Stephen Roach is a former chair of Morgan Stanley Asia (now at Yale), here he is on CNBC on China and USTs
- a risk China could look at selling some of its U.S. Treasurys (China is the largest holder of U.S. debt, holding $1.17 trillion in Treasury bonds)
- “We depend on China to fund our budget deficits, which as you know are going to get bigger and bigger
- If they just reduce their buying at a time when we are increasing our supply of new Treasurys into the market that could lead to a real rout in the bond market.”
- “Lacking in saving and wanting to grow, we import surplus savings from aboard to square the circle,” he said. “China loans us their surplus saving to help us square the circle. And so, if they stop doing that where are we going to get the money from?”
Roach sounding an alarm bell, but this is not an imminent threat as yet.