According to a breaking news article on Bloomberg the following sentence is causing all sorts of reactions in the markets.
The Treasury also doesn’t want to give any impression to investors, particularly those based overseas, that it might be coordinating with the Fed to finance the national debt.
The issue is that many foreign investors have believed this for at least the past 3 years. Many of those people believe that they are getting paid back in freshly printed dollars. As for the most part the new Quantitative easing policy or printing money (which ever term you use to describe it) is roughly equal to the interest payments on the national debt.
In other words many of them believe that literally we are printing off our national debt. This has many concerned of the real threat of inflation, or in extreme cases even hyperinflation.
This is the fear, in the most simplest terms.
1 – We hand over to China freshly printed dollars to pay back our debt.
2 – China then re-exports those inflation causing dollars back to the US in the form of buying hard assets in the United States
3 – At the end of the cycle you find yourself standing in the middle of your fair city with all the high rises around you owned by the Chinese and your wallet full of worthless money.
Honestly that is what the fear is… and it’s a very valid fear.