
China's Role in the Federal Fund Rate - kghamilton89
https://github.com/axibase/atsd-use-cases/tree/master/Analysis/Treasuries_as_Assets#united-states-treasuries-as-international-assets-chinas-role-in-the-federal-fund-rate
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JumpCrisscross
> _the likelihood that the American economy is beholden to Chinese financial
> machinations is an oversimplification of an complex issue_

Interesting analysis and thank you for this qualifier. It's important because
the Fed Funds rate is an explicitly manipulated rate.

America loves to buy Chinese stuff. This leaves China with lots of dollars.
From a monetary policy perspective, a dollar that isn't moving might as well
be dead. When China buys Treasuries, they pump those dollars back into the
global economy. This pushes down the Fed Funds rate, which presently promotes
the Fed's monetary policy.

If China started dumping Treasuries, a deflationary sucking sound would be
heard as dollars left the global market (ex China) to go chill with China. If
China then sat on those dollars, the Fed could inject new cash into the market
(by buying Treasuries from anyone, including China) to replace them. If they
spent it, nothing really changed--dollars went from someone who wanted to buy
Treasuries to China to someone who sold something to China.

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kghamilton89
The thing about China dumping their treasuries though is that I bet the
Japanese would love to buy them up as fast as PBOC can sell them, especially
with the currently low interest rates and the guaranteed devaluation that mass
sales would create.

