Veto would easily break the agreement, the central eu bank doesnt have that much power over it and US would get us back in other ways, since we rely heavily on their intel, cloud services, military weapons, tech etc…
The USA can simply refuse to pay up. However, that would instantly crater their credit rating. Going from AAA straight to D would make future lending very expensive.
Countries basically can’t work without borrowing money. That’s what these treasuries are. The EU holds a crapton of US government debt; 10 trillion dollars with all types of assets combined. Liquidating them sends a clear message that US debt is no longer worth holding onto. That leaves us with two scenarios:
The USA pay off their debt, instantly draining trillions of dollars out of their coffers. They will have to issue new bonds to pay for this; issuing this many bonds for this reason will be seen as a sign of economic weakness and lack of reliability. Even with their AAA rating, the USA wouldn’t get great deals for those bonds and their main customer has just called it quits. The credit rating may be reduced because of this.
The USA refuse to pay. That’s equivalent to being unable to pay; their credit rating instantly goes to hell. The only reason people love to lend money to countries is because those debts are stable and reliable. If a government fails to pay their debts back for any reason, especially at that scale, that government instantly loses all credibility as a debtor. That means future US debt won’t be issued at something like 1% interest but more like 10-20% interest. And that interest will have to be paid, reliably, if they want any chance of climbing out of that hole.
Either way, it’s economic warfare, and not the border skirmish kind. This could very well completely fuck the US economy for decades.
Would the USA retaliate? Sure. But this is already in a scenario where the USA pose a direct military threat to the EU. It’d simply add another layer to the war.
Where are you getting those figures? The TOTAL foreign held treasuries are around 10T (EU combined, without UK, has like 1,4T). US also does NOT owe repayment on demand. The COVID exceeded $4T without systemic collapse, although it made the market “feel” it. Theres no way to… financially nuke an economy, using bonds. You cant even sell them back to the US, youd have to sell them to China, Japan… other countries.
They can flood the open market with cheap bonds, meaning that when the US auctions off freshly minted bonds, they’re worth significantly less and therefore yields are significantly higher, which can lead to a death spiral of either: 1) the US has to continuously issue bonds at higher and higher yields just to pay off the previous round of bonds, 2) the Fed prints money to buy the bonds and the dollar collapses, or 3) the US just doesn’t pay, and then we’re basically back to 1 moving forward.
So yes, bond dumping can definitely fuck up the economy.
Veto would easily break the agreement, the central eu bank doesnt have that much power over it and US would get us back in other ways, since we rely heavily on their intel, cloud services, military weapons, tech etc…
The USA can simply refuse to pay up. However, that would instantly crater their credit rating. Going from AAA straight to D would make future lending very expensive.
Countries basically can’t work without borrowing money. That’s what these treasuries are. The EU holds a crapton of US government debt; 10 trillion dollars with all types of assets combined. Liquidating them sends a clear message that US debt is no longer worth holding onto. That leaves us with two scenarios:
Either way, it’s economic warfare, and not the border skirmish kind. This could very well completely fuck the US economy for decades.
Would the USA retaliate? Sure. But this is already in a scenario where the USA pose a direct military threat to the EU. It’d simply add another layer to the war.
Where are you getting those figures? The TOTAL foreign held treasuries are around 10T (EU combined, without UK, has like 1,4T). US also does NOT owe repayment on demand. The COVID exceeded $4T without systemic collapse, although it made the market “feel” it. Theres no way to… financially nuke an economy, using bonds. You cant even sell them back to the US, youd have to sell them to China, Japan… other countries.
They can flood the open market with cheap bonds, meaning that when the US auctions off freshly minted bonds, they’re worth significantly less and therefore yields are significantly higher, which can lead to a death spiral of either: 1) the US has to continuously issue bonds at higher and higher yields just to pay off the previous round of bonds, 2) the Fed prints money to buy the bonds and the dollar collapses, or 3) the US just doesn’t pay, and then we’re basically back to 1 moving forward.
So yes, bond dumping can definitely fuck up the economy.
If I’m not mistaken, the US has 5 nuclear missile installations in the EU. Talk about the call coming from inside the house!