I dunno if the era of free money is over in Japan, as Felix puts it.. I heard the borrowed money investors used to buy US Treasury is going to be sold in order to shore up the cashflow needed back home bc interest rates have risen in anticipation of the stimulus Takaichi secured approval for with her supermajority win. A different influencer said money is flowing back to domestic soil as it makes more sense to support your country when both US/Japan are equally risky investments; only now all boats float with the influx of free cash infused by its gov't, so why wouldn't ppl focus on capturing those yens through business initiatives.. as a result selling-off US bonds at a time when the foreign exchange is favourable has already incentivized Japan to sell [8:05] The same sell-off can be said of NATO members, if Trump continues to demand they increase its military spending, they may have no choice but to sell US Bonds to meet this obligation—an interesting dilemma to be caught in the middle of. Telling ppl to wait for the big players to move runs counter to understanding the market fundamentals Felix advised earlier, now it seems he wants ppl to be left holding the bag. They say the only things guaranteed in life is death & taxes, but if you read the Bible—GOD remains the ever constant which is becoming more evident each passing day if you pay attention to all the ups & downs.
Q: Did Japanese goverment use money borrowed from domestic savings account to invest in US Treasury?
Yes, Japanese gov't & its affiliated institutions have historically used funds, including those derived from domestic savings & borrowing, to invest in US Treasury securities. This mechanism has allowed Japan to become the largest foreign holder of US debt.
Here is a breakdown of how this process works based on financial reports:
Funded by Domestic Borrowing: Contrary to a simple, direct transfer of consumer cash, Japanese public sector operates a de facto sovereign wealth fund. This fund is financed in part by domestic borrowing—issuing Japanese government bonds (JGBs) to domestic banks, insurers, pension funds—at very low-interest rates.
Foreign Exchange Reserves: A significant portion of Japan's US Treasury holdings comes from the Ministry of Finance’s Foreign Exchange Fund Special Account, which manages foreign reserves. These reserves are partly funded by yen-denominated financing bills, which are essentially short-term borrowings.
The "Carry Trade" Mechanic: For years, Japanese financial institutions (pension funds, insurers, banks) would borrow in yen at near-zero rates, convert the money to dollars, and invest in higher-yielding US Treasuries, locking in a spread.
Trade Surplus Contribution: Beyond borrowing, Japan’s massive accumulated trade surpluses with the US have provided a steady stream of dollars, which are frequently reinvested into US Treasury bonds.
Context for the Action Japan's investment in US Treasuries is driven by the need to:
Maintain Export Competitiveness: By buying US Treasuries, Japan keeps value of yen lower against the dollar, helping its export-oriented economy.
Find Yield: With domestic Japanese interest rates at or below zero, Japanese investors have sought higher returns elsewhere.
Manage Currency Stability: These investments are part of a strategy to stabilize the yen against the dollar.
Recent reports (as of late 2025/early 2026) suggest this model is under strain, with potential, though likely, for Japanese investors to keep more savings at home as domestic yields rise, or to sell U.S. holdings to support the weakening yen.
Fiscal responsibility means Takaichi can't borrow money endlessly or print money endlessly, so where is she going to get the money? [11:00] This may be scary depending on how you see it, but Japan has a "Special Account" for its foreign exchange & it has just posted a surplus of $1.4Trillion USD.
Japanese Minister of Finance Satsuki Katayama on Tuesday said using surplus from $1.4 trillion foreign currency reserves could be considered when discussing funding sources for planned cuts in food sales tax. Asked about tapping the surplus generated from foreign exchange reserves, Katayama said at a press conference that such surplus had been transferred to the general account in the past. Focus on the $1.4 trillion stockpile, far larger than annual state budget, underscores intense pressure on Tokyo to identify alternative funding sources for an estimated 5 trillion yen ($31.99 billion) annual revenue shortfall, a prospect that has unsettled financial markets. Q: Why does Japan not pay off it's deficit with its foreign exchange reserves? Japan does not pay off its massive national debt with its $1.4 trillion in foreign exchange reserves primarily bc those reserves are essential for maintaining currency stability, curbing yen weakness, protecting its export-driven economy. Most Japanese debt is held domestically in yen, making it more manageable than foreign-denominated debt.
Takaichi is looking to fund her tax cuts w/ this fund w/o having to borrow more money.. What does that mean? She might sell US Bonds to fund Japanese Tax Cuts, so she's sort of raiding the piggy bank that holds American I-Owe-You's: [a] more US debt for sale means prices drop, and interest rates rise, US deficit rises in correlation when no one has appetite to invest.. So Trump's demand to lower interest rates runs the risk of causing a weakened dollar & inflation to spike & premium pricing for capital flight of US debt, but if rates stay high debt service explodes & the budget breaks—the perfect storm to cause an onset of a crisis of one kind or another: Lightning sell-off or slightly less rapid rise of deficit, a dilemma either way but the new Fed Chair is going to have to go against Trump or release the flood gates on the US markets. It seems like the 10 year runway Tom Bilyeu was expecting may actually run dry sooner than expected—how fast is AI helping you complete that game, can it get er done by end of February? I have a feeling the popularity of self-help may drop-off in the coming months, as ppl struggle to pay rent & what not.
1950s-70s (Popularity Boom): The post-war era & 1960s/70s cultural shifts brought spiritual & psychological approaches to the mainstream, including Norman Vincent Peale’s The Power of Positive Thinking and the "New Age" movement.
Is it time to 'sell America'? Why financial retribution comes with plenty of risk
Trump's aggression toward allies has some raising the possibility of a co-ordinated sell-off of U.S. Treasuries. But controlling the financial fallout could be difficult.
Financial Post | Barbara Shecter | Jan. 22, 2026
U.S. President Donald Trump’s willingness to use economic pressure against allies is again raising the possibility that targeted nations could join forces and push back with a coordinated “sell America” strategy involving U.S. Treasuries and, potentially, broader U.S. investments.Article contentAmerican stock markets sold off briefly earlier this week after Trump said he planned to impose stiff tariffs against numerous EU nations and suggested military confrontation was possible in his pursuit of Greenland.
With Prime Minister Mark Carney using his global platform at Davos Tuesday to call for “intermediate powers” such as Canada to join forces in an era where financial infrastructure has become a tool of coercion, the idea of dumping U.S. holdings to retaliate against pressure from the United States has gained traction.
“In principle, ’selling America’ would be incredibly powerful bc of the U.S. current account deficit,” said Mark Manger, director of global economic policy lab at the University of Toronto’s Munk School. “If the ‘middle powers’ really did that, U.S. interest rates would blow up & the dollar would fall, almost surely tipping the U.S. into a massive recession.” A Denmark pension official said this week the fund planned to sell its $100 million worth of U.S. Treasuries. While “poor government finances” in United States were blamed, the timing suggested Danish pension was reacting to more than America’s long-recognized debt problem, as Trump continued to threaten to take over Greenland, a largely autonomous part of the Kingdom of Denmark. On Wednesday, U.S. Treasury Secretary Scott Bessent brushed off pension fund’s plan, calling planned Treasuries dump “irrelevant” and telling reporters in Davos all of Denmark holds less than $10 billion of the $30.8 trillion U.S. Treasury market.
While Denmark’s U.S. debt holdings alone aren’t huge, EU countries together hold ~$8 trillion worth, while Japan, China & Canada hold more than $2 trillion combined. However, there would be major caveats to pursuing a co-coordinated strategy of unwinding those holdings. For one thing, U.S. Treasuries have become an integral part of managing financial institutions across the G7 & they serve as a traditionally stabilizing force for gov't to hedge against credit risks in their own mkts. Many pension funds, too, have leaned on the bonds to match their long-term liabilities in form of inflation-protected guarantees to pensioners. [what about dilution from money printing?] None of this would be easy to replace. “Governments demand it to hold as foreign reserves & financial institutions hold it for liquidity purposes. It has been a good hedge; its price increases in turbulent times,” said Juan Carlos Hatchondo Couture, an economics professor at the University of Western Ontario whose research focuses on international finance and sovereign debt.
Q: Do other countries print money more than US gov't and have higher inflation rates?
Yes, several countries print money at higher rates and experience significantly higher inflation than the United States, with 2024–2025 rates exceeding 100% in nations like Venezuela, South Sudan, and Zimbabwe. These nations often resort to excessive money creation to fund deficits, leading to hyperinflation and severe currency devaluation. Key Findings on High Inflation Countries
Top Inflation Countries (2024-2025): Venezuela (approx. 270%), South Sudan (97%), Zimbabwe (89%) are experiencing extreme inflation far surpassing the U.S..
Reasons for Higher Rates: Unlike the U.S., which can finance debt through global demand for dollars, these countries often lack revenue options, forcing them to print money, which devalues their currency and causes prices to surge.
Comparison to U.S.: While the U.S. has increased its money supply and experienced high inflation, it is generally much lower than in these developing nations. The U.S. dollar remains a strong, stable currency because it is less affected by excessive printing compared to these other, often smaller, economies.
Why Other Countries Have Higher Inflation
Excessive Money Printing: When a country prints more money to grow its economy without a corresponding increase in goods/services, prices soar.
Limited Resources: Many of these countries cannot raise revenue through traditional taxes or debt, leaving printing money as a survival mechanism.
Currency Deprecation: If a country imports in foreign currencies and its local currency falls, inflation rapidly increases, especially if they are printing more money simultaneously.
Q: What is the rate of inflation in Denmark?
Denmark's annual inflation rate fell to 0.8% in January 2026, dropping from 1.9% in December 2025 to the lowest level since April 2024. This significant decrease was driven by lower costs in housing, utilities, and transportation, while core inflation dropped to 1.9%.
Key details regarding inflation in Denmark:
Monthly Change: Consumer prices fell by 0.6% in January 2026 compared to December 2025.
Components: While overall inflation fell, food and non-alcoholic beverage prices saw a slight increase in inflation to 3.8%.
Outlook: The average inflation rate in 2025 was 1.9%, with forecasts suggesting it will remain low in the coming months.
Historical Context: The current 0.8% rate is a sharp decline from the 10.1% peak reached in October 2022.
Q: What is the rate of inflation in Canada?
Canada's annual inflation rate was 2.4% in December 2025, according to Statistics Canada. This was an increase from 2.2% in November 2025, driven by the end of a temporary GST/HST tax break. While gasoline prices continued to fall, high costs for rent and food maintained upward pressure on the CPI.
Key Inflation Details (As of December 2025):
Annual Inflation Rate: 2.4% (year-over-year).
Monthly Change: The Consumer Price Index (CPI) fell 0.2% on a non-seasonally adjusted basis in December compared to November.
Key Drivers:
Upward Pressures: Restaurant food (+8.5%), rent (+4.9%), and passenger vehicles (+3.2%).
Downward Pressures: Gasoline (-13.8%), natural gas (-15.3%), and lower homeowner replacement costs (-1.6%).
Core Inflation: Bank of Canada’s preferred core measures eased to around 2.5% in December.
The 2025 annual average inflation rate was 2.1%, marking a moderation from 2024, although the cost of living remains elevated. The Bank of Canada expects inflation to stay close to its 2% target, according to this statement from Tiff Macklem.
Q: What is the rate of inflation in China? [No answer given]
China’s annual inflation eased sharply to 0.2% in January 2026 from 0.8% a month earlier, marking the lowest print since October & missing market expectations of 0.4%. Food prices fell for the first time in three months (-0.7% vs 1.1% in December), dragged by drops in pork, eggs, and cooking oils. Non-food inflation slowed (0.4% vs 0.8%), despite ongoing consumer trade-in programs. Healthcare inflation slowed slightly (1.7% vs 1.8%), education cost was flat after a 0.9% rise previously, while housing (-0.1% vs -0.2%) and transport (-3.4% vs -2.6%) saw deeper declines. Clothing prices, however, accelerated (1.9% vs 1.7%). NBS statistician Dong Lijuan said the moderation in January inflation was mainly due to a high base and sharper energy price drops. Meanwhile, core inflation, excluding food and energy, rose 0.8% year-on-year, the weakest in six months after 1.2% in December and November. Monthly, CPI increased 0.2%, matching the December level but undershooting the 0.3% consensus. source: National Bureau of Statistics of China
Q: What is the rate of inflation in EU?
As of early 2026, the annual inflation rate in the European Union (EU) is showing signs of easing, with flash estimate for euro area (the 20 EU member states using the euro) expected to be 1.7% in January 2026, down from 2.0% in December 2025. For the entire EU, the annual inflation rate was 2.3% in December 2025.
Euro Area (January 2026 Estimate): 1.7%.
EU (December 2025): 2.3%.
Key Drivers: Services have the highest inflation rate (3.2%), while energy prices have seen a significant decrease (-4.1%).
Member State Variation: In December 2025, inflation varied significantly across the EU, with the highest rates in Romania (8.6%) and the lowest in Cyprus (0.1%).
Trend: The overall inflation trend in EU has decreased from a high of 9.2% in 2022 to a more moderate level, although it remained at 6.4% for full year 2023, before falling further in 2024 and 2025.
The European Central Bank (ECB) targets an inflation rate of 2% over the medium term.
Q: What is the rate of inflation in US?
As of December 2025, the annual inflation rate in the US is 2.7%, according to the Bureau of Labor Statistics and Trading Economics. This rate remained stable compared to November, with significant price increases in shelter and food offset by a decline in energy costs. Key Inflation Details (December 2025):
Headline CPI: 2.7% (12-month change).
Core CPI: 2.6% (excludes volatile food and energy).
Monthly Rate: 0.3% (seasonally adjusted).
Drivers: Shelter costs (+3.2% year-over-year) continue to be a major contributor, while gasoline prices declined 3.4%.
The current rate is higher than the Federal Reserve’s long-term target of 2%.
Q1: Does Japan have a special account for foreign exchange surplus?
Yes, Japan utilizes the Foreign Exchange Fund Special Account (FEFSA) to manage funds related to foreign exchange interventions. Managed by the Ministry of Finance, this account holds foreign reserves & records profits/losses from market interventions, with a record surplus of 5,360.3 billion yen at the end of fiscal 2024.
Key Aspects of the FEFSA:
Purpose: The account is used for buying and selling foreign currencies (mostly U.S. dollars) to stabilize the yen, holding assets like U.S. government bonds.
Surplus Usage: Due to a weak yen, the account has accumulated significant, often "untapped," investment returns, which are occasionally discussed as a potential source for government funding.
Structure: It operates under the Ministry of Finance to handle the financial aspects of foreign currency intervention and management of foreign assets.
While this account exists, it is distinct from Japan's broader "current account surplus," which relates to trade and investment income.
Q2: Is Japan's FEFSA balance currently $1.4Trillion Yen?
Based on data from February 2026, Japan's foreign exchange reserves (often referred to in the context of foreign assets held by the central bank) rose by $24.98 billion to $1.39 trillion USD. While the total is very close to $1.4 trillion, it is important to note:
Currency: The figure is in US Dollars ($), not Japanese Yen (¥).
Composition: The $1.39 trillion in foreign reserves as of January 2026 comprises foreign currency assets, IMF reserve positions, SDRs, and gold.
Note: The results indicate a "4-year high" in foreign reserves as of early 2026.
Q3: cumulative deficit in Japan
As of late 2025 and early 2026, Japan faces a severe, long-term cumulative fiscal deficit, with total government debt reaching a record 1,342 trillion yen (approx. $8.5+ trillion USD) in 2025. This debt represents over 200% of Japan's GDP, the highest among developed nations. 1.342 quadrillion Yen = $8.776 Trillion USD
Key Aspects of Japan's Cumulative Deficit:
Persistent Deficits: Japan has not had a balanced budget in decades, running a consistent primary fiscal deficit that has averaged 5.1% of GDP since 1998.
Total Debt Load: The total debt consists of over 1,197 trillion yen in government bonds, with additional borrowing and financing bills.
Debt-to-GDP Ratio: The general government gross debt is around 260% of GDP.
Net Position: While gross debt is high, net debt (accounting for assets) is estimated at 78% to 100% of GDP.
Interest Rates: Rising bond yields are increasing the cost of servicing this massive debt, with interest payments consuming about 25% of the annual budget.
Trade and Current Account Balance: In contrast to the structural fiscal deficit, Japan has experienced a, somewhat erratic, trade balance, recently recording a 5th straight yearly trade deficit of 2.65 trillion yen in 2025. However, the overall current account (which includes income from overseas investments) has remained in a significant surplus, with a record high of almost 31.9 trillion yen ($203 billion) in 2025. Future Outlook: The Japanese government is targeting a primary budget surplus for the first time in 28 years in the FY2026 budget to address the long-term debt, but the country still faces high structural spending on social security and an aging population.
Q4: what unit of measure comes after trillion
The unit of measure that comes immediately after a trillion (10^12) in the standard short-scale system is the quadrillion (10^15), followed by the quintillion (10^18). Each subsequent number increases by a multiple of 1,000, continuing with sextillion, septillion, octillion, and so on.
Q5: How does USD get stronger when cost of borrowing rises & stock prices fall? [12:44]
A higher cost of borrowing & higher operating costs create a stronger dollar during an economic contraction primarily by attracting foreign capital seeking higher returns & by positioning the dollar as a "safe haven" asset. While a contracting economy usually weakens a currency, the combination of high-interest rates (designed to fight inflation) & increased safe-haven demand creates a counter-intuitive strengthening effect.
Here is the breakdown of how this process works:
1. The Impact of Higher Borrowing Costs (High Interest Rates)
When the central bank (Fed) raises rates to combat inflation, borrowing for consumers and businesses becomes more expensive, cooling the economy. This affects the dollar in the following ways:
Attraction of Foreign Capital: Higher interest rates mean U.S. Treasury bonds and corporate debt offer better returns compared to other countries. Global investors sell their local currencies to purchase U.S. dollars, increasing demand for the USD.
Reduced Money Supply: High borrowing costs discourage borrowing and spending, which reduces the velocity and overall supply of money in circulation.
Capital Flows: Foreign investors, seeking safety and higher yields, pour money into U.S. assets, which requires converting foreign capital into U.S. dollars.
2. The Impact of Higher Operating Costs
As inflation rises, the cost of labor, materials, and operations increases for businesses. In a contracting environment, this leads to:
Reduced Production and Lower Supply: High costs force companies to cut production and reduce output, creating scarcity.
Increased Demand for Value: As businesses struggle with operating costs, they may demand greater cash reserves, and investors may favor the US dollar as a store of value, driving up its price.
3. "Safe Haven" Status During Contraction
During an economic contraction (or recessionary fear), investors often panic & seek safety. The U.S. dollar is recognized as the world's primary reserve currency.
Flight to Quality: Even if U.S. economy is slowing, investors often view it as safer than emerging markets or other developed economies.
Panic Buying: A "flight to quality" drives capital into U.S. dollar-denominated assets, further boosting the currency's value.
Summary of the Mechanism
Inflation/High Costs: Fed hikes rates then Borrowing becomes expensive.
Capital Flows: High yields attract foreign money
Contraction/Safety: Investors buy USD for safety
Result: The dollar strengthens even as the economy slows.
This phenomenon can cause a "strong dollar" scenario that makes imports cheaper but also makes U.S. exports more expensive, which can create a further drag on economy, sometimes leading to a "stagflationary" environment (high inflation + contraction).
Q5.1: During economic contraction do companies raise prices to maintain profitability?
Yes, many companies do raise prices during an economic contraction to maintain profitability, a practice that has been observed in recent inflationary downturns, such as in 2022-2023. While conventional economic theory suggests prices should fall due to lower demand during a recession, modern economic conditions—often characterized by high inflation, supply chain issues, increased costs—have encouraged firms to adopt a "price over volume" strategy, prioritizing profit margins over sales volume. Here is a detailed breakdown of why and how companies do this:
1. Reasons Companies Raise Prices During Contraction
Rising Input Costs: Even in a downturn, if the economy is experiencing inflationary pressures, the costs of labor, materials, and transportation often rise.
"Price over Volume" Strategy: Companies may find it more profitable to sell fewer items at a much higher price rather than maintaining high volume at lower margins.
Leveraging Brand Power: Large companies with high market power, such as those in the consumer goods sector (e.g., PepsiCo), have raised prices significantly, trusting that consumers will continue purchasing despite price hikes.
Covering Cost Increases (and Expansion): Some companies have used the general environment of high inflation as "cover" to raise prices by more than their increased costs, thereby expanding their profit margins.
Defending Profit Margins: Many firms in sectors like software-as-a-service (SaaS) or B2B find that cutting prices in a downturn fails to drive significant volume and instead just destroys profitability.
2. When Price Increases Do Not Work
Raising prices is not always successful. It depends on the price sensitivity of the customer and the nature of the goods:
Price-Sensitive Consumers: If customers are highly price-sensitive, they will "trade down" to cheaper, generic alternatives, causing companies that raise prices to lose market share.
Resistance and Reduced Spending: When income drops, consumers often reduce spending, making it harder for companies to maintain higher prices, leading some firms (like Dollar Tree) to face falling margins.
3. Alternative Strategies to Maintain Profitability
Rather than direct price hikes, many companies use more nuanced approaches to boost profits during a contraction:
Value-Based Pricing: Rather than lowering prices, companies emphasize the value and quality of their products, justifying a higher price point.
Skimpflation/Shrinkflation: Reducing the size or quality of a product while keeping the price the same.
Tiered Options: Offering a lower-priced "essential" tier to keep price-sensitive customers, while keeping premium options high.
Temporary Discounts: Using,, promotions, or coupons to drive volume without permanently lowering the "anchor" price of the product.
Q6: was there a time when the yen was equivalent or higher than the USD?
Yes, there was a time in the late 19th century when the Japanese yen was roughly equivalent in value to the U.S. dollar, notes from the era indicate. When the yen was adopted in 1871, it was designed with a gold standard, defining the yen as 1.5 grams of gold, which was intentionally close to the value of the US silver dollar. However, the "strength" or exchange rate of the yen has fluctuated drastically since then, primarily driven by postwar economic conditions rather than a sustained period of being higher than the dollar in modern history.
Key Historical Context:
Late 19th Century: yen started on a gold standard with value close to 1 USD.
1931-1941: After leaving the gold standard, the yen fell to roughly $0.30–$0.50.
Post-WWII (1949): Due to massive inflation, the yen was pegged at 360 yen per 1 USD by the US occupation.
1971–1973: The Bretton Woods system collapsed, leading to a floating exchange rate. The yen immediately began to appreciate.
1985 (Plaza Accord): Major nations agreed to depreciate the US dollar, causing the yen to rise from roughly 240 JPY per USD to 120 JPY by 1987.
1995 (Peak): The yen hit a peak of under 80 yen/USD, at which point the Japanese economy was temporarily near the size of the US economy.
Modern Reality: While the yen has appreciated significantly from its 360-per-dollar peg, it has never in modern times been "higher" than the dollar in a direct "1 Yen = 1 Dollar" sense. Instead, its strength is measured by its appreciation, with the highest value (lowest exchange rate) reaching approximately 75.55 yen to the dollar in 2011.
Q7: Did the Chinese Gov't formally recommend selling US bonds yesterday? [No answer given, see AI is programmed to give bias information to sway investors]
China Reportedly Directs Banks To Cut US Treasury Holdings—Peter Schiff Warns Of 'Soaring' Consumer Prices
Yahoo Finance | Namrata Sen | Tue, February 10, 2026 at 8:31 AM PST
Chinese regulators have told financial institutions to limit their purchase of U.S. treasuries amid concentration risks and market volatility. Those with high exposure to the bonds have been advised to reduce their holdings, reported Bloomberg on Monday. Notably, the advice is not applicable to Chinese state holdings of U.S. gov't bonds. The publication reported the directive was issued to financial institutions before the recent call held between President Donald Trump and Chinese President Xi Jinping.
As per U.S Treasury data, China’s holding is worth $682.6 billion as of November 2025, the third-largest after Japan and the UK. Economist Peter Schiff said China’s move will mainly prompt the Federal Reserve to buy the bonds, creating inflationary conditions for consumers. “That will send consumer prices soaring,” he wrote on X.
China has advised its banks to sell U.S. Treasuries. That is very good advice. Soon foreign governments and many private investors will be selling U.S. Treasuries. The main buyer will be the Fed, creating inflation that will send consumer prices soaring.
US Treasuries Sale Raise Alarm
China’s move comes weeks after Danish pension fund AkademikerPension, with funds of $25 million, reportedly planned to offload U.S. treasuries amid credit risk tied to U.S. fiscal and political upheavals. The Chief Investment Officer of the fund, Anders Schelde, raised questions on the quality of the U.S. government bonds & stated that government finances are “not sustainable.” Several economists have previously warned that the $38 trillion debt poses a massive threat to the global financial perception of the U.S. Treasury Secretary Scott Bessent had brushed off the concerns, but Sen. Elizabeth Warren (D-Mass.) raised alarm over the potential development. She said it would be a “huge deal” if the world curbs U.S. Treasury purchases, as it would translate to higher rates for car loans and mortgages.
At the same time, Geng Ngarmboonanant, managing director at JPMorgan Chase & Co., and former deputy chief of staff to ex-Treasury Secretary Janet Yellen, had told that foreign governments, which held nearly 40% of the U.S. debt in 2010, have now lowered their holdings to 15%, and that the investors should be concerned about this.
Interestingly, a chart compiled by Otavio Costa of Crescat Capital LLC, in October, showed the Federal Reserve has shrunk its holdings of the U.S. government debt by $1.5 trillion since May 2022.
Why China Is Urging Banks to Limit US Treasury Holdings
Bloomberg | Mon, February 9, 2026 at 6:40 PM PST
Chinese regulators have advised financial institutions to rein in their holdings of US Treasuries, citing concerns over concentration risks and market volatility, according to people familiar with the matter. Bloomberg's Minmin Low reports. This is driven in part by diminishing trade between US & China, which dropped by 20% in 2025, and need to diversify their asset holdings to safe guard against market volatility.
Q8: how did Federal Reserve has shrunk its holdings of the U.S. government debt by $1.5 trillion
The Federal Reserve reduced its holdings of U.S. government debt by over $1.5 trillion (totaling over $2 trillion in securities overall) since June 2022 through a policy of quantitative tightening (QT). This was achieved by allowing maturing Treasury securities to "roll off" the balance sheet—not reinvesting the principal payments—up to specific, monthly caps rather than selling them directly.
Key Aspects of the Reduction Mechanism:
Passive Runoff (Rolling Off): Instead of active selling, the Fed stopped re-investing the cash from maturing Treasury bonds & Mortgage-Backed Securities (MBS).
Monthly Caps: Initially, the Fed allowed up to $30B in Treasuries & $17.5B in MBS to mature monthly without replacement.
Pace Adjustment: To ensure a smooth transition & avoid market disruptions, the FOMC reduced monthly cap on Treasury securities to $5 billion in June 2024 while maintaining MBS cap, effectively slowing pace of reduction.
Total Reduction: As of late 2025, total securities holdings (Treasuries & agency MBS) have declined by more than $2.2 trillion.
This process, known as QT, is the opposite of Quantitative Easing (QE) & is designed to shrink the balance sheet, tighten financial conditions, and reduce the massive holdings accumulated during the COVID-19 pandemic.
Q9: Can the US print money indefinitely
Technically, the U.S. can print money indefinitely due to the dollar’s status as the global reserve currency, but it cannot do so without severe consequences. Unlimited printing would trigger massive inflation, devaluation of the dollar, loss of international trust, and potential economic collapse. Key details regarding limits of printing money:
Inflation Risk: Creating money without a corresponding increase in economic output leads to more dollars chasing the same amount of goods, causing prices to rise.
Hyperinflation: Unchecked, could lead to hyperinflation = the currency worthless.
Global Reserve Status: Because the world uses the US dollar for trade, the U.S. faces less immediate pressure than other nations, but this is not absolute.
Debt & Confidence: Excessive printing to pay for debt can damage confidence of foreign investors, who might seek alternatives to the dollar.
While the Fed can expand the money supply to combat crises (as seen in 2020), it is a strategy limited by the need to maintain a stable economy.
One more impetus to sell US bonds..
Q10: how many zoombie companies in US loading up on debt?
As of late 2024 and heading into 2025, there are approximately 2,000 publicly traded "zombie" companies in the United States. These are companies have loaded up on debt—often at low rates during the pandemic—and are currently struggling to pay even the interest on their loans, with their numbers reaching the highest levels since early 2022. Here is a breakdown of the current situation regarding US zombie companies:
Total Numbers & Growth: Globally, the number of zombie companies has soared to nearly 7,000, with the US holding a significant portion of these.
Definition & Characteristics: Zombie companies are generally defined as mature firms that fail to earn enough to cover their interest expenses 3yrs consecutively. They are often characterized by stagnant sales, declining productivity, and reliance on debt to survive.
The Debt Load: These companies "gorged on debt" at near-zero rates during pandemic era. With interest rates now at decade highs, they face intense pressure.
Key Sectors: The worst-affected sectors include airlines, cruise lines, energy companies, and car manufacturers.
Risks & Outlook: Experts say many of these companies may face "day of reckoning" as they face looming deadlines on hundreds of billions of dollars in debt. If interest rates remain high, many firms are likely to face bankruptcy or forced restructuring.
Recent Trends: Nearly 100 new companies gained the "zombie" designation in October 2025, signaling a continued, accelerating trend.
This, however, does not include smaller private companies that are not publicly listed but are also struggling with debt burdens.
Q11: Did Brazil have trade agreement with China to transact in Chinese RMB?
Yes, Brazil and China have entered into agreements to transact directly in Chinese Yuan (Renminbi/RMB), bypassing the U.S. dollar for a significant portion of their bilateral trade. As of 2025, it is reported that approximately 40% of trade transactions between Brazil and China are settled in yuan. Key details regarding this arrangement include:
Currency Swap and Clearing Arrangement: In early 2023, the central banks of both countries signed a memorandum of understanding to establish yuan clearing arrangements in Brazil.
Expansion in 2025: In May 2025, Brazil and China strengthened this partnership with a new five-year, R$157 billion (US$27.7 billion) currency swap agreement, designed to increase liquidity and encourage the use of local currencies, particularly in commodities like soybeans, oil, and iron ore.
"Weapon Against Imperialism": Brazilian officials, including Minister Fernando Haddad, have described the move as a strategic shift to reduce reliance on the U.S. dollar and decrease transaction costs.
First Transactions: The first commercial deals settled directly in RMB and converted into Brazilian Reais were completed in late 2023.
This initiative is part of a broader push by BRICS nations to increase the use of local currencies in international trade.
Q12: why did japan bomb pearl harbour
Japan bombed Pearl Harbor on December 7, 1941, to preemptively destroy the U.S. Pacific Fleet, aiming to neutralize American interference & secure vital oil and resource-rich territories in Southeast Asia. Facing a severe U.S. embargo, Japan believed this swift strike would allow them to establish a defensive perimeter, "before the oil gauge ran empty".
Securing Resources: Japan was engaged in a war with China and needed to secure resources like oil, rubber, and tin from Southeast Asia to continue its expansionist efforts.
Neutralizing the U.S. Navy: Japan's naval leaders, specifically Admiral Isoroku Yamamoto, feared that the U.S. Pacific Fleet, stationed in Hawaii, would pose a threat to their planned expansion into Southeast Asia, which was then controlled by European nations (and the U.S. in the Philippines).
Preemptive Strike Strategy: The attack was designed as a surprise blow to cripple the U.S. Pacific Fleet's ability to respond to Japanese operations in the region.
A "Limited" War: Japan hoped the strike would be so demoralizing the U.S. would not have the "stomach" for a long, costly, and distant war, leading the U.S. to negotiate for peace on terms favorable to Japan.
Response to U.S. Pressure: The U.S. had imposed a total trade embargo in 1941, threatening to cripple Japan's military, which left Japan believing they had no choice but to fight or abandon their imperial ambitions.
Although the attack was a massive tactical success, it failed to destroy the U.S. aircraft carriers, which were not at the port, ultimately drew U.S. directly into World War II.
Q13: why did us issue a trade embargo in 1941
The United States imposed a total trade embargo on Japan in July 1941, notably freezing all Japanese assets and halting oil exports, to penalize Japan for its ongoing invasion of China & its expansion into French Indochina. The move aimed to stop Japanese military aggression, which was furthered by its alliance with Germany & Italy. Key reasons for the 1941 embargo included:
Expansionism in Southeast Asia: The immediate catalyst was Japan's July 1941 move into Southern Indochina.
Sino-Japanese War: The US opposed Japan's brutal, ongoing war in China and sought to hinder their war efforts.
The Axis Alliance: Japan's pact with Germany and Italy increased U.S. concerns about global stability, triggering economic, non-military pressure.
Resource Dependence: The U.S. provided roughly 80% of Japan's oil, making an oil embargo a devastating blow that halted their military machine.
The embargo, followed by similar restrictions from Britain &the Dutch East Indies, left Japan with a choice: withdraw from China & Indochina or seize oil fields in Dutch East Indies by force. Japan chose the latter, leading directly to attack on Pearl Harbor.
Q14: where was Dutch East Indies
The Dutch East Indies (modern-day Indonesia) was taken by force by the Empire of Japan between December 1941 and March 1942. Key, violent campaigns occurred across the archipelago, including Borneo, Celebes, Moluccas, Bali, Sumatra, Java. The formal surrender occurred on March 8, 1942, in Java, ending Dutch colonial rule. Key Locations of the Japanese Invasion (1941–1942):
Borneo: Japanese forces landed in Tarakan on January 11, 1942.
Celebes and Moluccas: Attacked simultaneously in January 1942.
Bali: Targeted in mid-February 1942 to secure airfields.
Sumatra & Java: final, main targets, with invasions occurring in Feb/Mar 1942.
Battle of the Java Sea: Japanese destroyed Allied fleet on February 27, 1942, sealing the fate of the colony.
The Japanese conquest was motivated by the desire for the region's rich oil resources. Following the surrender, the Dutch East Indies were under Japanese occupation until 1945, when Indonesian independence was declared.
Q15: Why did the US come to China's rescue in 1941?
The United States began providing significant, and eventually direct, aid to China in 1941 as part of a strategy to curb Japanese expansionism, protect American economic interests, and respond to public outcry over Japanese atrocities. This involvement escalated from economic sanctions into direct military support following the attack on Pearl Harbor. Key reasons for the U.S. "rescue" of China in 1941 included:
Containing Japanese Aggression: By 1941, it was clear Japan intended to dominate East Asia. The U.S. sought to prevent Japan from winning the Sino-Japanese War (which began in 1937) and to stop its expansion into Southeast Asia.
The Oil Embargo and Economic Sanctions: Following Japan's occupation of French Indochina in July 1941, U.S. froze Japanese assets & implemented total oil embargo. This forced Japan into high-risk decision, as it relied on U.S. for 80% of its oil.
"Open Door" Policy and Trade Interests: The U.S. had long maintained an "Open Door" policy, favoring free trade with China, which was threatened by Japanese territorial expansion.
Public Opinion & Atrocities: Reports & photos of Japanese atrocities, such as Rape of Nanking, caused American public opinion to shift heavily in favor of China.
Strategic Importance of Chinese Resistance: U.S. recognized Chinese resistance was tying down millions of Japanese troops, preventing them from being deployed elsewhere in the Pacific.
Lend-Lease Aid and the "Flying Tigers": In May 1941, the U.S. extended Lend-Lease Act assistance to China. Additionally, American Volunteer Group ("Flying Tigers"), a group of mercenaries officially approved by the US government, began operations to aid the Chinese Air Force.
Entry into the War: After Japan attacked Pearl Harbor in December 1941, the U.S. officially entered the war & became a full ally of China, formalizing its commitment to ensuring Japan did not conquer the nation.
While there was some sentiment to help, the primary driver for U.S. involvement was protecting its own strategic interests in the Pacific, which became impossible to maintain without active engagement once the war escalated.
Q16: what is the rape of nanking?
The Rape of Nanking, or Nanjing Massacre, was a six-week period of mass murder, sexual violence, and looting committed by the Imperial Japanese Army against Chinese civilians and prisoners of war in Nanjing, China, beginning on December 13, 1937, during the Second Sino-Japanese War. Estimates of deaths range from 40,000 to over 300,000. Key details regarding the atrocity include:
Timeframe: atrocities occurred from December 13, 1937, for roughly six weeks, following the city's fall.
Atrocities: Japanese soldiers engaged in widespread rape, torture, arson, and mass executions of unarmed civilians and disarmed soldiers.
Casualties: While Chinese government maintains an estimate of 300,000 victims, international scholars have debated the exact toll, with estimates often ranging between 50,000 & 300,000.
Impact: Events remain a significant point of tension in Sino-Japanese relations, particularly regarding acknowledgement & documentation of the war crimes.
Documentation: The event was heavily documented by international residents, including missionaries & businesspeople who established a safe zone.
The event is also famously detailed in the 1997 book, The Rape of Nanking: The Forgotten Holocaust of World War II, by Iris Chang.
Q17: Why did US favour trade with China over Japan in 1930-1940
US favored trade with China over Japan between 1930 & 1940 to maintain the "Open Door" policy, secure vast market potential, counter Japanese militaristic expansion. Japan’s aggression in Manchuria (1931) and invasion of China (1937) threatened US interests, prompting trade sanctions. Key Reasons for Favoring China over Japan:
Open Door Policy & Market Access: The U.S. sought to keep China open for trade, viewing it as a massive potential market for American goods, rather than allowing Japan to monopolize it as a colony.
Opposition to Japanese Expansion: Following Japan's 1931 invasion of Manchuria and 1937 invasion of China, the U.S. implemented policies (like the Stimson Doctrine) to oppose Japan's aggression, which violated international agreements.
Economic Sanctions on Japan: By 1940, the US moved from favoring China to actively restricting Japan, implementing embargos on critical war materials like scrap metal, oil, and aviation fuel due to Japan's expansion into French Indochina.
Protection of U.S. Interests: Japan’s military advancements threatened U.S. territories and territorial integrity in the Pacific, particularly the Philippines.
Pro-China Sentiment: There was a strong, often romanticized, sentiment in the US supporting China's struggle against Japanese aggression, influenced by policy makers like F.D. Roosevelt.
While Japan was a major trading partner early in the decade, its aggressive actions forced the U.S. to choose between supporting a friendly, weaker nation (China) and restricting an expansionist competitor (Japan).
