The United States has imposed high-profile sanctions, but China has made a low-key move. In the marginal interests of the United States, China is submissive, but in the core interests of the United States, China is striking hard. Gold, as a reference to the US dollar, continued to grow and was even snapped up. However, the U.S. bonds, which are the core assets of the United States, have been sold off sharply by China, and China has sold U.S. bonds to increase its holdings of gold, is it becoming the mainstream of the world?
The unsalable US bonds and the soaring rise in gold are impacting US financial hegemony, is Yellen's visit to China for US hegemony? Has the final financial showdown between China and the United States begun?
Reducing holdings of U.S. bonds and increasing holdings of gold
The dollar is a welfare for Americans, but it is a global nightmare. However, as the world's safest asset, U.S. bonds have gradually become a sword of Dalikos hanging over the head of the United States, and China is reshaping the new pattern of the world by reducing its holdings of U.S. bonds and increasing its holdings of gold.
Recently, the central bank released gold reserve data, data show that the mainland's gold reserves have increased to 72.74 million ounces at the end of March, and this is our 17th consecutive increase, it can be said that this data is very exaggerated.
Moreover, in addition to the increase in holdings by the central bank of the mainland, the gold consumed in the mainland will reach about 1,089 tons in 2023, and it will increase by about 8% compared with 2022.
If we add the 224 tonnes of gold that the central bank increased last year, then our gold consumption has reached about 1,300 tonnes last year. It can be said that this data is very exaggerated.
And we all know that people hoard gold in troubled times, and gold is a safe-haven asset. And this is very unacceptable for the United States, because if there are more people buying gold, there will definitely be fewer people buying U.S. bonds.
And although after the collapse of the Bretton Woods system, the dollar is no longer pegged to gold, we must know that the dollar and gold are still mutually influential, and even in the past for a long time, there will always be a situation where the dollar rises and gold falls, and the dollar falls and gold rises.
And now we see that the United States is raising interest rates vigorously to create a scarcity of dollars, but there have been record highs for gold, and this is all about one point, that is, the dollar is not fragrant, and the US bonds are even less fragrant.
While China has increased gold for 17 consecutive years, according to relevant information from the Federal Reserve, our holdings of U.S. bonds have fallen sharply.
Compared with the trillion U.S. bonds at the peak, the scale of U.S. bonds we hold has now decreased to about $797.7 billion, and has dropped to less than $800 billion again.
Unlike holding U.S. bonds, our foreign exchange reserves have grown. At the end of March, the mainland's foreign exchange reserves increased to about $3.2457 trillion, an increase of about $19.8 billion compared with February.
And it can be seen that our foreign exchange is increasing, our gold holdings are increasing, and only our holdings of U.S. bonds are decreasing. In the past, we invested more of our foreign exchange reserves in U.S. Treasury assets. Now we're more willing to invest in real assets.
And this is very intolerable for the United States. After all, you earn dollars, but you don't buy U.S. bonds. This is equivalent to the United States only producing dollars, but not enjoying the benefits of dollars. What's more, the current United States is very short of money.
On the one hand, China earns dollars for gold, and on the other hand, the United States auctions US bonds for dollars globally.
Now the United States is still in the interest rate hike cycle, hoping to harvest through the dollar tide, and at this time we have all seen that the United States has not only raised the debts of other countries so far, but is about to burst its own mines, and at this time the United States hopes that other countries will lend money to the United States to continue its life.
Therefore, China's current reduction of its holdings of U.S. bonds to invest in gold is the most intolerable for the United States. And Yellen's visit may be to change all that.
The final showdown between China and the United States?
The value of the dollar is not what the dollar can buy, but what is spent can continue to return to the hands of the United States, and this is the circulation of the dollar, and it is the basis of the dollar feeding system, and now all this is being broken.
We are now seeing that the United States is raising interest rates urgently, and at the same time, it is arching the fire around the world, the purpose of which is to drive the global dollar back to the United States to buy American Treasury bonds and American financial assets, so that Wall Street's capital can withdraw from the American virtual assets, but the financial assets of the United States will not collapse.
And this will lead to another scenario, that is, the price of US assets is still high, such as the stock market and US bonds, while the assets of other countries collapse because of the return of the dollar, such as Sri Lanka and Egypt, and finally the exchange rate collapses, and finally Wall Street capital takes advantage of the void to complete the asset harvest.
It can be said that all this is what the United States wants to see. But now the United States is being siphoned off by China. Because the dollars we hold no longer flow back to the United States to protect American assets, but more into developing countries, such as our currency swaps, and dollar debt swaps.
At the same time, there is also the purchase of gold and so on, which we have seen, and the end result is that the US interest rate hike has not only blown up the debt of other countries, but at the same time, there is not much dollar back to support US assets, which breaks the US harvest plan and puts a heavy burden on the US itself.
After all, the United States is now burdened with a debt of 34 trillion US dollars, and every time the interest rate is raised, the United States needs to repay an extra cent of debt, and now the United States needs to repay the interest in trillions, according to calculations, the interest of the United States this year will reach about 1.6 trillion US dollars, while the US itself has only about 4 trillion US dollars.
Therefore, the essence of this harvest in the United States is to quench its thirst, but our bottom of the pot has made it even more difficult for the United States to harvest. During Yellen's visit to China, although she kept talking about trade, she was actually thinking about U.S. debt.
Moreover, although the Federal Reserve has always said that it is not in a hurry to cut interest rates, in fact it is just that the Federal Reserve is holding on to it; after all, it lost 800 billion yuan last year, and how much will it be this year? Moreover, the United States has not much surplus grain in its hands, and the United States no longer has much room for choice.
As far as we are concerned, widening the moat, building high walls and accumulating grain, and looking for opportunities in the crisis created by the United States are the most important things we should do at the moment, after all, the United States will not last long.
Information sources:
China Industry Network: The People's Bank of China has increased its holdings of gold for 17 consecutive months
The Paper: In January, China reduced its holdings of U.S. bonds by US$18.6 billion to end the "two consecutive increases", and Japan increased its holdings by US$14.9 billion