Tuesday, September 18, 2012

Bond Wars: Chinese Advisor Calls For Japanese Bond Dump

Finance 101: when bonds are dumped, bond prices plummet, and bond yields soar.  Equals end game for Japan, Inc.

http://www.zerohedge.com/news/bond-wars-chinese-advisor-calls-japanese-bond-dump
China is actively considering "using its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to "impose sanctions on Japan in the most effective manner" and bring Tokyo’s festering fiscal crisis to a head." I.e., dump Japan's bonds en masse. 

Should this stunning recommendation be enacted, not only would it be the first time in world history that insurmountable credit is used as a weapon of retaliation, it would mark a clear phase transition in the evolution of modern warfare: from outright military incursions, to FX wars, to trade wars, culminating with "bond wars" which could in the span of minutes cripple the entire Japanese fiscal house of cards still standing solely due to the myth that unserviceable debt can be pushed off into perpetuity (as previously discussed here).

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