The News
Countries in Trump’s crosshairs have found few ways to fight back against a president who appears dug in on owning Greenland, patrolling the Western Hemisphere, and bullying Europe. One thing they do have, Bridgewater’s Ray Dalio told Semafor’s Liz Hoffman: A lot of America’s bonds.
The $9 trillion of US debt owned by foreign countries is an “enormous vulnerability,” Dalio said at Semafor Haus in Davos. His warning came as global investors finally appeared spooked by Trump’s actions, and stocks and bonds tumbled. An executive at Denmark’s largest pension plan said it was selling off its $100 million in US Treasury bonds — a move he insisted wasn’t political — after Trump doubled down on his Greenland demands.
“You could easily imagine it could simply become unpopular to buy or hold US debt,” Dalio said. (The hedge-fund founder promptly urged the audience to buy gold.)
This isn’t the first time the US’ reliance on global bondholders has become a weakness: In 2007, Russia suggested to Chinese officials that they simultaneously dump their holdings of Fannie Mae bonds, then-Treasury Secretary Hank Paulson wrote in his memoir.
A PIMCO executive told the Financial Times that the bond giant was pivoting away from US assets because of Trump’s “unpredictable” policies, and General Atlantic’s co-president told Bloomberg TV that “for the first time in our 45-year history, we have more assets outside the US than inside.”
Room for Disagreement
Michael Froman, head of the Council on Foreign Relations and a former US Treasury and trade official, told Semafor that the US’ growing debt load is “the most under-discussed risk that we face” but that he’s “less apocalyptic” about it being wielded by foreign countries as a cudgel. “You’ve got to put [your money] somewhere,” and there are few alternatives that have the depth, liquidity, and (relative) stability of the US dollar.