I don't think you understand.

I am not saying there are no other good options, there are literally no options.

You understand that having $1trn isn't like your TD Ameritrade account. Thought experiment: they put the money into Japanese banks. First, the JPY starts trading at 50 against the USD. Japanese industry is over. Second, Japanese banks literally cannot pay the interest on these deposits because they can't find enough people to lend to.

There aren't enough European govt bonds. They aren't enough corporate bonds (and they aren't liquid enough). Literally, there is no asset class in the world large enough for them. The only other asset class that was large enough was MBS...which some people feel skittish about since 2008 (but which Japan and China do own large amounts of...again, because there is nothing else).

Just as an example: in the 1970s the oil crisis caused a huge boom in earnings for Middle Eastern nations. Most govts there weren't financially sophisticated, they had no idea what to do with all this money so they started depositing it in US banks. These banks had no idea what to do with it either. They couldn't find enough borrowers (rates were pretty high then) so they started lending to govts in emerging markets. This trigged a decade-and-a-half long financial crisis from 1980 when these borrowers started defaulting (in 1980, Citibank was effectively bankrupt because of these loans). Again, this isn't like your Ameritrade account...when you have a lot of money, you start changing how financial markets fundamentally work. So you have to be very very careful.

Hopefully that makes it clear.

I'm aware of the impracticability of everyone divesting out of USTs right now. Your points are entirely valid and are the reason the system is still being held together.

My point is there exists some set of circumstances in which that assumption changes.

As an example, at some fed balance sheet level + inflation level, your options are either: 1) Do nothing and end up with nothing 2) Do something and end up with more than nothing

I've lost count of total fed pledges at this point, something on the order of $8T? Say things drag on and that goes to $12T+? And say inflation takes off, is the fed really going to fight inflation? It can't.

You start seeing high double digit inflation while the fed is printing money and keeping rates at zero, and at some point you have to move your USTs into something. If you don't, you'll be left with nothing.

I realize this is incredibly hard to imagine given the current system, but things that can't go on forever wont'.

The level is when we switch to a food, guns, and ammo economy. USTs are so deeply interwoven into the very fabric of the world economic systems the only way to get out of it is for the whole system to fall apart.

When you say it like that, it makes U.S. Treasuries sound like the S3 of the financial world. Simple, reliable, and comparatively inexhaustible. malloc() for the financial web.

Also very opaque to the average person.

They're in a good position as a net creditor nation. While they have a large national debt and have been undergoing QE, they have a steady income stream from treasury bills.

The income stream is unlikely to be steady; the real value of the fixed stream of dollars is (probably) going to drop.

It isn't really conceivable at this point that the US reduces their debt:GDP load without a currency crisis. Their period of service as the reserve currency is probably also drawing to a close; based on the poor fundamentals that the article mentions.