If China collectively sells off US Treasury bonds, the consequences are worrying? The global economy** sparks discussions.
In recent years, the diplomatic relationship between China and the United States has undergone significant changes. This is mainly because the United States has adopted a lot of measures to suppress China, which has aroused the indignation of many people.
But in fact, China is the largest debtor to the United States, holding trillions of dollars in U.S. Treasury bonds at most. So what would be the impact if China sold all of its U.S. Treasuries at once?
Objectively speaking, China has always been one of the main holders of US debt. And at that time, we would have massively increased our participation in the US debt for a number of reasons.
With the advent of the new century, China has accumulated a large amount of capital through rapid commercial and economic development. Thus, in this case, Chinese enterprises can make large-scale investments in the world market.
But investing is about making money, so there will be some Chinese capital to buy these relatively reliable commercial investment products, including U.S. Treasury bonds.
In fact, about a decade ago, U.S. Treasuries were actually one of the safest investment products in the world, with relatively stable yields.
After all, the United States is the world's only superpower, and there has never been a debt default. Therefore, buying U.S. bonds is a low-risk, high-yield investment.
Even now that the U.S. economy is in clear recession, U.S. Treasuries are still commonly bought by many investors, as not many believe that the U.S. will default on its debt.
Naturally, Chinese investors and even ours will buy some US debt to make money.
At the same time, since the beginning of the new century, great changes have taken place in the international situation. After the collapse of the Soviet Union, the United States regarded China as a new strategic rival and adopted a series of blockade and suppression measures against China, which exerted considerable pressure on China.
At that time, our national power was not as strong as it is now, so it was a little difficult to resist the pressure from the United States.
Therefore, we must find ways to maintain a stable relationship between China and the United States, which is beneficial to China's development. In the end, we decided to buy dollar debt.
To put it simply, buying large amounts of dollar debt serves two purposes: First, U.S. debt is actually an excellent investment.
The acquisition of U.S. bonds can also bring additional fiscal revenue to China, which has a positive effect on the country's economic development. In addition, under the condition that China's national strength was relatively limited at that time, it was also very necessary to maintain friendly and cooperative relations with the United States.
In recent years, as relations between China and the United States have deteriorated, we have felt the need to get rid of the US debt.
Over the past few years, China has been selling off dollar debt on a massive scale. China's holdings of U.S. debt have risen from a peak of 1More than $2 trillion has fallen to less than $800 billion today.
It can be said that China has sold off almost 1 3 dollars of debt and continues to reduce, which has a significant impact on the United States. There are two reasons for China's large-scale sell-off of U.S. bonds: First, Sino-US relations have deteriorated.
When Trump was still in office, the United States launched a ** war against China, which had an extraordinary impact on Sino-US relations. This also means that the era of Sino-US economic and trade cooperation has ended.
In the years since, while China has struggled to maintain communication and contact with the United States, the United States has not turned its back on China. Therefore, it is not advisable to hold a large amount of US dollar debt.
In the event of an accident in Sino-US relations, all US bonds purchased by the US from China will become waste paper, and not a penny will be recovered. So, a large number of ** US bonds is also a strategic issue.
Now that U.S.-China relations have deteriorated or even broken down, there is no need to consider holding large amounts of dollar-denominated U.S. debt to maintain the relationship.
In addition, from an economic point of view, US bonds are still not a completely reliable financial investment product. In the past, many international investors believed in U.S. bonds, not only because the U.S. is the only superpower, but also because the U.S. economy is more optimistic.
As long as the U.S. economy continues to grow, there will be no serious economic crisis and the problem of debt default will be resolved. But now economic growth in the United States has slowed significantly, and the total public debt is rapidly increasing.
In just a few years, the total U.S. national debt has exceeded $340 billion, which is a staggering number. The total U.S. national debt already exceeds the total U.S. economy, so we are skeptical that the U.S. will be able to repay such a large national debt.
For the past two years, even the United States** has been reporting that it is unknown when the United States will default on its debts.
In the event of a debt default, the value of the hundreds of billions of dollars in US debt we hold will drop sharply in a short period of time, and even become a high-risk investment.
It was because we realized that the United States was unable to solve the debt crisis that we began to sell off our holdings of U.S. debt.
This is the idea of selling all these hot potatoes before the United States defaults on its debt and the American debt system collapses completely, while there are still people willing to buy US Treasury bonds.
The aim is to recover as much as possible the money we lent to the United States at that time. Even if we have a slight loss of US debt now, it doesn't matter, it is better than a complete collapse of the US debt system and all US debt in our hands.
As a result, China will also sell US bonds on a large scale for the foreseeable future. And China's U.S. bonds, or even the cancellation of U.S. bonds, will have a huge impact on the United States.
Because China itself is one of the main holders of U.S. bonds, and although we have been selling U.S. bonds in recent years, China is still the second largest holder of U.S. bonds. Therefore, China's every move will be watched by the market.
Put simply, if we buy U.S. bonds, some investors will feel that China has confidence in dollar bonds, and thus follow China's lead in increasing their holdings of U.S. bonds.
But if China sells US bonds on a large scale, it will cause a ripple effect, and more sovereign and individual investors will start selling US bonds, which will have a devastating effect on the dollar bond system.
China's holdings of U.S. bonds are very large, and our massive sell-off of U.S. bonds is equivalent to increasing the supply of dollars in the market, which will directly cause the depreciation of the dollar. The depreciation of the U.S. dollar can cause sharp fluctuations in global currency markets and affect the stability of the U.S. financial system itself.
In the face of China's massive sell-off of U.S. bonds, there are not many means that the United States can take. For example, raising the interest rate on U.S. Treasury bonds and reinvigorating consumer confidence in the market.
However, further increases in U.S. interest rates and bonds on a global scale will create a huge fiscal gap for the U.S. and the Federal Reserve, which will eventually directly push up inflation in the U.S.
Therefore, theoretically, if we completely get rid of the US debt in our hands in the short term, it is equivalent to sending ** financial nuclear warhead to the Americans. This nuclear warhead will have a devastating effect on the US economy.
According to the United States' own investigations, China's large-scale ** US debt will mean the complete end of US global financial hegemony in a few years.
When China massively ** or cancels U.S. debt, it is likely to end U.S. global hegemony prematurely, because the impact on the U.S. economy is too great.
The collapse of the dollar debt system also means that it will no longer be possible for the United States to use the dollar and various financial means to plunder the world.
Therefore, in the absence of external financial support, the United States** has few means to deal with the US debt crisis. At first, the United States could also plunder the world's money through financial means to feed the American economy, thereby paying off the debts of countries around the world.
But China's massive sell-off of US bonds means an early collapse of the dollar system and the US debt system, in which case dollar bonds will have to have a hard landing. There are two ways to make a hard landing: one is not to directly admit these dollar debts and refuse to repay the creditors.
But this will lead to a complete collapse of the national credibility of the United States, and no country will trust the United States anymore. In addition, the United States has another solution, which is to have the Federal Reserve start its own money printing machine and print more than $10 trillion in money in a short period of time to pay off its debts. This is also a solution to the problem.
After all, the Lend-Lease Treaty was signed without specifying how the United States would repay the loan.
But this dishonest approach will also have an impact on the U.S. economy, because the inflow of large amounts of dollars into the market will directly push up inflation, which in turn will push up prices, which will ultimately fundamentally affect social stability.
If the United States still holds global financial hegemony, inflation in the United States can be transferred to the whole world through financial means, and the United States can make developing countries and third world countries suffer instead of the United States.
But China's massive sell-off of U.S. bonds led to an early collapse of the U.S. financial hegemony. This inflation can only be eaten and digested by the United States itself.
Therefore, for China, these US bonds in our hands are also a good card in the face of US blockade and repression.
But in general, this hole card is not being used, and if we do, it means that we and the United States will somehow completely reverse our positions. The United States will also resort to all kinds of crazy means to suppress and obstruct China, which is not what China wants to see.
Even if relations between China and the United States are bad right now, it is better not to go to war if possible. However, in the same situation that US bonds are not as good as before, it is also a last resort to continue to sell US bonds.