I think you’re really far off the mark.
Derek McDaniel

Corrado Rosca is basically correct. While China could not sue the Federal Reserve if they simply printed new dollars to repay outstanding Treasury debt, they could refuse to purchase or hold any dollar denominated assets. While this is not identical to what happened to Argentina, then Mexico, then Argentina twice again, then Venezuela; the consequences would be quite similar. For example, China might insist that it will only purchase US debt if it is denominated in a foreign currency (say Swiss francs) and under the jurisdiction of a more trustworthy legality (say Switzerland). At this point, it would become far more difficult for the US to finance any trade deficits with dollars, forcing the government and any private companies or individuals to acquire foreign “hard” currency in order to transact international trade. Venezuela is going through the second part of this process right now.

Like what you read? Give Derek Kaknes a round of applause.

From a quick cheer to a standing ovation, clap to show how much you enjoyed this story.