Part 6/8:
Integrating further complexity into the discussion is the proposed legislation known as Section 899, which aims to tax foreign corporations and individuals that own U.S. assets generating income. This regulation could have far-reaching effects not just on private credit investment, but also on U.S. Treasury securities, which represent a substantial portion of foreign investment.
If higher taxes deter foreign investors, we might see them liquidating their U.S. Treasury holdings, which would likely lead to an increase in yields and further strain the financial system. Countries like Japan and China, which hold massive amounts of U.S. debt, may respond to changes in tax policy by reassessing their investment strategies.