During the last two months Russia sold a whopping $81 billion of US treasuries, and has now pretty much emptied its portfolio, which once totaled more than $150 billion.
We mention this sobering fact not because like most of hysteria-ridden Washington we think it is some kind of nefarious act of economic warfare by the Russkies. After all, neither the UN Charter nor the 1949 Geneva Conventions on the treatment of the wounded, sick and shipwrecked obligate Moscow to “buy and hold” Uncle Sam’s prodigious emissions of debt.
To the contrary, the Russian bond-dumping campaign should be a wake-up call as to the utter artificiality of the financial foundation on which America’s faux prosperity rests. And Russia’s suddenly vanishing portfolio of T-bonds and notes provides a striking case of just how wobbly and contorted that foundation actually is.
The peak holdings of $150 billion shown in the chart for a few years back happen to amount to 10% of Russia’s entire GDP. It seems a little hard to believe that if the Russkies were plotting America’s downfall they would “invest” 10% of their entire national income in securities that Washington could stop payment on in a nanosecond in the event of a real war.
But, of course, Moscow was neither plotting an attack on the US homeland (and not Germany, Poland or Montenegro, either) nor commercially investing the balance sheet of its central bank in US treasury paper that had been producing a yield that averaged just 1.3% for a blend of 1-10 year paper as recently as 2016.