The three overseas countries with the largest holdings of U.S. bonds are selling off U.S. bonds, and the United States will no longer find a way, and U.S. bonds may collapse.
In desperation, the United States showed its final hole card, and through these data, we also unexpectedly found that the biggest receiver of U.S. bonds may be different from what many people imagined.
In recent years, the Federal Reserve has continued to raise interest rates in an attempt to address internal inflation and achieve a transfer of global wealth by siphoning away global dollar savings. However, this plan has so far failed to achieve the desired results, and no large economies have become insolvent due to the impact of the US dollar's interest rate hikes.
With the pace of interest rate hikes by the Federal Reserve, the scale of public debt in the United States has continued to expand, especially after the end of the debt ceiling, the fiscal deficit has surged, and as of mid-December this year, the US debt has climbed to 33$9 trillion, a new record. In just a few years since the outbreak of the pandemic, the U.S. debt has rapidly accumulated close to $10 trillion.
According to the latest data from the U.S. Treasury Department, since the beginning of this year alone, China has accumulated 89 billion U.S. bonds, and its stock has fallen to a low point in 2009. China's holdings of U.S. debt are now below $780 billion.
Similarly, Japan, a major creditor of the United States, has taken steps since the Fed raised interest rates, reducing its share of U.S. debt by about $210 billion. Despite some recent buybacks in Japan, the overall trend is one of continued sell-offs.
However, in this round of sell-off, the biggest seller is actually the Federal Reserve, ** more than a trillion dollars. Looking at the volume of selling alone, this figure far exceeds that of other countries, and even far exceeds that of China and Japan combined.
So far, the Fed still holds 4$9 trillion in U.S. debt, more than twice as much as China and Japan combined.
Countries are selling, but who is buying?
It turns out that most of the U.S. debt still ends up in the hands of domestic investors. In addition, since the beginning of this year, the new issuance of U.S. bonds has basically been completely absorbed by local capital in the United States.
If the Fed is included, we can further clarify that most of the U.S. debt is in the hands of the United States itself.
The U.S. Treasury Department continues to dig holes, and most of those who end up falling into the pit are Americans.
As U.S. debt climbs, so does interest repayment. As of the end of October this year, the annual interest payment had exceeded $1 trillion in record time, and it was realized earlier than previously expected. If this trend continues, the United States will have to pay close to $2 trillion in interest. It is worth noting that the U.S. fiscal revenue in fiscal year 2023 is about 44 trillion US dollars, it can be seen that the outstanding interest has significantly increased the risk of default on US bonds, and even threatened the stability of the US dollar credit system.
At present, the US fiscal deficit has reached 1$7 trillion, just one step away from the $2 trillion mark, and the debt crisis and the continued growth of attached interest are making it even more severe. In the face of difficulties, the Federal Reserve twice announced that it would suspend interest rate hikes, and if it starts to cut interest rates next, it will significantly reduce the interest expense of US bonds.
But perhaps for the United States, the ultimate card is in the hands of Congress.
Recently, the U.S. Congress approved a resolution stating that it would curtail by up to 1$5 trillion in public spending to alleviate debt pressure.
But the problem is that with great determination, it is very likely to turn into a slogan.