China & Japan DUMP US Debt While China HOARDS Silver (Interest Rate Crisis)

Summary

The video discusses the significant actions of China and Japan dumping over $100 billion in US treasuries in Q3 of 2024, signaling a lack of confidence in the US dollar. At the same time, China is strategically hoarding silver and gold, anticipating future industrial needs and hedging against a weakening dollar. The video explores the rising US interest rates, the impact of quantitative easing, and how precious metals like silver and gold are becoming increasingly crucial as a safeguard in a volatile financial landscape. It concludes by urging viewers to consider investing in precious metals.

Takeaways

• 😀 China and Japan are significantly reducing their holdings of U.S. Treasuries, dumping over $100 billion worth in the last quarter, signaling a waning confidence in the U.S. dollar.
• 😀 Rising long-term U.S. interest rates, despite the Fed’s recent rate cuts, are pushing the cost of servicing U.S. debt to unsustainable levels, surpassing $1 trillion annually.
• 😀 Japan’s debt selloff is largely driven by the need to stabilize their domestic economy, particularly the devaluation of the yen and the risk of domestic inflation.
• 😀 China’s motivations for selling U.S. Treasuries include concerns about inflation, higher rates eroding bond value, and potential geopolitical risks similar to those faced by Russia with frozen reserves.
• 😀 The U.S. national debt and rising deficits are putting upward pressure on interest rates, creating a vicious cycle of bond sales, lower bond prices, and higher yields.
• 😀 There are fears that the Federal Reserve will have to intervene by resuming quantitative easing (QE), which could involve printing more money to buy bonds, potentially devaluing the dollar further.
• 😀 Quantitative easing, if enacted, could lead to inflation spikes, reduced purchasing power domestically, and a loss of global trust in the U.S. dollar as the world’s reserve currency.
• 😀 In contrast to the U.S. Treasury selloff, China is actively accumulating precious metals, especially silver and gold, signaling a strategy to hedge against dollar weakness and secure industrial dominance.
• 😀 China’s silver acquisition is part of a broader strategy to secure vital materials for future technologies, such as solar panels and electronics, as well as industrial uses in high-tech applications like solid-state batteries.
• 😀 China’s strategy also involves securing direct access to raw silver from Peru, bypassing global markets to secure its supply chain for the future, highlighting geopolitical and economic interests in critical resources.
• 😀 The global trend of accumulating gold and silver is not exclusive to China; other nations, including Russia and members of the BRICS bloc, are stockpiling these metals as a hedge against dollar volatility and economic instability.
• 😀 The combination of increasing U.S. debt, rising interest rates, and precious metals accumulation suggests that both China and Japan are preparing for potential global financial instability, positioning themselves in a world where hard assets like gold and silver are becoming increasingly valuable.

Q & A

Why are China and Japan selling off US Treasuries?

China and Japan are selling off US Treasuries due to a combination of factors. Japan is attempting to stabilize its domestic economy by halting the devaluation of the yen, while China is concerned about rising US inflation, higher interest rates, and geopolitical risks such as the potential freezing of dollar reserves, similar to what happened to Russia.

How much US debt did China and Japan sell in Q3 of 2024?

In Q3 of 2024, Japan sold a record $61.9 billion in US Treasuries, while China sold $51.3 billion. This represents the second-largest quarterly debt sell-off by China.

What impact are rising US interest rates having on US debt?

Rising US interest rates are increasing the cost of servicing the US national debt, which is now surpassing $1 trillion annually. The higher rates are also pushing bond prices lower, which results in higher yields and creates a vicious cycle of selling and rising rates.

What is the Federal Reserve's role in the current interest rate situation?

The Federal Reserve has been cutting the federal funds rate, but long-term interest rates, such as the 10-year bond yield, continue to rise. This suggests a loss of control over long-term rates, and the Fed may need to intervene to prevent further increases, potentially through quantitative easing.

What is quantitative easing, and how might it affect the economy?

Quantitative easing (QE) is a policy where the Federal Reserve creates new money to purchase government debt, which lowers bond yields. While QE could stabilize the bond market, it may also weaken the US dollar, leading to inflation, reduced purchasing power, and a loss of confidence in the dollar globally.

Why is China accumulating large amounts of silver?

China is hoarding silver not only for industrial use but also as a strategic asset. Silver is essential for high-tech industries like electronics, solar panels, and electric vehicles. Additionally, China is looking to secure its supply of silver to ensure dominance in emerging technologies.

What are the key industrial uses of silver that make it so valuable?

Silver is critical for industries such as electronics, solar energy, and high-tech manufacturing due to its unique properties, including the highest electrical conductivity, heat conductivity, and reflectivity. It is also used in cutting-edge technologies like solid-state batteries.

How much silver is China importing annually?

China is importing 9,000 metric tons of silver annually, which is approaching the consumption level of India, another major consumer of silver.

What is the significance of China's silver importation from Peru?

China’s direct purchase of silver from Peru signals a strategic move to secure its supply of the precious metal. This arrangement bypasses the open market, ensuring China has a stable and controlled source of silver for its growing industrial needs.

How are other countries, like Russia, responding to the global financial situation?

Russia and other BRICS nations are also stockpiling gold and, in Russia’s case, silver. Russia's state fund has recently announced plans to begin buying silver for the first time in history, signaling a broader trend among nations seeking to secure hard assets amidst global financial instability.