On the 2nd, the U.S. Treasury Department released a report showing that the total U.S. national debt hit a new high again, reaching $34 trillion for the first time.
What is the concept of $34 trillion? It is nearly two times higher than the GDP of the United States in a year. In January 2020, the U.S. Congressional Budget Office had budgeted that the total federal debt exceeded $34 trillion for fiscal year 2029, but now it has been reached at the beginning of 2024, and what was originally planned to be achieved in 9 years was done in only 3 years.
We also recall here that the U.S. government debt only reached $31.9 trillion at the beginning of last year, because 31.9 trillion was the U.S. government's debt ceiling at that time, and the Biden administration and Congress had a long dispute over raising the debt ceiling, and the result was not negotiated until June, so we remember it very well. And now it has reached $34 trillion, that is, the Biden administration can increase its debt by at least $2.1 trillion a year, what a terrible thing!
In this regard, a professor of economics at Loyola Marymount University bluntly said: So far, Washington has been spending money, as if we have unlimited resources. But the bottom line is that there is no such thing as a free lunch, and I think the outlook is pretty grim. The senior vice president of the Federal Budget Committee for Responsibility, a U.S. think tank, also said: "Reaching $34 trillion reminds us once again of how unsustainable our fiscal situation is. We are adding $2 trillion in debt every year while unemployment is near historic lows.
Last month, U.S. Treasury Secretary Janet Yellen has stated that she will visit China this year, and for this reason, she did not hesitate to criticize Trump, who is strongly advocating for the containment of China. So I believe that many friends here suspect that Yellen's visit to China is most likely to hope that China will increase its holdings of U.S. bonds. So is that really the case?
In fact, Yellen's visit to China this time is not low to ask China to increase its holdings of US bonds, but it would be too much to underestimate the United States when she only talked about US bonds. You must know that since the end of the 19th century, the United States has relied on the second industrial revolution to become the world's largest economic power, and after World War I, the industry is far ahead. Although there have been times when the Soviet Union, Japan, and other countries have been economically close to the United States, it can be said that before China's rise, no single country has the real economic ability to surpass the United States.
Here, interested friends can take a look at how many subordinate departments there are under the jurisdiction of the US Treasury Department, how big the authority is, and how wide the scope of management is.
It is true that for the U.S. government, U.S. debt is very important at the moment, and China, as an economy close to the United States, holds U.S. debt at the moment, which is not equal to the U.S. side, after all, Japan, whose economy is less than one-third of China's, holds about $1 trillion in U.S. debt. According to the consistent brains of the United States, if China does not hold three or four trillion dollars, it seems that the United States will not be happy. Not to mention, relevant data show that since December last year, as of October last year, China's U.S. bond holdings have decreased by $97.5 billion, which the United States must not be happy about.
But things won't be that simple. In fact, the issue of U.S. bonds, held by foreign financial institutions, has always been inferior to that of the United States. Evidence shows that in the 10 years to 2023, foreign holdings of U.S. debt have fallen from 34% to 24% of total U.S. debt, and it continues to decline.
The majority of the real holdings of US bonds come from within the United States, especially the US Federal Reserve and the US Government, which hold as much as 40 percent of US bonds! Some friends may be confused here, the US Government holds US bonds, doesn't that mean that it owes itself money? This is indeed the case, because whenever the US economy is in crisis, the Fed resorts to quantitative easing, and in order to prevent a violent market reaction, it increases its control over the public market by buying Treasuries and mortgage-backed bonds, which are generally bought through the secondary market. This is why Yellen has been dissatisfied with the Fed's continuous interest rate hikes to combat inflation, because this will make the Fed's holdings of U.S. bonds larger and larger, and the risk of U.S. bonds being shorted is also increasing.
In addition, some U.S. government departments in charge of trust funds do not advocate holding cash, but holding bonds to generate additional income. So there is the picture before our eyes. There are also some large investment institutions in the United States that also hold huge amounts of U.S. bonds, such as Vanguard Leader Investment, Fidelity Asset Management and BlackRock Funds, which together hold more U.S. bonds than Japan!
Therefore, although we can often see some netizens advocating the full sale of U.S. bonds and the collapse of the dollar, in fact, such a measure may make the U.S. bond market fluctuate, but it is not enough to say that the dollar will collapse. Think about it, how can the U.S. government allow other countries to have the weapons to overthrow their hegemony so easily?
Therefore, Yellen's visit to China, the US debt should be discussed, but it is definitely not the theme. What is her theme? Financial cooperation. Yellen's idea is that instead of relying on China to increase its holdings of U.S. bonds to ease the pressure on the United States, it is better to use China's strength to root out the current financial risks and market crises in the United States. It is also her real intention to completely pull the United States out of the quagmire of economic recession, so that she can continue to live in the United States for a long time.