Senator Graham Wants to Default on $1 Trillion Debt Owed to China

Mish

Senator Lindsey Graham proposes the US should default on the Chinese holding of US treasuries.

The US economically illiterate nutcases are out this weekend led by Senator Graham. 

The Senator proposes a Pandemic Tariff including cancelling  all debt owed to China.

Anger in political circles, particularly in the Republican Party, has manifested itself in legislative proposals seeking to allow U.S citizens to sue China in American courts for the pandemic, calling for sanctions on Chinese officials

Former US ambassador to the UN and former South Carolina governor, Indian-American Nikki Haley, widely seen as a prospective last-minute vice-presidential nominee for a Trump second term, is among those pressing for action against Beijing. "China’s Communist government needs to be held accountable for their role in lying about the Coronavirus pandemic, and the US Congress needs to respond – now," Haley said in a STOP Communist China petition that received rousing endorsement in Republican circles this week.

Other US lawmakers want to go even further. In a precipitate suggestion, Haley’s fellow South Carolinian, Senator Lindsey Graham, who has President Trump’s ear, called for cancelling the more than $1 trillion in U.S treasury securities that China holds.

A US default would be economic suicide, collapse the US dollar, collapse the stock market and throw the entire global currency system into chaos.

But it would do wonders for gold.

Mish

Comments (95)
No. 1-37
Casual_Observer
Casual_Observer

As I said in my response to Mish on another thread, it doesnt help to try and interpret the market in terms of 2007. Will other countries turn to China after what's happen ? China is trying to deflect blame but it isnt working.

Scooot
Scooot

Will China sell Treasuries with the threat overhanging them?

caradoc-again
caradoc-again

Supposedly the EU was to release a statement criticising China but under pressure of losing Chinese business for their exporters the EU is rewording it.

Welcome to the world of Chinese control.

Sechel
Sechel

the financial markets would love that. must be dementia would explain other lindsay graham actions. but seriously i can't find news of this elsewhere so wondering if this is real news and how serious it is

Sechel
Sechel

Nikki Haley has dropped her normalcy and gone full MAGA nuts ever since she let the U.N. I don't recognize her. Feels like she drank the clorox

BenBernank
BenBernank

And still no hyperinflation at this point right?

ZZR600
ZZR600

Wouldn't a total breakdown in trade relations between the USA and China achieve this selloff in treasures, albeit at a slower pace? My understanding is that China accumulates only as far as a trade deficit exists

cienfuegos
cienfuegos

And this warmonger fool is a long serving Senator...more evidence of a culture in terminal decline.

Webej
Webej

If they default on the Tr$1 they owe China, that would free up sideline cash so the Treasury can buy stocks to support the market to support the economy to support every day Americans. So there. We could soften the deal by force feeding them our oil, supporting the oil industry. What a lot of wins.

Herkie
Herkie

Good lord, you see what happens when a person is forced to spend all their mental currency on staying in the closet?

I know eventually we will transition from FRN's to some form of real money, but for the moment we have reserve currency status. That is a priceless benefit to the nation and we should keep it as long as we can, while also preparing for the day when we are forced to give it up. And we do need to prepare because even the best case scenario makes losing that status a really painful adjustment. Unprepared, the transition could end the US.

Selectively defaulting on China out of a desire to get back at them for the CV19 pandemic would be an outrage to the world and all creditors, it would cost us our global position. If it could be proven that this virus was lab created and intentionally released then a punitive judgement could be entered that allowed for a fine against the Chinese in the trillions and that would justify a first step of cancelling our debt to them as a down payment, but, it would have to be a globally agreed punishment for a international crime in which there is zero doubt that China intentionally inflicted this on the world. Anything short of that means shut up and stop making false accusations.

Thalamus
Thalamus

There’s more to this story imo. Trumps admin is fighting the entrenched deep state within as well as its collusion with China. They are publicly posturing to force the CCP to come clean on who the US actors are in this coordinated plandemic. Hillary left the classified server open to China and the nefarious plan to undermine the US has been mostly discovered - they probably want to hold all responsible for this virus including those parasites within our intelligence community. Just an educated guess.

Lance Manly
Lance Manly

Someone needs to bone up on the constitution.

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

michiganmoon
michiganmoon

A lot of countries would start to get nervous if we behaved like that.

dr smock
dr smock

Covid-19 started in Wuhan probably in their research lab rather than the wet market down the street, but either way they have infinite liability around the world for damages due to gross negligence, like at the very least, in the hundreds of trillions of dollars. China started buying up the world and stopped buying bonds with their global trade deficits 10 years ago. I am hearing calls from leaders all over the world for China to pay for these unconscionable acts of human pain, suffering, and death. I would expect that countries across the globe will start confiscating their massive purchases of real estate and business in the near future as just the starting point.

Blurtman
Blurtman

Even the despicable Geithner knew that the casino must always pay up, hence the AIG bailout and payoff of speculators' bets. But look, folks, without a comorbidity, the risk of death from COVID-19, even in the 75 and older population, is just extremely, extremely low. https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/

Six000mileyear
Six000mileyear

Clearly finances are now weapons. Senator Graham is "projecting force". As the world's largest debtor, the US has the advantage of a larger stockpile of financial weapons. Of course other nations would retaliate to a shot from a financial weapon. China, in particular would shut down all manufactured goods destined to the US. In that respect, the US should on-shore manufacturing before making any threats using any type of weapon.

Bam_Man
Bam_Man

It will ALL eventually be defaulted on, one way or another.

Bam_Man
Bam_Man

If I owe you $10,000 I have a problem.

If I owe you $1,000,000,000,000 you have a problem.

thimk
thimk

Quintessential saber rattling . Why not restrict china from our capital markets ?
Why not bring supply chains back to the USA ? read an article that even the defense
industry manufactures in Mexico. Florida's "grand reopening "this week . No PPE
to be found . I'm working off Chinese produced surgical masks bought at dollar tree .
12 for a dollar. Wake up Lindsey ;USA has been gutted/self liquidated.

njbr
njbr

that guy's one fart smeller, errr smart feller..

njbr
njbr

This is what happens when you have a guy at the top who habitually screwed lenders and subcontractors---the faithful minions pick up those habits.

All that does is increase borrowing costs and subcontractors add 30% on the price for the screwing at the end of the job.

What it takes is thinking of what can happen in response. Which these fools seem incapable of doing.

njbr
njbr

...corrupt American hating globalists...

You mean the multi/trans-national corporations who outsourced production in the search for lower worker pay and higher executive pay and increased share values?

You sound like a socialist !

The means of production belongs to the people!

Property is theft!

Maxx2000
Maxx2000

I not sure Mish, what premise you are basing your thesis of "economic suicide", as you don't expand on that idea. I would respectfully say there may be more depth to the idea of a default. If the rest of the world viewed a default as China specific, and "contained", it may actually serve as some remedy for China's ethical and financial malfeasance, esp. around the Wuhan virus. The rest of financial world might secretly view this as a "net positive".

lol
lol

LOL,yeah right.What happens if China decides to boycott the US,what's Dollar General,Walmart,Home Depot,Lowes,Amazon,Boeing,GM,Walgreens,virtually all suppliers to DOD...well everything how long will they survive?Everyone of these companies will in be Chpt 7 in a month (week)!

Stuki
Stuki

....Even a broken clock...
Leave the nonsensical special casing of "China" out of it, and we're talking downright greatness.

"A US default would be economic suicide,"
No it wouldn't. Debt dependence is not some form of "economic" benefit. What's economically suicidal, is dependence on credit rackets and the preeminence of rent seeking in all relations, which such dependence entails. Ending that nonsense, is suicide prevention as pertains to the economy. A bit late perhaps, but better late than never.

".... collapse the US dollar, collapse the stock market and throw the entire global currency system into chaos."
All of which are fully, 100%, in each and all and every way, purely positive developments. It's not as f any of those undifferentiated theft rackets serve any positive economic purpose, after all.

"...But it would do wonders for gold."
Which is another benefit.

Ergo, a win-win-win.....

Only downside is the idiotic "China" limitation. But we're talking Lindsey here. Not some economic (nor otherwise) brainiac. Go easy on the kid. At least he's improving.

Augustthegreat
Augustthegreat

Graham and his supporters need to inject large dose of Lysol into themselves, bc they are clearly very sick

Bam_Man
Bam_Man

We are watching $USD Global Reserve Currency status go down the drain in real time.

frozeninthenorth
frozeninthenorth

I bet you five bucks that American hedge funds will start buying US T-Bills from China at 20c in the dollar and selling them back at par to the US government...even better yet the Europeans can buy the US debt at a discount from the Chinese...

R Zarate
R Zarate

I would think if the US defaults on the Chinese they will simply nationalise all US firms, their products and intellectual property. They will then continue to manufacture said items and sell them around the world and at home while embargoing the US.
If China embargoed the US it would come as a very nasty shock to the US.

Sechel
Sechel

way to crash the financial markets. he's clearly been trying out the new clorox home remedies

truthseeker
truthseeker

Mish you know how over the last few years, especially during the Obama presidency that Xi and Putin became such good friends doing deals together and all, I was wondering if you have heard anything about how this pandemic may have hurt their relationship especially since crude oil and natural gas are so vital to Russia’s economy and the Russian people?

bigekordragonzh
bigekordragonzh

Start with Spanish flu which started in usa. Then h1n1. The then financial crisis 2008 with lehmann brothers collapse. All
these disasters started in usa. Proven. The USA owe the world a million trillions. And interest in accumulating for a century now. Only way to cure Americans disease is, CLOROX. Lol.

faber alum
faber alum

the combination of increasing longevity (and the impact on social security, medicare, etc. in most countries) and the already massive deficits of virtually every nation assures that government borrowings will never be repaid. Thus, we are approaching a global, simultaneous write down of sovereign debt. It will happen. China, as a creditor nation, will be hit hardest, if the write down occurs "now". Assume a 50% write down. The ensuing back up in sovereign debt yields will not offset the 50%. But, corporate bond yields should invert to USTs since corporate debt gets rated based upon the corporation's ability to service its debt. Fiat debt will be properly viewed as junk since once Pandora's box has been opened (write downs) ...
There's always a catch, however. When does one put this trade on? certainly not now when we are within shouting distance of negative yields. My guess is to wait until the write down occurs--and don't hesitate for a second!

Tax_Slave
Tax_Slave

What would we have done without Covid-19? Someone has to take the blame for the massive deficits, over-dependency on china, over-dependency on the godvernment class to enrich themselves and pretend to redistribute to the poor!

wmjack
wmjack

The communist researcher Shi who developed humanized covid virus is yelling the loudest that it was not out of her lab--but a hit dog always howls the loudest--now if it was her work that crashed and killed ---the treasuries held by China would be a good start toward paying back the world's losses


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