China isn't your neighbor topping up his pension or your local insurance company seeking a home for its premiums. Their risk profile and reasons for buying are utterly different. Even the liquidity of treasuries is, for them, different.
Why do you think Russia dumped its treasuries in 2018 if they're such a safe investment for military opponents of US hegemony? How liquid would they be right now if they'd kept them? Which buyer of treasuries do you really think China shares most in common with? Is it State Farm or Calpers? Or is it Russia?
What you're doing right now is the economic equivalent of trying to apply Newton's second law to relativistic speeds. Yes, that's absolutely misrepresenting the book.
OK, let's pretend that central banks around the world don't buy US treasuries because they are safe and liquid. Why do they buy them then? Is it because they are vassals of the American empire paying tribute? Or is it because they are trying to turn America into a client state? They both can't be simultaneously true. Yet these are the explanations proffered by Graber in addition to claiming:
> Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
China's holdings are large enough that will they be able to trigger an enormous inflationary spike by unloading US treasuries unlike pretty much every other holder.
The larger their holdings and the more the US is reliant upon their industrial output the larger the inflationary spike they can trigger just by flipping a switch.
Whether that spike is large enough to break confidence in the US dollar entirely and break its hegemony is another matter.
The longer China manages to maintain a trade surplus with a US and siphon US industry away the better their odds are though and the scarier them unloading is.
It's kind of like adage about how you owing the bank $1000 is 100% your problem and you owing the bank $10 mil is now the banks problem.
So, the thesis is that China will be able to trigger a inflationary spike in the US by plunging their own economy into a recession? As a nuclear option, it could possibly work. But I will point out that China holds ~3% of US debt. And if China starts dumping US treasuries, they will be scooped up by other central banks.
As interesting as this thesis may be, this is not even remotely close to what Graeber was alluding to:
> From a longer-term perspective, China's behavior isn't puzzling at all. In fact it's quite true to form. The unique thing about the Chinese empire is that it has, since the Han dynasty at least, adopted a peculiar sort of tribute system whereby, in exchange for recognition of the Chinese emperor as world-sovereign, they have been willing to shower their client states with gifts far greater than they receive in return. The echnique seems to have been developed almost as a kind of trick when dealing with the "northern barbarians" of the steppes, who always threatened Chinese frontiers : a way to overwhelm them with such luxuries that they would become complacent, effeminate, and unwarlike. It was systematized in the " tribute trade" practiced with client states like Japan, Taiwan, Korea, and various states of Southeast Asia, and for a brief period from 1405 to 1433, it even extended to a world scale, under the famous eunuch admiral Zheng He. He led a series of seven expeditions across the Indian Ocean, his great " treasure fleet"-in dramatic contrast to the Spanish treasure fleets of a century later-carrying not only thousands of armed marines, but endless quantities of silks, porcelain, and other Chinese luxuries to present to those local rulers willing to recognize the authority of the emperor.
China has been engaged in a multi-decades long project of import substitution slowly moving up the value chain that is coming close to completion. There is almost nothing the US makes that China cant make too now.
At the same time they have been exporting cheap goods to the US which the US has become slowly accustomed to. Treasury purchase operations were an integral part of discounting these goods by artificially pushing down the value of the yuan. I suspect theyll try to keep this up more or less indefinitely until something snaps - they get slowly stronger and the US gets slowly weaker.
It has led to the US slowly deindustrializing and relying more and more upon artificially competitive Chinese imports.
The key feature of this strategy is the destruction of US industrial ecosystems through systematic, persistent undercutting. This is something the US tolerates because A) the frog is being boiled slowly B) US corporates have the same relationship with short term profits that an addict has with crack. In a way it's similar to the alliance the US made with the first batch of the post USSR oligarchs.
It takes 15-20 years give or take to build or destroy an industrial ecosystem while a currency can collapse in hours.
So yes, the strategy is very much like zheng he - service the US oligarchy's addiction to profit for a few decades before finally pulling out the rug and leaving the US to realize that it making an iPhone in the US will cost $3000 and you're actually all rather poor now.
That makes no sense. China holds only about $1.1 trillion in US debt. They've actually been reducing their holdings in recent years. Even if they dumped it all on the open market tomorrow that wouldn't be sufficient to trigger an inflationary spike. Do the math.
Why do you think Russia dumped its treasuries in 2018 if they're such a safe investment for military opponents of US hegemony? How liquid would they be right now if they'd kept them? Which buyer of treasuries do you really think China shares most in common with? Is it State Farm or Calpers? Or is it Russia?
What you're doing right now is the economic equivalent of trying to apply Newton's second law to relativistic speeds. Yes, that's absolutely misrepresenting the book.