By Peter Schiff

At a commercial real estate conference earlier this week, Alan Greenspan downplayed concerns that the Chinese might sell their significant holdings of U.S. Treasuries. The former Fed chairman based his opinion not on the inherent investment merits of Treasuries, but rather on their lack of them. His confidence stems simply from his belief that the Chinese have no one to whom they can sell. Furthermore, Greenspan sees this as a problem for the Chinese and not the U.S. 
 
Although the performance of U.S. Treasuries has long been regarded as poor vis-à-vis other classes of sovereign debt, its overriding virtue has always been its supposed unrivalled “liquidity.” As the most heavily traded asset in the world, it is argued that massive investors like the Chinese have few other markets in which they can operate.  However, if there are no significant buyers to whom the Chinese can sell, then there is no real liquidity at all. If there is no performance or liquidity, why would they continue buying?
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