Financial markets work in strange ways.

The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.

For better or worse there’s unlikely to be a scenario where the US becomes insolvent but it’s not far worse for those outside the US.

May sound very similar but it's more like if everything is going down, the strongest one is going to go down last. It's not really "unlikely to be a scenario where the US becomes insolvent" — it's that if it happens, it happens last. And a lot of that just has to be because the US "owns" the dollar, and the world ended up picking (let's not get into how) the dollar as the reference point for their own currencies; aka everyone's reserve currency.

So no matter how much the US fucks up, they just print more and more dollars and ensure the entire world collectively pays up for their fuck-ups. But if the US doesn't fuck up and does something good, then the benefits of that? Oh, that's a different story. No excessive benefit printing, no sir.

All hail exorbitant privilege.

The US will become insolvent by trying to prop up Japan.

"The Insane US-Japan Currency Bailout" - https://youtu.be/yh18YXKMk3g

Why does the US need to prop Japan? Because they are the biggest holder of US treasuries ...and if they need to prop up their own currency, they will need to sell them. <Insert Pearl Harbor reference...>

> The markets generally respond to US concerns by buying more US treasuries.

I think the market is buying more gold from US than ever -- this is trading US dollar for gold

US gold export is at its all-time high.

>The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.

I thought that dynamic broke down with the liberation day tariffs, where both stocks and bonds dropped at the same time?

The financial markets only bought US treasuries under those conditions because they were the least bad option during risky moments. There's no law of physics which says that will always be the same.

Trumpanomics is trying to weaken the dollar to make us more competitive as an exporter (along with tariffs which make imports into the US less competitive with domestic goods) and he is Trump's Congress is blowing away previous deficits, so investors are wise to reevaluate their previous risk mitigation strategies.

The Yen Carry Trade is now fully in reverse and both JP and US are going to see higher interest rates, causing both of their debt service to take up an increasing slice of the budget pie.

Investors are jumping into CN bonds now and are likely to look to the rest of the BRICS nations as the IS looks increasingly unable to manage a responsible budget, an economy that doesn't seem to be growing much, and sovereign bonds which have fewer buyers today than a month ago.

>For better or worse there’s unlikely to be a scenario where the US becomes insolvent

How can any organization that issues its own fiat currency become insolvent? Being solvent is simply an issue of adding digits to the borrowers' account in an electronic database.

The only thing that happens (and is happening) is the increase in the supply of currency outpaces the increase in the economic value of goods and services that can be exported, hence the currency loses purchasing power.

The US also used to have the distinction of being the most stable large organization, allowing it to earn a "trust" premium on its currency. But we are voluntarily giving that up.