Will The Chinese Really Stop Buying Treasuries?

Don't believe the hype.

It's certainly possible that at some point the Chinese could stop buying U.S. debt and, therefore, drive up interest rates.  But every time I ask the question of true experts in the field (as opposed to inside-the-Beltway types who are interested in scoring political points), I get an answer that makes far more sense and is based on facts rather than fear-mongering.

Chuck Lieberman, who as I've said before is one of the economists whose words I always consider carefully, has an easy-to-read take on this issue that is worth a few minutes of your time.

If you don't have time to read the whole thing, here's the money quote:

The rhetorical question, what will we do if the Chinese stop buying Treasuries is best answered by the conclusion that the Chinese have nowhere else to go unless they are willing to allow a much slower pace of development of their domestic economy. Given that Hobson's choice, they will continue to buy dollar assets, even if they object to it periodically. And they do this strictly out of their own self interest, not out of compassion or sympathy for U.S. policy needs.