Published by FRN on: Sep 20, 2018 @ 22:03 – According to data from the US Treasury Department, China made a massive sale of its US $7.7 billion worth of US Treasury bonds.
Beijing has thus reduced its investment in US government debt to a six-month low of $1.171 trillion. Meanwhile, China remains the leader on the list of top US lenders. Japan is in second place, with $1.03 trillion.
Ireland ranks third, with bonds worth $300 billion.
Previously, Russia sold about 85% of the US Treasury securities it owned and increased its gold reserves to a record level. In April and May this year, Moscow reduced assets in US Treasury securities from $96 billion to $15 billion. The list of the 33 largest holders of public debt published by the US Treasury Department no longer includes Russia.
In response to possible sanctions against Russian sovereign debt, the head of the Russian State Duma Committee on Financial Markets proposed to reduce Russian investments in US Treasury securities so that “Russian money does not work in the interests of the US economy”.
Swiss daily Neue Zurcher Zeitung reported that the number of countries inclined to abandon the dollar or at least weaken dependence on the US currency has increased.
This trend is caused by the protectionist policy of the White House and by the constant trade conflicts between the US and other countries. The dollar is gradually losing world currency status, which could have serious implications for Americans, warned analyst Ronald-Peter Stoeferle.
According to him, since the end of World War II, the dollar enjoys a special status: trading of oil and other raw materials is done only in US currency. Without the so-called “petrodollars,” with which black gold miners buy US government bonds, Americans could not have accumulated so much debt without facing a financial crunch, explained Ronald-Peter Stoeferle, an analyst with investment firm Incrementum .
The publication adds that now many countries are beginning to abandon the dollar. At the forefront are Russia and China. “De-dollarization” is a slow process that highlights “the transformation of a US-centric monetary world into a multipolar one,” wrote the author of the Swiss publication.
He says that the more protectionist measures Americans take, the lower the turnover in dollars. In addition, countries with large dollar debt face serious difficulties. The fact that Trump uses his currency as an instrument of power contributes to its rejection in other parts of the world.
More and more states are challenging the dominance of the dollar, the publication continues. Russia and China are trying to trade in rubles and yuan, not dollars.
The dollar is gradually losing world currency status, and this can lead to large-scale consequences in the US, Stoeferle predicts. As a result, demand for dollars, as well as for US government bonds, could decline significantly. This, in turn, would lead to an increase in inflation and an increase in interest rates.
If China buys most of its oil in yuan, the country will lose interest in US securities. Similar processes can occur in the Middle East, clarifies the analyst.