China is no dummy. Really, so why was China buying all those Treasuries all these years?
Why do we buy bonds? Obviously to re-inflate the credit bubble. US private debt is through the roof, so the only way out of this predicament is to buy up the debt, so that the credit will flow again.
I doubt this will work as you can't fix 20 years of run away credit expansion and excessive borrowing. Time will only tell.
I still think the biggest threat is some of the crazy derivatives that were crated in the last 10 years.
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