At the end of July, Facebook experienced its worst day in stock market history. As market volatility continues to intensify, another warning sign is flashing: the dumping of U.S. Treasury Bonds. In today's installment of USMR Market Insights, Coy Wells discusses this economic impact and why you need to know about it.
Why Countries Dumping U.S. Debt Should Worry You- Video Transcription
Coy Wells: 00:01
Good morning and thank you for watching u.s. Money Reserve's Market Insights. Today we're going to continue to talk about some of the things that we talked about last week and that's going to be U.S. Treasury bonds and an overvalued stock market. Last week many of us experienced and watched Facebook continue to fall and plummet, taking one of the largest stock losses in U.S. history. This is exactly what we're talking about is that we have four companies or four corporations that are currently carrying the majority of the value in the U.S. stock market. And today on CNBC news it has been identified that since March Russia has dumped more than 80 percent of the U.S. Treasury bond. They've gone from about 90 one billion down to 14 billion in about two and a half to three months. Remember several months ago China was doing the same thing.Now China has gone back in and purchased more U.S. Treasury bonds leaving China and Japan being two of the largest holders of U.S. Treasury bonds in the entire world.
Coy Wells: 00:53
The remaining balance of Treasury bonds which is about 21 trillion which is right at the national debt of the country is sitting at about 21 trillion in the United States and about six trillion cumulative sit outside of the United States. Remember last week as we talked about the four things that could be critical to the U.S. economy. And as we've talked for over a year now three key indicators that the Treasury Department issued in 2013 that they felt that could be a catalyst to the recession of the United States or lead into a depression in the United States- and I hate using that word but that is the word that they used is that Treasury bonds would be one of the key elements in catalyst to the U.S. economy. Number two was interest rates and number three was a decline in the U.S. dollar. Those three compartments that we've been talking about have continued to be a topic for the last year and a half in these videos.
Coy Wells: 01:44
And as we continue to do these videos each one of those elements continue to be a piece of the puzzle that continue to keep coming up and they're becoming more volatile and they're becoming more fluid inside the markets. We typically don't see countries like China go out and dump about 43 trillion or billion in U.S. Treasury bonds. We don't see Russia in a period of time since March till now go out and dump 81 percent of their entire holdings of U.S. Treasury bonds. Now some individuals will say this is a financial move or a form of asset management in regards to the economy because treasury notes are at a high since 2011. or it could because the United States is placing sanctions against Russia or has placed sanctions against Russia as they invaded Crimea. It could be. There's a possibility of that. But at the end of the day, the trade war, the tariffs that are being placed, these are fundamental issues that normally would not be in place if the United States economy was not suffering or in a position of being extremely fragile at this moment.
Coy Wells: 02:44
Here in a few weeks, The most important and most critical thing that we have to think about is the stock market will be at a point on the longest run in U.S. history. Never been done in U.S. history I think since our past August 10th. Think about that for just a second your money is sitting whether it's a 401 k or an IRA or in the stock market in a run that has never lasted this long in U.S. history after about August 10th. So think about that for just a moment. Is that once it reaches past that moment how much more room how much more room is still eligible for your money to continue to grow without some type of major recession or a major correction taking place after that moment. The upside is extremely minimal.
Coy Wells: 03:27:
The downside is extremely large and that's what you have to be thinking about. If countries around the world have been maneuvering away from the U.S. economy since 2014 and we start seeing a massive sell off in U.S. Treasury bonds by major countries, it is a telltale sign of some of the things we've talked about. You also can't go back several months ago and know that the U.S. economy was running out of money when we met the debt ceiling crisis. But we have an economy that's supposed to be one the most robust that we've seen in years. And we have a stock market that's at a record high. How can we have a stock market at a record high but on the flip side the U.S. economy is running out of money? Think about the things we've talked about in these videos or go back to some of the videos that we've talked about in the past.
Coy Wells: 04:10
We've got tax cuts that were taking place in the beginning of the year. We had the repeal of the Dodd-Frank Act or portions of the Dodd-Frank being rolled back and then you start seeing the tariffs being placed on foreign countries and then you have an accumulation or a combination of countries selling off U.S. Treasury bonds. I think this is more about fear and asset management of that fear than it is of them just making general maneuvers in the financial world. Think about what we've talked about. As always thank you for watching U.S. money reserve market insights. As always, we've got the new flyer which is U.S. economy a house of cards. This is the new topic and subject that we are on. For your FREE copy, make sure you click on the link or call the phone number below. And that'll get you your copy of this and as always thank you for watching u.s. Money Reserve's Market Insights.