U.S. senators urge the Trump administration to prevent the IMF from bailing out several countries that face predatory Chinese loans.

Chanel Holden

2018-02-01 07:38:00 Thu ET

U.S. senators urge the Trump administration with a bipartisan proposal to prevent the International Monetary Fund (IMF) from bailing out several countries that face predatory Chinese loans. These predatory Chinese loans are part of the Belt-and-Road infrastructure development plan for the next decade. Belt-and-Road is a $8 trillion global infrastructure plan that the Xi administration now uses to expand its economic prowess around the world.

In effect, the Xi administration makes productive use of this infrastructure debt to control the economic policies in Asian countries such as Sri Lanka and Pakistan. President Xi intends to transform Belt-and-Road into a new world economic order with fresh and unique Chinese dominance.

U.S. State Secretary Mike Pompeo points out that at least 23 of these 68 Belt-and-Road countries now face financial debt difficulties. This debt distress signals the collective reliance of Belt-and-Road countries on China. Also, China holds about $1.2 trillion U.S. Treasury bonds, bills, and notes and hence can directly influence the U.S. yield curve. Should the Belt-and-Road countries fail to honor their principal and interest payments on their current debt contracts with China in the absence of IMF bailout finance, the Xi administration may unload its Treasury bond positions. In turn, China may effectively use its rich foreign reserves to entrench its current 260% public-debt-to-GDP ratio and Belt-and-Road infrastructure debt distress.

In the worst-case scenario, these ripple effects may inadvertently cause U.S. yield curve inversion. U.S. yield curve inversion reflects a negative term spread between short-term and long-term interest rates, indicates corporate investment sentiments with respect to mergers and acquisitions and capital expenditures, and hence often recurs in the early dawn of a severe economic recession. This red alert poses a major gray rhino, or some obvious highly probable negative incidence, in contrast to improbable black-swan rare events such as the U.S. subprime mortgage crisis, the European sovereign debt spiral, and the Global Great Depression. For these legitimate reasons, the Trump administration's advisors such as Pompeo, Mnuchin, and Kudlow need to alleviate this economic security concern in due course.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Treasury Secretary Steven Mnuchin welcomes a weak U.S. dollar amid pervasive fears of an open trade war between America and China.

James Campbell

2018-01-15 07:35:00 Monday ET

Treasury Secretary Steven Mnuchin welcomes a weak U.S. dollar amid pervasive fears of an open trade war between America and China.

Treasury Secretary Steven Mnuchin welcomes a weak U.S. dollar amid pervasive fears of an open trade war between America and China. At the World Economic For

+See More

Fed minutes reflect gradual interest rate normalization in response to high inflation risk.

Dan Rochefort

2018-02-15 07:43:00 Thursday ET

Fed minutes reflect gradual interest rate normalization in response to high inflation risk.

Fed minutes reflect gradual interest rate normalization in response to high inflation risk. FOMC members revise up the economic projections made at the Dece

+See More

PayPal earns great fintech reputation from its massive worldwide network of 250+ million users.

Peter Prince

2018-10-19 13:37:00 Friday ET

PayPal earns great fintech reputation from its massive worldwide network of 250+ million users.

PayPal earns great fintech reputation from its massive worldwide network of 250+ million active users. As PayPal beats the revenue and profit expectations o

+See More

Neoliberal public choice continues to spin national taxation and several other forms of government intervention.

Peter Prince

2019-01-07 18:42:00 Monday ET

Neoliberal public choice continues to spin national taxation and several other forms of government intervention.

Neoliberal public choice continues to spin national taxation and several other forms of government intervention. The key post-crisis consensus focuses on go

+See More

Eric Posner and Glen Weyl propose radical reforms to resolve key market design problems for better democracy and globalization.

Chanel Holden

2023-02-14 09:31:00 Tuesday ET

Eric Posner and Glen Weyl propose radical reforms to resolve key market design problems for better democracy and globalization.

Eric Posner and Glen Weyl propose radical reforms to resolve key market design problems for better democracy and globalization. Eric Posner and Glen Weyl

+See More

Apple settles its 2-year intellectual property lawsuit with Qualcomm by agreeing to a multi-year patent license.

Charlene Vos

2019-05-01 09:27:00 Wednesday ET

Apple settles its 2-year intellectual property lawsuit with Qualcomm by agreeing to a multi-year patent license.

Apple settles its 2-year intellectual property lawsuit with Qualcomm by agreeing to a multi-year patent license with royalty payments to the microchip maker

+See More