Comments by "D W" (@DW-op7ly) on "Demand for General Motors cars plummets with cars piling up in China" video.
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@lophiz1945
The difference is this in Q3 of 2019
The US FED was bailing out those TOOBIGTOFAIL banks in their repo markets less their credit markets seize up once again like in 2008
A few things we learned since the 2008 subprime crisis
Buying for US debt is not unlimited.
In 2013 the US FED had to buy 71% of the newly issued external Sovereign debt by the US Treasury
That Quantitative Easing (QE)debt that was soaped up/printing of money, that debt does not disappear
Since we know from Q3 of 2017 to Q3 of 2019 the FEDs bright idea was to allow 50 to 60 billion of the Agency Debt and US Treasury Debt it soaped up during QE to slowly mature each month, off the FEDs balance sheet. Quantitative Tightening (QT)
Where the US Treasury would issue new corresponding debt for the public to buy. Where with this QT selling they managed to dump about 600 to 700 billion in debt on the American “people”
As the American “people” are the biggest buyers of US Sovereign Debt (directly/indirectly)
That QT selling ended during Q3 of 2019 Because that selling of debt ended up freezing up the repo market
Just like when it happened in 2008/2009 during the subprime crisis
Thus the FED balance sheet went from 4.5 trillion to about 3.8 trillion.with that selling from 2017 to 2019
But then the FED had to come back in QE 2.0 and buy that Treasury debt again, all that they dumped and more
Last I checked they ran that FED balance sheeet back up to over 8 trillion. Now it’s back to around 7.8 trillion
Wait you might ask Agency debt is internal debt not supposed to be backed by the US Government
Well the USA has had no issue with taking private internal debt and turning it into External Sovereign Debt backed by the US Government and the American “people”
Something the Chinese might have been tempted to do with the Junk Bonds issued by those Chinese Property Developers
That were a hot commodity the last few years, sought after by sophisticated foreign investors
In short the Chinese purposely deflated their real estate markets. Cut off money to its Property Developers since 2010. And didnt bailout foreign investors who took a risk buying those Property Developer junk bonds the last few years
While the USA left their real estate market to implode. Kept the stimulus/bailout money flowing to the companies, and bailed out foreign investors who invested in private internal debt
Yet we are complaining who is capitalist/communist
👇
As politicians call for taxpayer bailouts and a government takeover of troubled mortgage lenders Freddie Mac and Fannie Mae,
FreedomWorks would like to point out that a bailout is a transfer of possibly hundreds of billions of U.S. tax dollars to sophisticated investors and governments overseas.
The top five foreign holders of Freddie and Fannie long-term debt are China, Japan, the Cayman Islands, Luxembourg, and Belgium. In total foreign investors hold over $1.3 trillion in these agency bonds, according to the U.S. Treasury’s most recent “Report on Foreign Portfolio Holdings of U.S. Securities.”
FreedomWorks President Matt Kibbe commented, “The prospectus for every GSE bond clearly states that it is not backed by the United States government. That’s why investors holding agency bonds already receive a significant risk premium over Treasuries.”
“A bailout at this stage would be the worst possible outcome for American taxpayers and mortgage holders, who have been paying a risk premium to these foreign investors.”
“It would change the rules of the game retroactively and would directly subsidize the risks taken by sophisticated foreign investors.”
“A bailout of GSE bondholders would be perhaps the greatest taxpayer rip-off in American history. It is bad economics and you can be sure it is terrible politics.”
FreedomWorks
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