Is the situation of the United States now very tricky? Its national debt is already tens of trillions of dollars, its fiscal deficit is getting bigger and bigger, and there are many cities that owe a large amount of debt, like a tumor growing in their bodies, which is weakening the United States little by little.
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At this time, we have seen that China has sold tens of billions of dollars of US Treasury bonds, will the Biden administration have no choice but to bow its head and ask us for cooperation? Is Blinken's sudden visit to China a sign that the United States wants to cooperate sincerely?
Previously released data shows that in the first two months of 2023, China has been reducing its holdings of U.S. Treasury bonds, and the reduction is quite large. In February, in particular, it was reduced by more than $20 billion. This reduction, combined with the fact that other countries and investors are also selling off US Treasuries, will certainly make the US debt crisis worse.
We all know that the U.S. government has always lived on fiscal deficits, which means that they spend more money than they earn, so what do they do? They came up with a solution, which is to issue Treasury bonds.
Right now, the main buyers of U.S. Treasuries are actually people in the United States itself. However, people in foreign countries have also bought a lot of U.S. Treasury bonds, especially in China. China is the foreign country that buys the most US Treasury bonds, and the amount of US Treasury bonds we hold in our hands is really large.
Whether we buy more or sell more is a big question for the United States. Because we buy more, it means that the market demand for US Treasury bonds is large, and the price of Treasury bonds will rise, and if we sell more, the market demand will go down, and the price of Treasury bonds will fall. It's like a scale, we and China are at one end of the scale, and the U.S. Treasury market is at the other end, and our buying and selling behavior will directly affect the balance of this scale.
The US Treasury bonds we hold in our hands are like a sharp sword hanging over the head of the United States. If we suddenly decide to sell all these Treasury bonds, the US Treasury market will be hit like a storm. Worse still, such a shock could also destabilize entire financial markets, like a giant wave in the ocean.
Right now, the debt problem in the United States is really serious. According to the data given by the government, within a few months of the first few months of 2023, the US fiscal deficit has already exceeded $600 billion, which is almost the ceiling they have set. More worryingly, they expect the deficit to rise to nearly $2 trillion in the coming year. That is, in the next two years, the U.S. government needs a lot of money to fill this hole, but there is less and less room for them to issue debt, which is really troublesome.
What is even more troubling is that in addition to the huge debt owed by the US federal government, many other large cities also owe more than $300 billion in total. Combined, the total amount of money owed by the United States is almost $200 trillion. It's like a huge number, and it's scary to look at. Moreover, there have been a lot of problems with the banks in the United States recently, and the financial system in the United States is now facing a lot of risks, like standing on the edge of a cliff, and if you are not careful, you may fall.
Faced with such a dilemma, the Biden administration must have a headache. On the one hand, they constantly put pressure on us and even threatened to sanction us, but on the other hand, they were very anxious to find our cooperation, so they frequently sent people to visit China to get to the bottom of us. Treasury Secretary Janet Yellen has already been to China, and now Secretary of State Blinken has announced her visit. It is clear that while the United States may seem tough on the surface, in reality they also want to solve problems through cooperation.
However, to truly solve the debt crisis, it is not enough to pay lip service. Because there have been many problems in the relationship between China and the United States before, if the United States puts pressure on us as before, it will only make us more vigilant. On the contrary, by selling Treasury bonds, we are actually giving the United States a strong response. Only when they really show good faith in cooperating will we consider continuing to add to their holdings of Treasuries to help them tide over the storm.
The debt problem of the United States is getting worse, and our attitude as their largest creditor is very important to them. If the Biden administration sticks to its position and is unwilling to take the initiative to cooperate with us, then they will only sink deeper and deeper into the debt crisis.
If they can take the initiative to reconcile with us and clear the way for future cooperation, it may also leave some room for maneuver in their economic policies. Therefore, Blinken's visit to China may be an important turning point and a major adjustment of their diplomatic strategy.