Will China Dumping US Bonds Undermine Global Finance?
SputnikNews.com
08.10.2015
China, Russia and Brazil have recently been selling US Treasuries, hedging their fiscal risks and stirring volatility on Wall Street, potentially signaling a more significant slowdown in the global economy coming up.
Kristian Rouz — Several emerging markets, including China, Brazil, Russia and Taiwan, previously among the biggest buyers of US governmental bonds, have recently been selling them at the fastest pace since 1978. US bonds, commonly referred to as ‘Treasury notes’ or ‘Treasuries’ are, however, widely regarded as being among the most ‘safe haven’ assets in the financial world, meaning the emerging markets must have serious reason to cash those out for the more volatile money liquidity.
Although part of the reason to sell US bonds might be attributed to either emerging markets suffering from lack of liquidity amidst the ongoing capital flight or select nations willing to replenish their fiscal revenues, the wider picture is quite dire for everybody. The massive slowdown in the economic expansion of several of the biggest emerging markets might eventually generate waves which wash over the developed world, from the already in-sight disinflation to a more distant perspective of lower job growth, wages and, ultimately, a decline in overall economic performance.
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