They buy for merchantilist reasons. They are, in effect, financing our purchase of their exports and obtaining political leverage. Current leverage, as with the oil exporters. Future leverage, as with China. As we all know, in general creditors rule debtors. Eventually.

So we can restate Max’s question — which is one of the major ones in today’s geopolitical world. When will private investors bail (aka “currency flight”)? Or, when will the political leadership in Asian and oil exporters begin “de-pegging” their currencies from the US Dollar — which will reduce their buying of US dollar assets? Nobody knows.

Currency flight by private (as opposed to State) investors is a “herd” event, and hence can start quickly and accellerate rapidly. Central banks are the opposite hind of animal. They are reactive, incrementalist, slow to decide, and slower to act. The common doomster analysis of some official in China deciding to hit the “red button” on his desk that sells all their US bonds — destroying the world financial system — is unlikely.

How much lower ? And how much longer ? Is the trillion dollar question,,? How long before the Fed runs out of capacity in dropping rates as a stimulus to the laging economy, how long before foreign investors look at the rate of return, and wiegh the risk, then deciede to go elsewhere ?