Sigh

Feels like a bad choice.

Does seem weird to keep propping up a country that's actively fighting a trade war with us, encouraging separatism in Alberta, and openly discussing an invasion.

We sold our gold in 2018 to buy US bonds. We are idiots.

Why are we buying debt of a country headed into a recession/depression and massive inflation?

Because we know they’ll pay it one way or another, their recession/inflation is irrelevant

But isn't this also leverage?

In what way, how could Canada practically threaten the US with this?

It gives us a "nuclear button" where we can threaten with massive sell-offs that could tank the value of US bonds. To counter it they would have to basically raise interest rates and/or print money. Sure it would hurt us too, but not before hurting them more. Now if you also place this in a context of coordination with other debt owners (Europeans, Chinese), we can really hurt them.

First question is, massive sell off to whom? Second, it's obviously going to have a have a huge impact on our own economy. It's not going to hurt them more because the US is a much bigger economy than us. Can you show me a historical instance of this sort of threat actually working in practice?

If this gave any actual leverage then China would be keeping their bonds instead of doing a fire sale right now. The only countries buying up US bonds are the ones that are under the US thumb right now.

First question is, massive sell off to whom?

Any bonds that are at their due date are required to be paid out by the US treasury.

Most holders of US bonds have a revolving collection of them, so some are coming due on a regular and continual basis.

Admittedly, that's not a mass sell-off, but it still puts pressure on the US if everyone starts doing it .

Because we know they’ll pay it one way or another

Unless Trump manages to succeed in completely collapsing their economy. (Whether intentionally or due to incompetence)

Sure, if everybody started dumping US assets in a coordinated fashion that would hurt the US, we both know is not going to happen though. So, in reality Canada is simply making itself more dependent on the US. There's no need to do mental gymnastics to pretend that this is some 4D chess.

You understand that the value of the bonds goes down and we lose money when US currency gets devalued right?

I don't pretend to know anything about international finance. I'm repeating what I've heard.

A trump never pays his debts.

He hasn't taken over the Federal reserve, YET. If the fed loses independence and trump takes over (which he clearly wants) all bets are off.

It's also worth thinking about what you hear as well. People say all kinds of things, and a lot of time it's just nonsense. As I pointed out, if holding US debt gave any actual leverage, then China would be doing that instead of selling it off now.

A trump never pays his debts.

What "a trump" does is not important, even the shittiest demagogues out there still rarely default on treasury and public debt like this. What's way more likely is that they'll fuck up the entire economy to pay off these debts, and use that as an excuse to cut the tiniest amount of public services and social welfare they accomplished in the last 20 years.

A default on public debt would impact Trump personally. On those matters you can bet that he works hard to cover his ass.

If USD is devalued over time we'll make bank in other ways, so not concerned about that. What's more likely is higher inflation would demand higher bond yields, which means bonds are cheaper and Canada should buy even more of them. It does mean that current bonds lose value but if we hold them to term doesn't matter much

Friendly reminder (June 2025 article): Nearly half of national public pension plan is invested in U.S. — and only 12% in Canada

There has been no official update or scrutiny on this close to trillion dollar investment almost a year later, which is hundreds of billions in the US. This is just one of the Canadian government's investments that is heavily invested into the US. Hard to say that Canada is doing any actions rather than just talking with a big mouth?

Friendly reminder (June 2025 article): Nearly half of national public pension plan is invested in U.S. — and only 12% in Canada

There has been no official update or scrutiny on this close to trillion dollar investment almost a year later, which is hundreds of billions in the US. This is just one of the Canadian government's investments that is heavily invested into the US. Hard to say that Canada is doing any actions rather than just talking with a big mouth?

That's not true. Inflation is VERY relevant. If money is losing its value then you want to have as much debt as you can because it's worth the most right now and will be worth less when you have to repay it.

It also means you don't want to loan money unless the interest rate is very high or you'll end up losing money.

Right, you'd think dumping US bonds and investing in Canada would be the obvious move here.

This logic is dangerously complacent and ignores the actual mechanics of how economies fail. You're assuming a smooth devaluation of the USD that conveniently boosts other assets, but that is not a guaranteed or even likely outcome at this point. An economic crash can lead to a rapid devaluation triggering a severe loss of confidence in US debt, not just higher yields on new bonds.

If inflation spirals then the Fed would be forced to hike interest rates aggressively to defend the currency, which would crush economic growth and likely trigger a recession. The idea that holding bonds to maturity makes losses irrelevant is a fundamental misunderstanding. Those losses represent destroyed capital and a massive opportunity cost. The government would be locking in negative real returns for decades while its debt servicing costs explode on new issuance. Canada buying more cheaper bonds in that scenario is like catching a falling knife. It's not exactly a clever investment strategy. We'd be doubling down on a failing asset as the underlying economy and fiscal position deteriorate. It's a recipe for a stagflationary crisis.

This could be the result of a smart, passive approach. I'd be hesitant to let anyone with strong ideological investment strategies run our pension.

That completely misses the destructive power of inflation and currency devaluation. The interest payments are nominally coming back to Canada, but their real value is what actually matters. If the US dollar is losing purchasing power faster than the bond's interest rate, then Canada is experiencing a negative real return. We are getting paid back in dollars that buy less which is the opposite of getting stronger. What we're seeing here is a classic transfer of wealth from the creditor to the debtor with Canada subsidizing US fiscal policy by accepting a steady erosion of its investment's true worth.

You're assuming he actually give a fuck about any of that. He's going to be in the office for three more years. He doesn't need to worry about reelections. He's going to spend that time making as much cash for his family and friends as he can, but any means he can. He absolutely doesn't care if he trashes the whole economy in the process.

in reality Canada is simply making itself more dependent on the US.

And doing so in a relatively carefully manner so as not to hurt ourselves unnecessarily.

Making ourselves more dependent on a hostile power is precisely what's hurting us unnecessarily. Incredible that people can't seem to understand this.

I understand that, but thrashing the economy is very different from thrashing the credit rating of the whole country. But I can see how perhaps I’m still in denial, looking back it is true that this regime has been worsen than my wildest imagination in all aspects

So what's your point here?

IIT you are both arguing it's bad Canada held onto these investments while saying Canada cannot actually dump them without hurting itself

No, I'm saying Canada should not have continued increasing investments, which is what we did, and we should have been dumping them instead. And the sooner we start doing that the less pain we will be in long term. Let me know if any of that is still unclear to you.

I mean just look at the debacle that it the war with Iran. There's a reason why no single US president was dumb enough to do that, but here we are now.

Your focus on the current bond overlooks the market's forward looking nature. Yields are stable because they reflect a consensus that the Fed will eventually cut rates to avoid a recession which is a precarious assumption. The moment inflation proves stickier than expected or the US debt trajectory worsens, we could see a violent repricing happening. It would lead to a bond vigilante reaction where yields spike suddenly and crater the value of existing holdings.

The whole idea that interest payments cushion import costs only works if the Canadian dollar doesn't weaken alongside or faster than the USD in a crisis, and that is not at all guaranteed. When a crisis hits, all assets correlated with the US including our bond portfolio would suffer together. Meanwhile, the only sector of the US economy that's doing well are the tech stocks, and that's just a handful of companies passing IOU notes around in a circle. The rest of the economy is showing deep imbalances with weak consumer savings, shrinking industrial output, and persistent inflation in services.

The US is funding massive deficits in a high interest rate environment, and that can't go on forever. The war on Iran could act as a catalyst for the whole house of cards to come crashing down because it's driving the price of energy through the roof. The resulting economic crash in the US could be far worse than 2008, and at that point we'd be left holding the bag.

Hmmm looks like Canada has increased that investment for the last 4-5 years. Without this year's report, it's hard to see if we still kept that 4-5 year old strategy going or not.

Keep in mind that, until the Orange Pedophile's second term (so early last year), Canada was only paying lip service to moving away from the USA

And yes, you are talking on both sides of your mouth... here you tell me this:

and we should have been dumping them instead

While responding to another person about the exact same "dump" strategy:

that's literally explained in the reply to the comment you screenshotted

yes, and you seemed to be arguing AGAINST that poster... hence my question

Also, letting bonds expire is not selling them so again, you are talking both ends here

US has been borrowing $50B a week for the last 5 months. You have to be an idiot to buy into that scheme.

https://news.y0.exchange/article/us-borrows-50b-weekly-for-5-months-cbo-reports-unsustainable-debt

We should have bought crypto!

The bitcoiner who will be Canada's next Prime Minister. LOL

they’ll pay it one way or another

oh really? What is Trump's track record on paying debts?

You seem to be utterly unable to actually engage with what's being said. Go read my reply to that comment. I'm not challenging that the bonds can be redeemed. Why don't you actually address what I said instead of accusing me of talking of both ends here?

I posted a screenshot of what you said... and now you want me to find another of your post that contradicts it... that is exactly what I am pointing out here.

If you don't want to be called out, maybe be a bit clearer?

Once again, I ask you to specifically explain what part what my argument you disagree with. I've already addressed the screenshot you posted. You completely ignored the rest of what I said. And I strongly suspect that you either don't understand what I wrote, or you're intentionally trolling here. Which is it?

Once again, I ask you to specifically explain what part what my argument you disagree with. I’ve already addressed the screenshot you posted.

You actually did not, you pointed me to someone ELSE who corrected you.. but whatever, it seemed very clear you just got defensive and started insulting people, not interested in your opinion anymore.

Have a nice day

I've given you detailed explanations, and you simply ignored them. I asked you to point out what you disagreed with specifically, and you started dancing around that. Sounds like the answer to my question is that you are just trolling here, and you're not interested in having a good faith discussion.

Bye.

You may be misunderstanding the data. This isn't government holdings of treasuries. It's public and private holdings, so it includes both the BoC holdings and the holdings of private investors. The government's holdings at the BoC stayed pretty much the same over the year. The increase basically all comes from private investors, and the government can't choose to sell their treasuries.

March 2022 he said it, which would be a 45k. So a 55% profit versus the bonds that lost value due to rising interest rates.

The US then used its strong dollar to levy tariffs against the globe.