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Joined 6 months ago
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Cake day: November 18th, 2024

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  • China has a much greater tolerance for pain than the US for a multitude of reasons. China is also in a position to bolster trading relationships with other nations since it has not gone scorched earth like the US.

    The US holds disproportionate purchasing power for its size but it’s still has far less than 50% global purchasing power. China and most other countries will find other partners to trade with while the US isolates itself further.

    The only reason the US holds 20% of global purchasing power is because of mutually beneficial relationships with other countries. Purchasing power will slowly erode over time if Trump continues on his current path.

    The US is really overestimating its leverage here and, being a fairly overmiliatarilized nation, one can only hope it doesn’t turn to violence once things go south.


  • Trump wants to devalue US currency. He sees US dollar supremacy as why the US is not competitive in the export market and part of the reason why manufacturing has left the country.

    Most countries take the US dollars they make on exports and stockpile them in US treasuries which keeps the dollars value high relative to other currencies.

    Essentially he sees the high value of the US dollar and trade deficit as bubbles that will eventually burst and collapse the US economy. Which is an issue he thinks he can fix/prevent with tariffs.



  • The interest rate isn’t fixed, the bond yield (in dollars) is fixed.

    Its presented as a percentage interest rate which can be variable.

    For example let’s say you have a $1000 bond that pays a $50 dollar yield at maturity. The rate would be 5% (50/1000).

    If the market is flooded with bonds, their value would decrease due to increased supply. Now that bond may only be worth $900 but still pays a fixed yield of $50. The interest you get paid in this scenario is now 900/50 = 5.5%

    This is great if you are a lender. When you buy bonds you are essentially lending money the government and now your yield will be higher.

    But many ordinary people are more often in the position of borrower. The interest rate for mortgages, car loans etc. are based off of bond rates. So if that rates goes up, many major purchases become more expensive over time. Small businesses are also heavily impacted by increased borrowing costs.

    Generally, higher bond rates represent decreased confidence in a government entity’s fiscal responsibility. When US federal bonds are sold off collectively, the rate goes up, signalling that investors have lost faith in the US government reliably paying back its debts.