Congress sees China selling all US debt

Treasury Secretary Janet Yellen warned the US Congress on Monday that the dollar’s share of global reserves is to be expected to decline slowly.

The twilight of the dollar

The former Fed chairwoman, however, tried to reassure by saying that there is no alternative that could completely supplant the greenback.

Members of Congress, however, expressed concern about the proliferation of sanctions. “Shouldn’t we be more thoughtful about our sanctions, at the risk of creating paranoia causing countries to look for other currencies to transact with?” “.

Janet Yellen has answered who should have “accept it”further arguing that escaping the dollar “is much more difficult when we work together with our allies”.

Congress then remembered that “even countries like France are looking for other currencies”, referring to a yuan-denominated gas contract signed by Total. A well-known thing about the Secretary of the Treasury:

“You know, France and some of our allies didn’t like us pulling out of the JCPOA and imposing sanctions. But for most countries, there is no alternative but to use the dollar as a reserve currency. »

Concerning the share of the dollar in international reserves:

“There has been some increase in other reserve assets, but that is something to be expected in a growing global economy where there is a desire for diversification. We should expect this, over time, to see a gradual increase in the share of other assets held by countries as reserves. It is a natural desire for diversification. But the dollar is by far the dominant reserve asset. »

US debt held by China

Congress then considered the scenario in which China invades Taiwan. In it, China dumps its $859 billion in US Treasuries. The question was “are you working with our allies and the FED to deal with such a situation where China dumps such a volume of Treasuries overnight”?

“We don’t do exercises that take into account such a risk, but the National Security Council of the United States is certainly concerned. »

To which the deputy replied: “I encourage the Treasury to prepare and be ready to face this scenario and to work with the FED and our allies”.

We are indeed at a turning point. Even Africa is sending very clear signals in favor of abandoning the dollar:

Things could speed up following the next annual BRICS summit to be held in South Africa at the end of August. It is rumored that a new international reserve currency will be introduced there.

The diversification of reserve assets is very good news for Bitcoin. Most countries still hesitate before this monetary UFO. But sooner or later, we will have to realize that Bitcoin is the ultimate store of value. Especially in an inflationary world where:

1) Rates are shrinking under the weight of debt;
2) Productivity (and hence rates of return) slows due to limits to growth (peak oil).

Do not miss our article: “Why so much debt”.