The hidden leverage China has in the trade talks – Fixie News

The hidden leverage China has in the trade talks

A lot of attention is being paid to the tit for tat going on between Washington and Beijing on trade.

But people also should be looking at something else — the holdings of US bonds by the Chinese government.

I’ve been harping on this for years. The US has left itself vulnerable by allowing the Chinese to buy so many of our bonds.

The US, of course, doesn’t really have much choice.

We spend too much, so we need to borrow around a trillion dollars each year. And the Chinese are willing to lend us the money.

That, of course, gives the Chinese clout over our financial well-being. It’s not a good situation.

And now the Chinese seem to be using the leverage they have. China’s holdings of US notes, bills and bonds have fallen for five straight months. Those holdings are now down to $1.14 trillion, from $1.15 trillion in September. Chinese bond holdings are now the lowest since May 2017.

If the Chinese continue to unload our bonds, the Fed will have less and less control over where interest rates go in the open market. So someone should be paying attention.

How did Goldman Sachs know?

Before the Fed announcement of a rate hike Wednesday, Goldman predicted a wording change in the accompanying communique. The Fed, Goldman said, would indicate “some further increases” in rates. That’s compared with the “further gradual increases” wording after the September meeting.

The word “some” is the key, and Goldman nailed it.

But how did the extremely well-connected firm guess at that?

Congratulations to the Trump administration for its decision to give $10.6 billion in aid to Central America and Southern Mexico.

That won’t stop unwanted immigration to America because we will still be considered the land of opportunity to people who don’t have much. But as I’ve suggested in this column before, this is not only the right thing to do but the smart thing — give people south of the border some hope so that they will stay put.

Now, all we have to do is make sure the money doesn’t get into the hands of corrupt people.

A class-action lawsuit by Census Bureau workers claiming they weren’t paid proper overtime amounts is moving forward.

“We are pleased to report that we have submitted our motion to the court requesting entry of judgments in favor of each class member,” says the law firm of Alterman & Boop.

The case could cost the Census Bureau millions. So it’s not surprising that it is expected to appeal.

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