Reply #11: As I Understand Things - The Chinese Have Signaled That They

[mhr]

Won't be buying as much of our debt as they have in the past.

They said they would diversify their holdings of foreign currency. In other words, their treasury has a limited amount of money for buying foreign currencies which means less will go to buying our debt.

One impact will be higher interest rates as the Federal Reserve will have to raise rates to persuade more foreign investors to buy our debt.

The second impact will be the continued increase in prices as foreign goods cost ever more due to the dollars devaluation.