When things cannot go on forever, they stop. And so it is with China’s support of the US dollar.
Foreigners sold more than $500bn of US government bonds during the second quarter, and perhaps one-third of that was unloaded by Chinese entities. The trend is worth watching.
Ever since 2001, when China was allowed unfettered entry into the World Trade Organization, the country has played a huge behind-the-scenes role in pushing up the value of the US currency and suppressing US bond yields.
“Stein’s law” If something cannot go on forever, it will stop.
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