China is selling Treasurys at rates unseen since 2008, while Japan's yields hit multi-decade highs, signaling a structural shift in global capital flows. The resulting pressure threatens the dollar's purchasing power, fuels inflation risks, and may force the Federal Reserve into controversial debt monetization.

File this under "you heard it here first".

I mentioned a week or so ago that the Chinese were likely to exercise the "nuclear option" and start dumping USTs, and lo & behold, that's exactly what's happening.  This could rapidly become a serious problem if da fed has to monetize the debt, which seems pretty unavoidable.  Hyperinflation in that scenario.

Another RE prediction comes to pass. 😀

RE

When the Japanese invaded Manchuria, people talked about the 'war in China.' When Germany invaded Poland in September 1939, well, that was 'the Polish War.' Then, the Winter War at the end of the same year was 'the war in Finland' as Finland was invaded by the Soviet Union," the source commented.

Much more to come.

RE

Quote from: RE on Apr 20, 2026, 02:59 AMI mentioned a week or so ago that the Chinese were likely to exercise the "nuclear option" and start dumping USTs, and lo & behold, that's exactly what's happening.  This could rapidly become a serious problem if da fed has to monetize the debt, which seems pretty unavoidable.  Hyperinflation in that scenario.

Another RE prediction comes to pass. 😀[/color]

RE

What is "the Fed monetizing the debt" signify? I'm  not sure I know what that means, "monetizing debt".

Quote from: TDoS on Apr 20, 2026, 03:04 PMWhat is "the Fed monetizing the debt" signify? I'm  not sure I know what that means, "monetizing debt".

Basically, it means issuing a debt instrument without having collateral to borrow against.  Money is a debt instrument, it's a note of infinite duration.  To do it, Da Fed issues USTs and buys them with money it prints rather than selling them to other banks and investors.  They have to do that because they don't have enough buyers for the debt on the open market.

RE

Isn't this what the government has been doing already, for the $30+ trillions we've already borrowed? We print money, hand it out, and put it on the countries tab?

Quote from: TDoS on Apr 20, 2026, 05:46 PMIsn't this what the government has been doing already, for the $30+ trillions we've already borrowed? We print money, hand it out, and put it on the countries tab?

No, not really.

When the FSoA wants to borrow money, it goes to Da Fed (a theoretically separate corporation, not a department of Da Goobermint) and asks for it, like you would ask for a loan at the bank.  To get that loan, you have to offer up collateral, which are the USTs.  What are they worth?  To find out, you sell them on the open market.  You've heard of treasury auctions, right?  What they sell for determines the interest rate, the price runs inversely to the yield.  The lower the price, the higher the interest.

When a big holder of USTs (like the Chinese) starts selling their supply, the interest rate goes up.  If they flood the market, the sky's the limit there.  The risk in holding them to maturity has gone up so there are not enough buyers.

At this point, the only option is for Da Fed itself to buy the USTs,  without any collateral.  Now nobody knows what the USTs are really worth, or by extension what the dollars they back are worth.  The more you print this way, the less they trade for, until they're worthless.  AKA, Hyperinflation.

RE