The Great Dump: How China’s Record $53.3 Billion Sell-Off of US Treasuries Could Change Everything

China and BRICS Countries Are Deliberately Reducing US Treasury Holdings Since 2022, China and the BRICS nations have been steadily dumping their US treasuries, shedding billions in the process. China has led the charge, breaking records for the largest sell-offs over the past two years. Considering the state of America’s economy, worsened by its failing monetary and fiscal policies, BRICS and other emerging economies are determined to reduce their reliance on toxic US assets. Rising US Debt and the ‘Toxification’ of American Financial Assets With the US national debt hitting a staggering $34.4 trillion, BRICS countries are turning to their local currencies over the dollar. Even Belgium, a close US ally, has jumped on this trend, offloading $22 billion worth of treasuries during the same period. This tells us that de-dollarization isn’t just a trend among rival or non-allied nations. Our allies are increasingly trying to rid themselves of their greenback holdings. Considering the US economy today, this trend shouldn’t surprise any American. China's Aggressive Gold Accumulation While China dumps its US treasuries, it's been aggressively purchasing gold. Over 2022, 2023, and now into 2024, China and the BRICS alliance have been the biggest buyers of the yellow metal. Just last year, China added tonnes of gold, worth a staggering $550 billion, to its reserves. While gold is a means to achieve financial diversification, for BRICS, it’s a strategic move to tip the balance against America’s global economic position. Diversification Away from the US Dollar What Stephen Chiu, Chief Asia Foreign-Exchange and Rates Strategist at Bloomberg Intelligence has to say about the matter is something that most of us already know: "China’s actions suggest a deliberate strategy to diversify away from US dollar holdings." Chiu also warned that China’s sell-off of US securities could speed up, especially if US-China trade tensions worsen. In other words, should Trump get re-elected as president, BRICS and China are going to double down and accelerate their efforts to unload US treasuries. So, what does this mean for every American? Potential Impact on Americans if De-dollarization Accelerates As the trend of de-dollarization gains momentum, you might feel several significant impacts, especially if this trend accelerates. Here’s what you could face: Inflationary Pressures If the US dollar loses its status as the world's primary reserve currency, brace for a harsh reality. The value of every dollar you hold will sink. With imports pricier, it will drive up the cost of everything you buy. Inflation may seem high now, but the kind of inflation we’re about to experience will dwarf anything you’ve experienced in your lifetime. Increased Interest Rates To combat inflation and stabilize the dollar, the Federal Reserve might crank up interest rates. But here's the catch—higher rates mean borrowing costs will shoot up, choking economic growth. For you, it means pricier loans for homes, cars, education, and everything requiring a loan. Volatility in Financial Markets We’re going to see chaos in the financial markets. As investors ditch dollar-denominated assets, stock and bond markets will swing wildly. This will immediately tank the value of your retirement accounts and other securities investments. The Value of Your Savings Will Decline As the dollar's value drops, your savings will take a serious hit. For retirees or those nearing retirement, this is especially alarming. Imagine relying on a fixed income, only to find your savings can’t keep up with rising costs. Your carefully laid financial plans could unravel, forcing you to make drastic adjustments just to get by. Opportunities for Diversification On a brighter note, the de-dollarization trend pushes you towards diversification. You might start looking into other currencies, commodities like gold, or emerging digital currencies. This shift could lead to a more balanced and resilient investment portfolio. By not putting all your eggs in one basket, you could protect yourself from the volatility tied to the dollar and strengthen your financial future. Strategic Responses for Americans To mitigate these risks, you can take several strategic steps: Buy Gold and Silver: Investing in precious metals like gold and silver can provide a stable store of value and hedge against currency depreciation and inflation. Diversify Your Investments: Spread your investments across different assets, like commodities, digital assets, and other foreign investments. Stay Informed: Keep up with global economic trends and geopolitical events to make informed financial decisions. Consider Hedging: For the dollar-denominated assets you choose to hold on to, use options to protect against market and currency risk. The Takeaway China's unprecedented $53.3 billion sell-off of US treasuries in early 2024 is a clear signal of a seismic shift in the global economy. As BRICS nations steadily dump US assets and turn to alternatives like gold, the ripple effects are set to hit every American hard. But with strategic actions like diversification, staying informed, and hedging against risks, you can better navigate these turbulent times and protect your financial future. The writing is on the wall—ignore it at your peril.

The Great Dump: How China’s Record $53.3 Billion Sell-Off of US Treasuries Could Change Everything

Mr. Anderson May 29

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