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preface
Sino-US friction is intensifying. The root of everything is the United States. They do everything they can to contain China and hope that China will help them when they encounter difficulties. The hegemonic ideology of the United States is vividly embodied. Recently, the United States has played tricks again. Some foreign media reported that the United States will sell a large amount of Chinese government bonds to its allies to put pressure on the Chinese economy. Where does the United States do this?
Increase U.S. debt
Recently, the US debt crisis has attracted global attention. From the beginning of World War I, the United States began to borrow money from the world and invest in the world battlefield. Since then, it has been out of control, the road of "money lending" is rampant, and the United States has accumulated more and more national debt. In recent years, the global economy has continued to be sluggish due to various factors such as the outbreak of the epidemic, the war crisis, and trade barriers. The United States has an average economic momentum, but as the world's largest economy, they can use financial means to collect leeks from the world. However, the US debt crisis remains inevitable.
In June, the United States resolved its debt ceiling and continued to issue large amounts of government debt. Within half a month, the issuance of U.S. bonds soared, and the ceiling of U.S. bonds rose to 32 trillion. The United States has not stopped and watched as the US debt reaches $33 trillion.
Under normal circumstances, the United States issues about $2 trillion in debt each year, which means it borrows that much money from the world each year to maintain domestic spending.
At the current level of U.S. debt, anyone can see that there is a problem. U.S. debt snowballs bigger and bigger. If it collapses, it will be an avalanche that will bring a serious crisis to the world economy. The United States is the largest economy in the world. If there is a crisis in the process of global economic globalization, many countries in the world will not be able to escape.
For the current US debt crisis, the United States needs a "successor" to take over the huge US debt.
The United States is of course "pinned on high hopes" by the world's second largest economic player - China.
China has a large economy and large dollar foreign exchange reserves. However, the mainland certainly does not choose to be "exploited". As U.S. Treasuries are sold around the world, so are U.S. Treasuries. The United States is trying to talk to China and force China to buy U.S. Treasuries. China's attitude: There is no room for negotiation.
The United States passed the Fiscal Responsibility Act of 2023, extending the US debt ceiling until 2025. This shows that the US Treasury has become a wild horse out of control. Over the past two years, the U.S. has issued as many bonds as it wants.
So why does the United States continue to issue Treasury bonds in the face of the US debt crisis?
This move by the United States can be seen as a bad move, and indeed it is powerless. They are already "looking for the end". The data shows that the fiscal expenditure of the United States is much greater than the fiscal revenue. The budget deficit in 2023 increased 157% from the same period last year to $942.7 billion. How to say "spend more than you earn", how to live without a loan?
U.S. debt is essentially a Ponzi scheme. As the saying goes, "empty gloves white wolf", "tear down the east wall to make up for the western wall". The United States also understands that sooner or later this situation will not work, so they are already trying to find ways to reduce fiscal spending as much as possible. However, the hole in the United States is like a sieve, and all kinds of financial expenditures cannot be stopped, such as social, military, etc., so this debt problem cannot be solved for a while, and can only be watched. Getting bigger and bigger.
In the United States, economic problems are widespread, the financial sector is stormy, and inflation remains high across the country. The first problem to solve. Under these circumstances, the United States cannot afford to bear the huge debt burden, so it turns its attention to China, hoping that the mainland will help them get out of their current predicament and take over the huge amount of US debt.
This is one of the main goals of US Treasury Secretary Janet Yellen's visit to China. It's just that China has no intention of taking on U.S. debt at all, and the answer is clear. Yellen was unsuccessful.
Countries that sell "hot potatoes".
In July this year, the United States released data on the stock of US debt for May. Unsurprisingly, China continues to reduce its U.S. debt. However, the data showed that in March, China's propensity to reduce US debt fluctuated, turning from a decrease to an increase. The change has left many pessimistic that China has "compromised" and wants to take over U.S. debt.
Of course not. In the long run, China's trend toward reducing its U.S. debt stock has not changed. "De-dollarization" has become a general trend. Through the hegemony of the dollar, the United States imposed economic sanctions on Russia, which shocked the whole world. The international monetary system with the United States at its core is like the sword of Damocles hanging over the heads of countries, and all countries are at risk.
Not to mention the current trend, not to mention the attitude of the United States to ask for help, China will not agree to bear the debt of the United States.
Yellen wants China to buy U.S. bonds and the two sides to work together to address global challenges. But when it comes to the trade war, he claimed that "the United States is thinking about national security." After U.S. Secretary of State Antony Blinken left office, he joined allies to impose sanctions on China in the high-tech industry. The United States added China to the "list of currency manipulators" and declared that China was not eligible for World Bank loans.
The United States pursues its "double standards" to the end, striving for peace on the one hand and suppressing peace on the other. But China is not a "soft persimmon". While reducing the US debt, gold reserves were increased. In short, its attitude is the same: there can be no "takeover".
The world is reducing the U.S. debt. Who can afford a huge amount of US debt?
Japan, China and the United Kingdom are the three countries with the most U.S. debt in the world. Japan and Britain, one is the "little sister" of the United States, and the other is an ally of the United States. In the U.S. debt crisis, many people decided to "save their lives" and reduce the U.S. debt.
In May, Japan cut US debt by $30.4 billion and Britain by $14.1 billion. The current US debt is like a fireball that will "burn itself" if not sold.
In fact, Japan is not just beginning to sell U.S. Treasuries. In 2022, Japan will sell $200 billion in U.S. debt, which is no less than other countries.
Russia liquidated U.S. debt, but their own holdings of U.S. debt peaked at only $180 billion, which is not among the countries that hold U.S. debt, so although the selling volume is large, the selling volume is average.
At present, China and Japan are the countries that have significantly reduced their debt, but the largest seller of US debt is unexpectedly the United States itself - the Federal Reserve.
The Federal Reserve is the private central bank of the United States and is responsible for performing the functions of the central bank of the United States. It plays an important mediation role in the US economy, and any move it makes will cause shocks in the world's capital markets. In March 2022, the Federal Reserve launched the current round of interest rate hikes, transferring global funds to the United States and collecting leeks from the world. This will have a significant impact on the global economy, and the world is watching this issue. South Korea's real estate industry is in turmoil, and the Fed's interest rate hike is one of the important reasons.
In June, the Fed sold $58 billion in U.S. Treasuries, more than China and Japan combined in May. Why is the Fed reducing US Treasuries?
In 2020, the United States entered a period of quantitative easing, and the Federal Reserve increased US debt to stimulate economic growth; In 2022, the Fed will raise interest rates, begin quantitative easing, and reduce U.S. debt. Generally, the purpose of the Fed is to regulate the U.S. economy.
It is normal for the Fed not to take over the US debt. The Fed continued to raise interest rates, eventually reducing domestic inflation. If the US debt is undertaken, the inflation crisis will be even worse.
The reasons why countries reduce US debt are also simple: first, the Fed raises interest rates, causing the national currency to depreciate. If he does not sell, he will become a leek at the mercy of the United States, and eventually the United States will expel him. Second, in order to reduce losses, after the US interest rate hike, the US bond yield will rise, resulting in a relative decline in the yield of US bonds issued in the past. Finally, the current U.S. debt resembles a volcano about to erupt. In order to avoid risks, many countries chose to sell US debt.
A variety of factors drove down the U.S. debt
Of course, the decline in mainland U.S. debt is not just related to the deterioration of the US economy. U.S. debt risks are intensifying. There are deeper considerations.
The first is to stabilize the RMB exchange rate. The basic form of China's debt reduction has not changed, but in the cycle of exchange rate fluctuations, we can see that if the renminbi exchange rate rises, China will increase the debt stock of the United States, or reduce the speed of selling in the United States. Debt; For now, China will accelerate the relief of US debt.
China regulates the supply and demand relationship between the dollar and the renminbi through the increase or decrease of US dollar foreign exchange reserves, thereby affecting the RMB exchange rate and keeping it stable. Second, structural changes in the mainland's foreign economic relations require changes in the structure of foreign currency assets. The foreign currency assets held by the central bank should roughly correspond to the mainland's foreign economic structure, as well as the structure of foreign debt, foreign investment, and imports of goods and services.
In recent years, affected by the Sino-US trade war, US investment in China has declined and turned to Europe. China is also constantly opening up new markets and changing the regional structure of foreign trade. As a result, China has reduced its U.S. debt.
Finally, China also considers the safety of foreign currency assets. Of course, this consideration is not the security of U.S. debt itself, but the security of assets brought about by geopolitical conflicts. As everyone knows, the current conflict in the Taiwan Strait is constantly intensifying, and armed conflict may occur at any time, triggering a crisis in the Taiwan Strait. The US interference in the Taiwan Strait issue is even more obvious. It is difficult to guarantee whether the United States will freeze US dollar foreign exchange reserves to sanction China when the Taiwan Strait crisis does occur.
A lesson from Russia to China. If the United States uses the same tactics against China, China's holdings of U.S. debt will face greater political risks.
In the context of tensions between China and the United States, the dollar is one of the weapons at the disposal of the United States. If China holds too much U.S. debt, it is likely to create financial risks, and if frozen, it will cause huge economic losses.
At present, US sanctions against Russia have affected the dollar system, and the United States has defaulted on its debt. Japan is the exploited party. And if the United States defaults on its debt to the mainland, a large amount of American debt held by China will become junk paper. Of course, the United States should not personally expose this Ponzi scheme, and China will not stand idly by.
As mentioned at the beginning, the United States is asking its allies to sell Chinese Treasuries, largely to force China to buy U.S. Treasuries. In this way, the United States wants to put pressure on China's economy to force China to make compromises.
But the United States is on the wrong path. Unlike the United States, China did not have a major debt crisis. China's sovereign debt issuance has always been planned. Even if the United States sells China's sovereign debt with allies, the impact on China's economy will be limited.
The United States uses U.S. debt to run its domestic economy, but China does not. If the two sides consume each other in this way, the losses of the United States will definitely be even greater. The collapse of the US debt is extraordinary. Yellen also pressed China that a collapse in U.S. debt would trigger a global economic crisis.
So, the US debt crisis was not caused by China, so why should China be responsible?
conclusion
If the United States wants China to act, it must show some sincerity, such as stopping meddling in the Taiwan Strait issue, stopping disrupting the situation in the South China Sea, and ending sanctions against Chinese high technology. In this way, China can still think about it. China has always pursued peace and development and does not want to oppose the United States, but the United States has provoked incidents every time. Wait until the US side really shows its sincerity of cooperation before talking with China. reference
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