Personal Finance and Investing

I believe there were at least 3 objectives with this move:

1) Remind people in the Beltway that the US has been accumulating massive debt. That means other countries have been funding our lifestyle. And this shows that they are willing to band together.

2) Hit corporate execs hard with the threat of their borrowing costs going way up, after a decade of practically free money.

3) Show Trump that other countries have the power to explode the cost of the US government. With today's cheap money, we pay almost a trillion dollars a year in interest, which is about 13% of our budget, roughly the same as the entire defense budget. The foreign debt-holders could conceivably push this to twice its current size, which would be calamitous.

Trump didn't come to any realizations. He simply got beat up by Jamie Dimon, Musk and others who understand how this could blow up in our faces.

The big question is China. China is the second-largest holder of US debt (second to Japan). Canada and friends decide to include CHina in their club, this would be huge amount of economic leverage over the US.

Bottom line, this is what 45 years of Reaganomics has done to us. When Reagan took office, foreign countries held about $30 billion of our debt -- an insignificant amount. In today's dollars, that's a little over $100 billion. That's not enough to worry about. Thanks to the miracle of Reaganomics, today the amount of US debt held by foreign countries is about $8 trillion.