China Sells $778.1B in US Debt

2024-05-09 93 Comments

Lifting a rock only to drop it on one's own feet. This has always been a reminder we have given to the United States, yet the U.S. has consistently turned a deaf ear. But now, that rock has fallen on America's own feet. If in the past the U.S. dollar was a currency of the Americans and a global issue, now the dollar is becoming a currency of the U.S. and a problem for America.

The dollar hegemony that the U.S. has always taken pride in is rapidly declining, and even the U.S. dollar tide that has been reaped up to now may be reaping America itself. It can be said that, in the end, it is the American people who bear all. Will this dollar tide be the starting point of the decline of dollar hegemony? Is the biggest victim of the U.S. debt crisis about to emerge?

$778.1 billion! China massively sells U.S. debt

U.S. debt is a supplement for the United States, but it is a poison for the world. If in the past, U.S. debt prolonged the life of American hegemony, then in the future, U.S. debt will be the biggest death knell for the United States.

U.S. debt has always been an asset that the world competes to buy, and even the 10-year U.S. Treasury bonds are regarded as the anchor of global asset pricing. Therefore, U.S. debt has always been considered the hardest currency in the world, second only to the U.S. dollar.

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However, in recent years, it has been found that compared to its returns, the risks of U.S. debt have become increasingly greater.

In the past, the United States accumulated a large amount of wealth through global trade and making a fortune in national disasters, so the United States vigorously promoted the globalization of the dollar and the globalization of U.S. debt with American hegemony as the anchor.

Through a large trade deficit, a large amount of reserve currency was stored worldwide, and then lent to the United States to operate through U.S. debt. And this interest rate is determined by the United States. Moreover, before this, the yield of these U.S. debts was relatively low, basically only a little more than 1. So, the United States hoped to use this method to slowly transfuse blood to the United States from all over the world.

However, contrary to expectations, the issuance speed of U.S. national debt is far higher than the United States' estimate, and it is accompanied by a decline in the United States' debt repayment ability. Therefore, what we see is that most countries in the world are selling U.S. debt.Since the end of 2021, up until September of this year, China has consistently maintained its U.S. Treasury holdings below 900 billion U.S. dollars. Moreover, by September, we have broken a multi-year record, reducing the scale of holdings to 778.1 billion U.S. dollars. It's not just us that is reducing holdings, but most central banks around the world are taking action.

For instance, in September, Japan reduced its holdings by 28.5 billion U.S. dollars, bringing the scale down to around 1 trillion, which is a reduction of about 24 billion U.S. dollars compared to the 1.3 trillion in 2021.

In addition to Japan, countries such as the United Kingdom, India, and Saudi Arabia are also significantly reducing their U.S. Treasury holdings. It can be said that how attractive U.S. Treasuries were in the past, how risky they are now.

However, we know that the United States relies on issuing U.S. Treasuries to function. If U.S. Treasuries cannot be issued, then the U.S. authorities would come to a halt, which means that U.S. Treasuries must be taken over by someone.

In the past, Americans were only responsible for enjoying themselves, with global central banks taking over U.S. Treasuries for the United States. But now it's a bit different, as global central banks are all running away, leaving the United States to take over the role of the buyer.

According to relevant data reports, in recent years, the Federal Reserve has incurred losses of nearly 86 billion U.S. dollars. We know that after the outbreak of the pandemic, the United States, in order to massively distribute money, had the Federal Reserve take on a large amount of U.S. Treasuries. This has led to the Federal Reserve suffering from a historically rare huge loss in the context of U.S. interest rate hikes.

Compared to the Federal Reserve, it is now the American people themselves who are taking over a large amount of U.S. Treasuries. We know that the yield on U.S. Treasuries has increased to around 4%, which is already the highest in recent years. Therefore, compared to investment returns, more people choose the more stable national debt.

Moreover, according to data from relevant institutions, nearly 70% of U.S. Treasury buyers are now Americans, and among them there are not a few ordinary people.

That is to say, it is the American people themselves who are now sustaining the United States. But with a scale of 33.7 trillion U.S. dollars, can the American people really afford to take it on?Is the United States Reaping What It Sows?

There is always a hidden price tag behind the occurrence of events. The United States has always relied on the global economy to sustain itself, and now it is time for the U.S. to repay its debts.

We know that today's United States boasts a GDP of 26 trillion U.S. dollars, and this hiatus is mainly consumption-driven, which means that the U.S. is borrowing money from the world to consume, thereby boosting its own GDP.

However, the United States may no longer be able to borrow money, and it is time to repay its debts. In the past, the U.S. borrowed money from around the world and directly gave cash to the American people, but now the money from the world is no longer available. Moreover, the most difficult part is that not only are countries not lending money, but they are also withdrawing loans.

This requires the United States to either raise interest rates or sell assets to repay its debts. So we see that the U.S. is now raising interest rates to attract investors, but these investors are not central banks of various countries, but the American people themselves.

That is to say, the United States is now in the hands of its people for the last leg of the Ponzi lending scheme. We know that with the current scale of 33.7 trillion U.S. dollars in debt, the U.S.'s current fiscal revenue is definitely unable to repay it. Therefore, the only thing the U.S. can do is to inflate to erase its debts.

And this means that those who are now taking over U.S. debt will bear the greatest cost for the United States. Moreover, what the United States has been looking forward to is to harvest global assets through the dollar tide to make up for the holes in the United States.

However, this dollar tide has not met the expectations of the United States. Even with interest rates raised to their highest point, it is the United States itself that cannot bear it first, so we see the Federal Reserve suffering huge losses, and the U.S. industry and consumption have seen a significant decrease.

Even rating agencies such as those in Europe and the United States have downgraded the U.S. rating, so it can be said that the United States, by picking up the big stone of the dollar, is very likely to hurt itself.

The current interest in the United States has reached a scale of nearly a trillion U.S. dollars, and the assets it has harvested, apart from Europe affected by the Russia-Ukraine conflict, have not been harvested much by the United States in other regions. So, it can be said that the United States' sickle for harvesting has become dull.And if the harvest fails, a rate cut in the United States might be the beginning of the dollar's collapse, with the American people paying the ultimate price.

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