What kind of signal did the meeting between senior officials of China and the United States reveal? The Biden administration is facing a "shutdown" crisis, while a large amount of gold is being shipped to China, and Japan has become the first "punching bag" when the United States suffers.
According to a report by Xinhua News Agency on the 18th, Liu He, the leader of the Chinese side of the China-US Comprehensive Economic Dialogue, and US Treasury Secretary Yellen held a half-day meeting in Zurich, Switzerland. As far as is known, the topics of the talks between the two sides are the global and bilateral macroeconomic and financial situations.
This point may make some friends in front of the screen feel strange or puzzled, with the current aggressive attitude of the United States towards China, how can the United States be so friendly and talk about cooperation with China? Not to mention that it is still on top of the most critical pillar industry in the United States, the financial industry. You know, the means of the United States to defend finance can be called the ultimate "cold-blooded and ruthless", even Japan, South Korea, these allies of the United States, have launched financial wars with the United States in the past, in addition, the United States is also taking advantage of the Russian-Ukrainian conflict to launch an impact on the European financial market.
Therefore, we have reason to believe that the United States must have encountered a great crisis, so it has to choose to negotiate cooperation with China on top of the pillar industry.
According to Yellen's previous warning to the US Congress, on the second day of the Sino-US meeting, that is, on the 19th, the size of the US debt will reach the ceiling, and the US government will face a shutdown crisis, but it turns out that Yellen's prediction is wrong, according to the real-time data of the "US Treasury Clock Clock" website, on the morning of the 18th local time, the US government debt has exceeded the legal limit of $31.4 trillion.
So did Congress heed Yellen's advice? According to previous relevant news, the Republican Party who controls the House of Representatives does not seem to be enthusiastic, and House Speaker McCarthy said that he will talk to US President Biden about spending cuts and other issues. However, White House spokesman Jean-Pierre stressed that the White House will not start any negotiations on the matter, that is, it will not accept the proposed spending cuts. Republicans in the House of Representatives countered, stressing that they would not easily push for new debt-limit legislation.
As a result, a key issue related to the survival of the US government has become a tool of bipartisan contention. In fact, both the Democrats' advocacy of raising the debt limit and the Republican Party's proposed cuts in government spending can suspend the US government's fiscal problems. But there are differences, the Republican Party advocates cutting government spending because Biden and his team are Democrats, and cutting government spending can effectively limit the implementation of Democratic policies, which is beneficial to the Republican Party, while raising the debt limit does not need to worry about spending restrictions at least in the short term. Therefore, around this serious financial problem dispute, the US government has once again committed an old mistake and has been reduced to a "political football game" between the two parties.
The US government spends more than $6 trillion a fiscal year, which is higher than the GDP of Japan, the world's third largest economy, so although the US economy is strong, the US government has been plagued by fiscal deficits, only Clinton achieved a deficit reduction during the US administration, and even achieved a surplus for a while. But the Clinton period largely relied on the dividends of the end of the Cold War, but with such achievements, Clinton is already the best president of the US economy after Reagan left office.
In addition, the end of the Cold War does not mean that the United States can hegemony, the collapse of the Soviet Union to reshape the global situation, the economic transformation of the Soviet Union and Eastern Europe, new regional conflicts, as well as the rise of China, and the stimulation of the Russian-Ukrainian conflict, so that the United States, which intends to dominate the world, once again took the initiative to burden itself with heavy economic baggage, the US fiscal year was from October of the previous year to September of this year, so last October the United States has introduced the government revenue and expenditure for fiscal year 2022, The US fiscal deficit reached $1.375 trillion, according to the forecast data, the US GDP in 2022 is about $25 trillion, the deficit rate is about 5.5%, which is already the Cold War level data, but this is actually a relatively good performance, Biden's first year in office, the US government deficit in 2021 is $2.776 trillion, more than twice the last year, accounting for 12.3% of the GDP of that year. The reason why the US government deficit rate can be reduced so much when the Russian-Ukrainian conflict consumes a lot of US government resources, in the final analysis, is because the Russian-Ukrainian conflict has substantially benefited the United States. In addition, the Fed's six rounds of interest rate hikes have also brought benefits to the dollar, but they still cannot alleviate the difficulties of the United States.
At the same time, the Fed's interest rate hike has also had a negative impact on other countries' currencies. This is why so many countries are selling their US bonds in the second half of last year, the purpose is to defend their currencies, such as China, the second largest holder of US bonds, not only that, according to the report released by the World Gold Council on the 17th, at the end of last year, two months, China twice announced the increase of gold reserves, buying 62 tons, you know, the last time China announced to increase gold reserves, or in 2019.
And such a dump of US bonds, and a large amount of gold shipped to China, for the dollar itself means a "counterattack", just under the Biden administration facing the crisis of "shutdown", the United States must be very eager to stop China. So it's not hard to understand why Yellen is meeting with the Chinese side. If China stops selling US debt, can it solve the US crisis? I'm afraid not, because now it is not only China that sells U.S. bonds, the largest sell-off is not China, but Japan, because of the Fed's continuous interest rate hikes, Japan's economy is now in jeopardy, so Japan began last year, has been selling U.S. bonds for several months, as of last November, Japan sold U.S. bonds more than $330 billion, much higher than China, and it has not yet shown the intention to completely stop selling.
So in fact, if the United States wants to continue to defend its financial system, it must first not only make China stop selling US debt, but also seek China's help to get out of the quagmire, and secondly, stop Japan. In this kind of matter, the United States will not be as polite to Japan as it is to China, and in fact, Yellen has warned Japan before, saying that the United States is paying attention to Japan's large-scale sale of US debt, so if the United States really takes action against Japan, Japan will become a punching bag for the United States, and will also become the first unlucky object of the US "financial defense war".