The U.S. debt problem has been the focus of global attention, and many people are uneasy about U.S. creditworthiness. However, U.S. Treasury Secretary Janet Yellen did not give a clear commitment to the holders of U.S. bonds, but instead said that she would not use ** to repay China's debts.
Such a statement will undoubtedly make other countries that hold U.S. debt more worried about the ability of the United States to pay its debts.
Yellen may say this because she knows that if she agrees to pay off her debts with **, the position of the dollar will be seriously threatened.
As the world's first reserve currency and the main settlement currency, the US dollar is the basis of US hegemony. However, the crisis of the dollar is also intensifying.
The United States is the world's largest consumer and has a high demand for a wide range of goods and services. Because of the advantage of the dollar, other countries are willing to exchange their goods and services for dollars.
This allows Americans to enjoy the convenience of low-cost consumption, but it also makes American imports greater than exports, forming a ** deficit.
At the same time, the U.S. economy and resources also dictate that it prefers to buy rather than produce.
The United States has an advanced financial system and strong scientific and technological innovation capabilities, and it is better at engaging in financial investment and technological innovation, and does not pay much attention to traditional manufacturing.
Under the trend of globalization, the United States has invested more resources in high-value-added financial and technological fields, while transferring low-value-added manufacturing to other countries. This industrial structure makes the United States more dependent on imports, exacerbating the problem of ** deficit.
In addition, due to the global demand for dollars, a large amount of dollars has flowed to other countries, especially exporting countries, which have accumulated large amounts of dollars in their hands.
However, these dollars are difficult to use domestically, so these countries can only invest dollars in assets such as U.S. Treasuries.
The problem now is that when other countries have more and more reserves, the dollar depreciates more and more. Because more than 50 years ago, the dollar had abandoned its peg to **.
Although the United States has been promoting U.S. debt as an asset, in fact, U.S. debt is debt. Now, as countries around the world reduce their dependence on the dollar, US bonds are being sold off in large numbers. The value of U.S. debt is not as high as it used to be.
In the past, I held U.S. bonds, which were safe and liquid, and there was a certain amount of income. But now countries that hold U.S. bonds are finding that the yield on U.S. bonds is not only lower than inflation, but also at risk of a weaker dollar.
China, for example, now holds nearly $850 billion in U.S. bonds, which should earn more than $30 billion a year at a 4% yield. However, inflation in the United States reached more than 8% last year, which means that China will lose nearly $70 billion a year.
Moreover, the dollar will continue to depreciate in the future, and China will have to pay an extra 1% for every 1% depreciation.
In this case, it is obviously better to hold U.S. bonds than to hold**.
With the changes in the global economy and geopolitical instability, many countries are facing high inflationary pressures. In this case, ** is considered the most suitable super currency for reserves, and its position is much higher than that of the US dollar or US Treasuries.
And, as interest rates in the U.S. dollar and some other countries fall, international rates are expected to go further.
A decrease in interest rates means an increase in the currency** and a decrease in the value of the currency, which usually pushes***
Therefore, for China's foreign exchange reserves, holding ** is an option to maintain and increase value.