Oil prices jump after Iran says critical Strait of Hormuz to remain shut
A Danish pension fund, Akademiker Pension, which manages roughly $25 billion in retirement assets for teachers, announced that it plans to sell all of its U.S. Treasury holdings by the end of January. Their action is a symbolic rebuke against rising tensions over Greenland’s sovereignty. The fund claims:
The decision is rooted in the poor U.S. government finances, which make us think that we need to make an effort to find an alternative way of conducting our liquidity and risk management.
While their action provides an interesting twist on how Europe may counter Trump’s Greenland goals, Akademiker holds only approximately $100 million in US Treasury bonds, which, even if liquidated at once, would not move the US bond market given its enormous size.
The concern is that Akademiker’s decision might gain traction with other European countries. However, that risk is extremely low, as Europe can’t easily sell US Treasuries in a coordinated way because most holdings are in private hands (pension funds, banks, individuals) rather than government-controlled, which requires complex coordination across many nations. Furthermore, a sell-off would backfire by devaluing their own assets and disrupting global markets they rely on, making it a financial “nuclear option” with mutual destruction.
At the World Economic Forum in Davos, Treasury Secretary Scott Bessent publicly downplayed the idea that European governments or institutions would retaliate against U.S. policy by selling off U.S. debt. Further, he said that such actions don’t make sense given the central role that the US Treasury debt plays in global trade and finance. Regarding the market reaction, Bessent advised investors:
Why are we jumping there? Why are you taking it to the worst case?… Calm down the hysteria. Take a deep breath.”
Economy
Dimon Warns Trump About Credit Card Caps
President Trump recently proposed capping credit card interest rates at 10%. This is part of his broader push to ease the cost of living that is taking a financial toll on consumers and harming sentiment. The proposal would potentially save consumers tens of billions of dollars. While the cap may seem like a great idea, there are significant cons to consider. For example:
- Reduced credit availability: Banks and financial-services companies warn that a hard credit card cap would make it uneconomical to lend to many consumers, especially those with lower credit scores and historically high default rates. Banks’ response would be to eliminate or reduce credit lines for a large number of credit card users. Jamie Dimon, CEO of JPMorgan, claims it could deprive as many as 80% of Americans of essential credit access and broadly constrain lending. The Tweet of the Day says Dimon’s estimate could be low.
- Tighter credit markets and economic drag: Reduced credit availability would harm small businesses that rely on credit cards to purchase inventory. Furthermore, they would lose customers without credit cards, further impeding their businesses. Lastly, consider the impact on internet shopping, which requires customers to have credit cards.
- Shift to riskier alternatives and savings: The action could push consumers toward higher-cost options such as buy now – pay later and payday loans, which carry much higher interest rates. Doing so would worsen debt burdens for the most vulnerable consumers. Moreover, the nation’s already low savings rate, shown below, would likely decline further as consumers drain their savings to replace credit.
Our business, you know, we would survive it by the way. In the worst case, you’d have to have a drastic reduction of the credit card business – Jamie Dimon.
Tweet of the Day
