U.S. Treasury Department.

https://www.yahoo.com/finance/news/dani ... 06281.html

[Joe Shlabotnik]

This is what i don't understand about these thugs. It doesn’t take many brain cells to figure out how the US debt held by our allies could be used as an economic weapon of mass destruction.

But maybe the big change of heart God's Instrument had in Davos this evening happened after the Europeans made him aware they were prepared to follow the Danes lead.

[sighyoung]

I think Canada has been re-positioning itself concerning U.S. debt since last year, too, and that's why the administration shut up about Canadian tariffs and Canada as a 51st state. Carney is an international banker and fully understands these implications.

Countries have long bought American debt because they assumed that the U.S. government debt was among the safest investments in the world, but also likely for some degree of economic leverage.

If countries don't trust the U.S. and have nothing to lose, they'll stop bankrolling American profligacy, and they will use that debt as leverage over the U.S.

[AWvsCBsteeeerike3]

US Debt stands at what about 120% gdp. The treasury is not nearly the safe asset it once was. That said, it's not foreign governments alone that hold treasuries. It's also foreign funds, pensions, businesses, etc. Foreign governments dumping treasuries to spite America also hurt their own citizens who are likely in some way invested in them. Kind of like when US banks were selling CDOs made up of worthless mortgages, it wasn't just US investors that were hurt by that, the pain was felt worldwide. Additionally, flooding the market with treasuries is going to lower the value of them, so they'd be selling at a loss, which they may be okay with but let's not pretend the US can't just print another $30T or whatever they want to and buy them back up. Here, you get a trillion and you get a trillion and you get 500 billion!

Regardless, the US debt is such a huge weakness. It'll never be repaid in todays dollars. It won't be defaulted on. The government will just continue to print money and devalue the dollar to the point its damn near worthless to avoid default and lower the value of the debt in general. The USD has lost about 14% of its value over the last year. In that timeframe, gold has doubled and silver has tripled if not quadrupled. The dollar, if it hasn't already, is quickly losing it's spot as the reserve currency....imo.

The government is set to print, what, another $5T this year. Sure, why not.

[Joe Shlabotnik]

Im retired. I'm trying to get my head around how all the flavors of bond funds I hold for income would be affected by lack of buyers for new treasury auctions and dumping of treasuries by forwign governments trying to make a point. I suppose there is a heightened though probably not too great a default risk but otherwise, would the income stream be affected? Don't see how.

Going forward would it be smart to invest in government bonds of other nations via etfs and mutual funds?

[AWvsCBsteeeerike3]

Im retired. I'm trying to get my head around how all the flavors of bond funds I hold for income would be affected by lack of buyers for new treasury auctions and dumping of treasuries by forwign governments trying to make a point. I suppose there is a heightened though probably not too great a default risk but otherwise, would the income stream be affected? Don't see how.

Going forward would it be smart to invest in government bonds of other nations via etfs and mutual funds?

From my limited understanding, so take it fwiw, there's a couple layers in the answer to your question....and I'm really out of my depth here so don't trust the answer.

But, if there's a massive sell off of bonds that are already owned, the bonds themselves lose face value (same way a stock loses value if everyone sells and no one buys). So if you hold a $1K bond, and everyone sells, you won't be able to sell for $1K. You'd have to sell it for less. Additionally, by selling it for less, the yield on the bond will rise because the interest payments stay the same. This how downstream effects, I believe, on how new bonds are issued because why would anyone buy a new $1K bond yielding X% when they can buy a distressed bond for less money, yielding more, and still maturing at $1K.

The risk of default is non-existent because the US treasury can just print money to cover the interest payments and maturation on the bonds...which is what they've been doing for the better part of the last two decades. And, if liquidity in the bond market (ie, lack of buyers) becomes a problem, it can print money to buy the existing bonds being sold. This would actually be decent, on paper, for the US government because it just prints money and buys debt at less than it's worth. But, of course, the USD loses an untold amount of value and the people being paid with those trillions of printed dollars not only get less money than they paid for the bond, they also get paid with a devalued USD. So it's kind of like a nuclear option all around. Yes, it's terrible for the USD which is terrible for the US but it's also terrible for the people selling the bonds.

[mikechamp]

US Debt stands at what about 120% gdp.

Not quite. It's at 100%.

The article below goes through all 6 fiscal crises:

‘Some form of crisis is almost inevitable’: The $38 trillion national debt will soon be growing faster than the U.S. economy itself, watchdog warns

The United States national debt has reached a precarious milestone, hitting 100% of Gross Domestic Product (GDP) and placing the nation on a trajectory that could trigger six distinct types of fiscal crises, according to an ominous new warning issued Thursday by the Committee for a Responsible Federal Budget (CRFB).

With the national debt now effectively equal to the size of the entire U.S. economy, the nonpartisan watchdog’s latest report, “What Would a Fiscal Crisis Look Like?” outlined a dangerous future ahead. “If the national debt continues to grow faster than the economy,” the report said, “the country could ultimately experience a financial crisis, an inflation crisis, an austerity crisis, a currency crisis, a default crisis, a gradual crisis, or some combination of crises. Any of these would cause massive disruption and substantially reduce living standards for Americans and people across the world.”

The report warned that unless policymakers enact a “thoughtful pro-growth deficit reduction package,” disaster likely lies ahead.”The United States is deeply indebted, and its finances are on an unsustainable long-term trajectory,” the report concluded. While it’s “impossible” to know when disaster will strike, “some form of crisis is almost inevitable” without a course correction, the CRFB said.

https://finance.yahoo.com/news/form-cri ... 55339.html

[AWvsCBsteeeerike3]

US Debt stands at what about 120% gdp.

Not quite. It's at 100%.

The article below goes through all 6 fiscal crises:

‘Some form of crisis is almost inevitable’: The $38 trillion national debt will soon be growing faster than the U.S. economy itself, watchdog warns

The United States national debt has reached a precarious milestone, hitting 100% of Gross Domestic Product (GDP) and placing the nation on a trajectory that could trigger six distinct types of fiscal crises, according to an ominous new warning issued Thursday by the Committee for a Responsible Federal Budget (CRFB).

With the national debt now effectively equal to the size of the entire U.S. economy, the nonpartisan watchdog’s latest report, “What Would a Fiscal Crisis Look Like?” outlined a dangerous future ahead. “If the national debt continues to grow faster than the economy,” the report said, “the country could ultimately experience a financial crisis, an inflation crisis, an austerity crisis, a currency crisis, a default crisis, a gradual crisis, or some combination of crises. Any of these would cause massive disruption and substantially reduce living standards for Americans and people across the world.”

The report warned that unless policymakers enact a “thoughtful pro-growth deficit reduction package,” disaster likely lies ahead.”The United States is deeply indebted, and its finances are on an unsustainable long-term trajectory,” the report concluded. While it’s “impossible” to know when disaster will strike, “some form of crisis is almost inevitable” without a course correction, the CRFB said.

https://finance.yahoo.com/news/form-cri ... 55339.html

Yep. Thanks for posting. I think it is almost unavoidable that we see 2 and 3 play out over the next however many years. It's the 'least' painful and the 'least' shocking way forward. Inflate the value of the debt away and take the lumps to the value of the USD along with it. It also increases asset (eg, stock and real estate) values, or at least those assets keep up with the inflation while hurting cash and bond positions. I kind of feel like [expletive] the middle class has become the default answer to all America's problems. And, only a handful of people will even notice if they do it without creating a stink.

[Popeye_Card]

Well let's not make any bones about it - the lower class is also [expletive], just in general. Meanwhile we keep cutting taxes for billionaires and corporations.