China Dumps $780B in US Debt: Instant Dollar Collapse?
According to American media reports, as of last month's 26th, the United States' national debt has grown wildly and has already surpassed the 35 trillion mark. This far exceeds the total amount of the U.S. GDP. To make matters worse, the scale of U.S. national debt continues to expand. Under high U.S. interest rates, the interest expenditure of the United States has already surpassed military expenditure and is about to break through the trillion-dollar mark.
At present, the United States is experiencing multiple pressures such as high debt, the upcoming U.S. election, and a weak economy. At a critical moment, it was revealed that the U.S. non-farm data was falsified. The number of people applying for unemployment benefits in mid-August far exceeded the official expectations of the United States. The economic situation in the United States is far worse than expected. Is the United States about to collapse? Faced with the pessimistic economic situation in the United States, various countries have been selling U.S. debt, and the U.S. debt has piled up like a mountain. The United States has fallen to a point where no one can borrow, and it has even auctioned TIPS worth 8 billion U.S. dollars on August 23. Can the United States really not bear it anymore? If China sells all the U.S. debt in its hands at this time, what consequences will it bring?
The United States is in danger?
The rise and fall of the United States are both due to U.S. debt. The establishment of the United States relied on the east wind of U.S. debt, and the United States also began a history of getting rich by borrowing money, obtaining a large amount of funds by paying one year's interest. The United States has brought the merchant thinking to the extreme. However, the interest increases year by year, and what's worse, the huge interest is parallel with the high interest rates in the United States. Behind the United States' crazy borrowing, the U.S. national debt grows wildly, soaring directly to 35 trillion. Now, the economic situation in the United States is not optimistic, and various countries are selling U.S. debt. The U.S. debt has piled up like a mountain, and the United States has fallen to a point where no one can borrow. It has even fallen to the point of auctioning TIPS. Can the United States really not bear it anymore?
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The United States, which should have reduced interest rates as soon as possible, seems to have been waiting for the Chinese economy to collapse first. However, what was unexpected was that the United States fell on the road of raising interest rates first.
The United States uses the U.S. dollar to raise interest rates to harvest the global economy, especially China, which is a thorn in the United States' side. However, its own debt grows crazily, and随之而来的是高额的利息支出. What the United States did not expect was that the U.S. debt, which was once sought after by everyone, has now become a hot potato in people's eyes. Various countries are selling U.S. debt, and even Japan, which used to be close to the United States, has started a three-time sell-off.
The United States complains that other countries are dropping a stone in the well at a critical moment, but it does not know that it is the United States that has been lifting a stone and dropping it on its own foot step by step.
In order to extend the life of the U.S. dollar, the United States has always claimed that the domestic economy in the United States is good, but in fact, it is just a Ponzi scheme.On August 21st, it was revealed that the United States had falsified its non-farm data. It's important to note that the non-farm data has always been a barometer for outsiders to judge the U.S. economy. However, in order to maintain high interest rates in the U.S. and attract hot money to flow into the country, the U.S. resorted to falsifying the non-farm data. This action undoubtedly dealt a blow to the U.S. credit.
Behind the falsification of non-farm data, it also led to an increase in the number of unemployed people in the U.S. According to media reports on the 22nd, the number of people applying for unemployment benefits in mid-August in the U.S. far exceeded expectations, indicating that the employment situation in the U.S. is not as good as claimed.
As the real data of the U.S. is exposed, the credit of the U.S. government is greatly discounted. The U.S. has fallen to a point where no one can borrow money. For the U.S., which urgently needs money, it has started to auction TIPS worth $8 billion with a term of 30 years.
What is the TIPS auctioned by the U.S. Treasury?
TIPS is actually a type of national bond designed to combat inflation. The powerful feature of this bond is that its principal will automatically adjust with changes in the inflation rate. In simple terms, if prices rise in the future, the interest you can get will also rise with the tide, ensuring that your money will not depreciate due to inflation. Therefore, when people's expectations for future inflation become unclear, this bond has become a sought-after "hot cake".
The data behind this auction by the U.S. Treasury also conveys some worrying information.
Firstly, the sharp decline in interest rates indicates that the market believes that future inflation will slow down, and there may even be an optimistic situation. But think about it, can the economic situation in the U.S. really be as optimistic as these data show?
During this period, the U.S. government seems to be under pressure and is frantically issuing Treasury bonds to fill their budget gaps. The result is that the debt is piling up, reaching a historically unprecedented level. Although interest rates have declined, this does not mean that the financial situation in the U.S. has improved. In fact, it is more likely that the U.S. Treasury had to lower interest rates to attract more investors.
This auction by the U.S. Treasury seems very ordinary, but at present, it more reflects the current economic situation in the U.S. Perhaps the current situation in the U.S. is not as simple as we think. If China sells all its U.S. debt at this time, what consequences will it have for the U.S., China and the world?What would be the consequences if China were to polish off US Treasury bonds?
Since China's rapid development, the world structure has gradually shifted from a unipolar world dominated by the United States to a multipolar one. Today, both China and the United States are indispensable poles. Currently, the United States is facing a crisis of bankruptcy, and many netizens suggest that China should sell off all its US Treasury bonds so that it will not be affected by the United States. However, things are far from as simple as imagined. China and the United States are so intertwined that they prosper or suffer together. If China really were to sell off all its US Treasury bonds, the consequences would be unimaginable.
Why are the consequences of China selling off all $780.2 billion in US Treasury bonds considered unimaginable?
Firstly, the United States is still at the center of the world today. Although the current situation in the United States is not optimistic, a瘦死的骆驼比马大. The US dollar remains the world's only international currency. Although the BRICS payment system has taken shape, it still has a long way to go to replace the US dollar.
For example, what is the target of the BRICS payment system? It is difficult for the interests of BRICS countries to be unified in a short time. Even though China has been promoting the internationalization of the renminbi, it is undeniable that the hegemony of the US dollar cannot be dismantled in a day. Moreover, the European Union is currently on the side of the United States. If China were to sell off all its US Treasury bonds at once, it would be tantamount to officially declaring war on the United States, and a third world war would be inevitable.
Some people say, "Let's go to war, we are not afraid." The reality is that China is indeed not afraid, but if China and the United States were to engage in a conflict, the world would inevitably suffer a devastating blow. Today's weapons are no longer the simple rifles and bayonets of the past. Once the fighting begins, it would be a contest of nuclear weapons, resulting in devastating destruction.
Secondly, if we were to quickly sell off our US Treasury bonds in a short period, it would cause a great shock to the global financial market and could even trigger market panic and various unstable factors.
Moreover, doing so would also cause China to suffer considerable economic losses, especially for our country's foreign exchange reserves and the stability of the renminbi exchange rate, which would have a very adverse impact.
Furthermore, although China is the second-largest holder of US Treasury bonds, 27 out of the $35 trillion US debt is absorbed by the United States itself. Therefore, it is currently unrealistic to use the sale of all US Treasury bonds to deal a fatal blow to the United States. Moreover, they still have the initiative in currency, and they can print as much as they want.
Therefore, China's sale of all US Treasury bonds may backfire on itself.To truly escape the threat of the United States, take the initiative, and gradually overthrow American hegemony, what's more important is that it is not enough to rely solely on China; the awakening of the whole world is indispensable.
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