China doesn't hold all that much debt, so this doesn't apply
But anyway, a large debt holder can bind up the borrower by announcing they think the debt they hold is worthless. The impact would depend on how much debt it was, with a large amount being dumped almost certainly increasing the cost of borrowing.
If I go to a bank, and I get a loan, then the terms of that loan allow the bank to do that.
If I sell a bond, then I set the terms, and I say that you can’t do that. You buy the bond understanding the terms.
China owns treasury bonds, they don’t have the ability to “bind up the borrower”. They can sell their bonds at market prices, but they can’t say “this debt is worthless, pay us now”. That’s not how bonds work.
That's isn't what I am arguing. I'm arguing that a very large holder of bonds can potentially set the market price. If they move the market for the older bonds, they will move the market for new issues.
Comments
How would china “make the call on us debt”?
That debt is all treasury securities bought on the open market.
They can’t demand the US pays them back early any more than you can.
China doesn't hold all that much debt, so this doesn't apply
But anyway, a large debt holder can bind up the borrower by announcing they think the debt they hold is worthless. The impact would depend on how much debt it was, with a large amount being dumped almost certainly increasing the cost of borrowing.
It depends on how that debt is owned.
If I go to a bank, and I get a loan, then the terms of that loan allow the bank to do that.
If I sell a bond, then I set the terms, and I say that you can’t do that. You buy the bond understanding the terms.
China owns treasury bonds, they don’t have the ability to “bind up the borrower”. They can sell their bonds at market prices, but they can’t say “this debt is worthless, pay us now”. That’s not how bonds work.
That's isn't what I am arguing. I'm arguing that a very large holder of bonds can potentially set the market price. If they move the market for the older bonds, they will move the market for new issues.