Many countries, such as Russia, have already sold off all their U.S. Treasury debt holdings, according to E.J. Antoni and Peter St. Onge, who write that China, the second-largest foreign holder of U.S. debt, is “selling them hand-over-fist, having sold one-third in the past five years.”
“If the largest holder, Japan, has a fire sale in this environment, it would be the equivalent of a margin call on the U.S. Treasury Department — the moment the bank tells you to cough up more cash or they cut you off,” write Mr. Antoni and Mr. St. Onge.
“People the world over are losing confidence in the federal government’s ability to repay its debts and no longer see the dollar as a secure asset,” they write. “In just 3½ years, the dollar has lost one-fifth of its value, wiping out trillions of dollars of bondholders’ wealth around the world.”