The U.S. Treasury Department financed record debt to markets during the week of Feb. 9 as the U.S. federal government desperately needed debt to fund a generous fiscal stimulus ahead of November. In this regard, the U.S. financial analyst agency Zero Hedge analyzed on February 9 that the total amount of bonds issued by the U.S. Treasury this year will actually reach $10 trillion. At present, as the world's largest debtor, the total federal debt of the United States has reached 34$22 trillion, or 123% of the GDP of the United States.
This means that by the end of 2024, the total US federal debt could pile up to about $44 trillion. Even against the backdrop of Yellen's public statement a week ago that $34 trillion is a terrible and uncontrollable figure, it is almost foreseeable that the US Treasury debt may completely get out of control in the next 10 months.
On February 8, the U.S. Treasury auctioned $42 billion of 10-year U.S. Treasury bonds due on February 15, 2034. This is the largest ...... ever in the history of the 10-year Treasury auction
Not long ago, the U.S. Treasury auctioned $25 billion in 30-year bonds. That's just $2 billion less than the record size of $27 billion at the height of the pandemic. The data shows that 4360% high yield from 4229% is 13 basis points higher.
And all of the above new additions to US Treasuries are kept at 5 by the Federal Reserve25%-5.The benchmark interest rate of 5% is high, and the yield of US Treasury bonds is at the high level of this century. As a result, whether it is the largest single sale of 10-year Treasury bonds in history, or the second largest auction of 30-year Treasury bonds during the pandemic, the US Treasury has to pay high interest costs when it matures. Total interest on federal debt has now surpassed the $1 trillion mark.
The Congressional Budget Office (CBO) on February 8 projected that the net interest cost of U.S. debt as a percentage of GDP will be higher than at any time since 1940 starting next year. Federal spending is also expected to increase after 2028, as will spending on programs such as Social Security and Medicare, and net interest costs will also rise. And Medicare, hospital insurance, and Social Security** in the U.S. public sector are expected to run out in about 10 years due to the surge in debt-servicing costs.
This suggests that the risk of a potentially large debt crisis awaits the US economy. In fact, in March last year, against the backdrop of high interest rates by the Federal Reserve, U.S. Treasury yields rose, leading to U.S. bond assets held by many U.S. banks such as Silicon Valley Bank**, which in turn formed a liquidity run on Silicon Valley Bank and many other banks, and collapsed one after another.
At that time, the crisis spread rapidly, and the Federal Reserve was forced to step in and introduce an emergency tool called the Bank Term Financing Program (BTFP), which allowed banks to convert insolvent U.S. Treasury bonds into cash at their face value at extremely low interest rates. The BTFP is structured as a 1-year loan, and the Fed has announced that they will not extend the BTFP.
With BTFP set to end next month, both 10-year and 30-year Treasury yields are hovering slightly higher than they were during last year's U.S. banking crisis. At the same time, the ongoing wave of mass layoffs in the US banking sector means that the US banking crisis that began last spring is not over.
And commercial real estate seems to be the top economic area for every American. As a result of the pandemic's shift in the way they do business, more and more U.S. companies are leaving expensive office buildings and moving into home offices, combined with a sharp rise in the cost of financing borrowing, has created a perfect storm. Companies are getting financing as quickly as they were three years ago, which means fewer potential tenants for U.S. commercial real estate owners. As a result, companies in categories such as commercial real estate in the United States have also had to cut costs quickly through layoffs to stay afloat. U.S. investors who see the problem are indulging their commercial real estate positions at a lower level.
As a result, banks with a lot of commercial real estate risk are going through tough times, and the dominoes seem to be starting to fall, with New York Community Bank (NYCB), which has been downgraded to junk with a significant share price, leading the way. In this regard, Yellen, the United States, said again on February 8 local time that it is expected that the weakness of the U.S. commercial real estate market will bring additional bank pressure and financial losses, but it is believed that this will not pose a systemic risk to the banking system.
Yellen said at a Senate Banking Committee hearing that regulators are working with banks to address the risks posed by rising vacancy rates in many large U.S. office buildings and rising rates on refinancing loans in the wake of the pandemic. Yellen said: "Valuations are **. So it is clear that there will be stress and losses associated with this. "I hope and believe that this will not ultimately pose a systemic risk to the banking system. The risk exposure of the largest banks is quite low, but there may be some smaller banks that are under pressure from these developments. ”
Yellen's testimony marked her second attempt this week to downplay commercial real estate risks, telling the House Financial Services Committee on Tuesday that she was concerned about the pressure on U.S. commercial real estate, but that the situation was manageable. Yellen also said she was concerned about the lack of affordable insurance in some U.S. markets due to rising risks such as storms, floods and wildfires triggered by climate change, adding that this could create a "feedback loop" that threatens U.S. financial stability. is hurting the cost-of-living well-being of American families.
Moody's, for example, reported that by the end of last year, 33 percent of deposits at New York community banks were uninsured. This means that if the New York Community Bank becomes the next Silicon Valley Bank, it will eventually fail. Those depositors who did not withdraw their cash, especially the 33% of those who did not have deposit insurance, were at risk of being wiped out.
And compared to the financial difficulties faced by many regional banks and commercial real estate in the United States, more and more states in the United States are also paying the price for being heavily indebted. The Accounting Truth Society reports that at least 28 states across the country do not have enough money to pay all debt bills and are at risk of bankruptcy.
Not only that, due to the deepening economic fragmentation in the United States, the White House and Congress have not reached an agreement on the details of some budget spending, and if the relevant spending bill cannot be passed within a month, the federal government will stage a shutdown crisis by March 8 at the latest. And even if the temporary spending bill is still used as a contingency measure in March, it is foreseeable that the debt-budget dispute will continue until at least November this year, and the U.S. federal government may face multiple potential shutdown risks.
There is no doubt that the fig leaf of the US economy in relation to debt is constantly being uncovered, which directly reduces the status of the US dollar as a reserve currency. Just as the famous American journalist Tucker Carlson bluntly said during his interview in Russia, the dominance of the dollar is disintegrating.
According to the latest report of the International Monetary Organization, the share of the US dollar in global reserve currencies has fallen from a peak of 85% in the 70s of the last century to only 59% at present, a decline of 26%.
And considering that the banking and finance industry is one of the core industries in the United States, when there are constantly bank failures, people's concerns about the creditworthiness of the dollar are further exacerbated. At the same time, the banking crisis is also becoming a catalyst for global de-dollarization, following the continuous abuse of the dollar's status as a reserve currency by initiating various financial restrictions at every turn to keep people away from the dollar. One of the most obvious changes is that more and more countries are accelerating the process of repatriation** from overseas coffers such as the Federal Reserve.
According to the research report of Invesco, an international asset management institution, in the third quarter of last year, many countries around the world are transporting the best reserves stored in overseas vaults such as the Federal Reserve back to their home countries. Sixty-eight percent of respondents said their country's reserves** should be kept in their own coffers.
As of December 2023, the number of deposits** deposited by central banks with the Federal Reserve Bank of New York has fallen to around 6,000 tonnes. This is higher than 1971, after the United States unilaterally abolished the gold standard and decoupled the dollar from **, it had a peak of 12,000 tons, and about 6,000 tons** have been shipped out of the United States by many central banks.
As the Central Bank of Russia has warned, the Fed will eventually need to return all depositors' reserves, because the ownership of these assets is very clear. At the same time, within the United States, as the tearing phenomenon grows more severe, more and more states are on the path to monetary independence that treats ** and ** as legal tender and can replace the dollar.
The latest development in the matter is that an Iowa Senate subcommittee recommended passing a bill on Feb. 8 to establish a state-issued currency for trading or transactions. The enactment of this legislation will give Iowa the option to conduct its economy and trade with a sound currency and undermine the Federal Reserve's monopoly on money.
Senator Kevin Alons and 14 co-sponsors introduced SF2108 on Jan. 24. The proposed law would require state treasury departments to issue gold or silver coins and establish a currency of exchange in place of the U.S. dollar.
Under the proposed law, currency would be defined as "a coin that is *** embossed into a uniform shape, size, design, content, and purity, suitable for or commonly used as a currency, medium of exchange, or medium for buying, selling, selling." Storage, transfer, or delivery in a retail or wholesale transaction***
The currency of a transaction is defined as "a representation of the actual coins and gold bars held in the deposit account by the deposit account holder and which can be transferred by electronic instructions." Coins, bars, and silver bars that support the currency will be stored in "approved" bullion depository, which may include the state bullion depository that Iowa plans to establish, and there may also be a gold bar depository that has been established separately in Texas. And all of this is in the bill agenda that makes it clear that Iowa will allow anyone to barter goods using **or**.
This is also the following Texas, Florida, Oklahoma, Missouri, New Jersey and other states in the United States have used to declare ** and ** as legal tender equivalent to the US dollar; the establishment of independent state gold and silver reserves; It is possible to pay wages with ***; The state first resumed the anchoring of the physical ** research and development of digital currency and other methods one or more methods, staged after the independence of the currency, the latest changes in things. And as of February 9, 43 states in the United States have completed the redefinition of gold and silver as a monetary attribute by eliminating the sales tax on gold and silver bars.
Economist Maharare said that the abolition of the ** and ** taxes is also the first step in the abolition of the Federal Reserve system, attacking the Fed from the bottom up in an effort to make its functions independent of the state. This means that at least 43 states in the United States are implementing the function of currency independence that can replace the US dollar.
Former U.S. Rep. Ron Paul has repeatedly responded that neither the U.S. Treasury nor the Federal Reserve have the right to levy sales taxes on gold and silver as natural currency, but instead people should impose a large money printing tax on these two departments, because for more than half a century since the dollar was decoupled from ** in 1971, the dollar notes they printed out of thin air are actually just **.
And that's not all, senior economist Peter. Schiff analyzed on February 8 that no matter what changes occur in the US economy in November, it will be bad for the dollar. With the expanding budget and deficit, the escalating conflict in the Middle East, and other factors all the more driving the Fed's potential historic money print, a decline in the dollar's position is all the more inevitable in the long run.
This explains why the World Association's report released on 31 January showed that global central banks bought a net 1,037t in 2023, almost on par with the record level of 1,082t in 2022.
It is worth mentioning that since November 2022, China has increased its holdings of about 297 tons of ** reserves for 15 consecutive months, breaking the state that ** reserves have remained flat at 1,948 tons for 40 consecutive months since July 2019, and continuously issued ** signals.
In addition, the World ** Association reported that from 2022 to October 2023, China has imported a total of 2,584 tons**. In addition, about 297 tons have been added at the reserve level, which is equivalent to about 2,881 tons since 2022, which is currently known, and has been shipped to China from overseas markets such as the United States and Europe.
And as the second largest holder of U.S. bonds, China's U.S. bond holdings are currently $782 billion, up about 1.0 percent from 2013At a peak of $32 trillion, China has sold about $538 billion of U.S. Treasury bonds in the past 10 years, with a cumulative net selling ratio of 41%. In the long term, China has become the largest international net seller of U.S. Treasury bonds.
According to the analysis of Dalio, the founder of the world's largest hedge ** Bridgewater, and the new bond king Ganglak, China may only hold US Treasury bonds of the order of 100 billion US dollars in the future, that is, it is possible that there will be a cumulative net sale of up to 680 billion US Treasury bonds, or further replace them with ** reserves. (ENDS).
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