ExtremeDullardTrump dealt major blow as Europe threatens ‘nuclear option’ over Ukraine
European leaders are considering dumping $2.34 trillion in US debt if Trump abandons Ukraine, potentially triggering an economic crisis worse than 2008
ProfessorozoneWhat’s does it mean to dump debt?
That they would sell or let their holding of US bonds expire and take the principal.
So like calling in the loan?
wiesonI don’t think exactly. As I understand: let’s say Italy is holding US debt. This debt has a certain value as long as the US economy is good because then there is a chance of repayment. So as long as Italy holds US debt, it’s interested in having trade with the US or generally being invested in the US economy to keep up the value of their debt.
If they let go of the debt they would have less interest in keeping the US economy up. They would pr stop encouraging their Italian companies to buy American machines/goods/services.
Something like that.
But how do they “let go” of US debt?
Sell it. Basically they can sell bonds that guarantee the US will pay $x at y time at a better deal than the US will. It’s taking a slight loss in exchange for hurting us and creating liquid cash.
A bond is basically a future on tax money. And a future is converting something that will be real, but with risk, into a set amount of money today. It’s “I’ll sell you the amount of potatoes this acre produces, in exchange for a reasonable bit less than it would take to buy that many potatoes in bulk now, that way I can grow them and am not fucked if my field doesn’t get enough rain, but you as the investor can average to it being worth your money and time.” If the acre is incredibly consistent, that farmer can get a really good deal on that future because there’s little risk.
The American taxpayers are very consistent. We don’t default on bonds and our money inflates comparatively little to other countries.
Corkyskog