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Fed Starts Losing Money, Faces Bankruptcy Risk
Why is it said that the United States has already lost the trade war with China? Why has the Federal Reserve started to lose money? Is the United States really going bankrupt? In comparison, what is the state of China's economy?
Recently, the economic problems in the United States have become increasingly severe. According to data released by the Federal Reserve, its losses have exceeded the $200 billion mark, setting a new low since the data has been tracked. How should we understand this news?
Firstly, it is important to understand how the Federal Reserve earns its money. There are mainly two businesses: one is providing services to banks, and the other is the interest from the bonds it holds. However, the Federal Reserve is now losing money. Why? The reason is that during this round of the interest rate hike cycle, the Federal Reserve has paid too much interest to major financial institutions, exceeding the interest income generated by the bonds it holds. With an imbalance between income and expenditure, it naturally loses money. So, since the Federal Reserve is losing money due to this, its main choice would be to lower interest rates to pursue a relative balance between income and expenditure.
However, in the view of Tesla's boss Musk, the news of the Federal Reserve losing $200 billion represents that "the United States is heading towards bankruptcy." Musk's view is not unreasonable. First, on the first day of the new fiscal year, the U.S. debt surged by $200 billion, directly setting a new record for the total U.S. debt, reaching $35.6 trillion. This rapid growth trend in debt is not good. Second, the bill freezing the debt ceiling in the United States is about to be unfrozen, and the debt crisis will return to the White House. Under these circumstances, the debt crisis is an issue that the two parties in the United States must face. However, some analyses believe that the two major political parties in the United States are always unable to deal with the debt crisis. On one side is the debt snowball that keeps getting bigger, and on the other side are the two parties in the United States that always fail to propose a debt repayment plan. Such a vicious cycle may make Musk's prophecy come true.
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In this situation, some Americans have started to reflect on whether launching a trade war against China was the right choice. In their view, the United States' trade war against China has not only failed to reverse the trade deficit between China and the United States but also has not brought a huge number of job opportunities to the United States. Most importantly, it has not put much pressure on China in terms of intellectual property rights, and has even promoted the resilience of China's technology. On the contrary, the United States has earned much less yuan, and ordinary American consumers have also been harmed by the transferred tariffs, and the competitiveness of American companies has also declined. Therefore, some Westerners believe that the United States has actually lost the trade war with China.
As the U.S. economy shows signs of decline, China's economy is developing with high quality. During this National Day Golden Week, the domestic consumer market is booming. Nearly 300 million people travel daily, and the sales of home appliance products have reached 7.357 billion yuan, and this is just the data for the first three days of the holiday. This indicates that China's economic fundamentals are broad, strong in resilience, and have great potential. Of course, more importantly, it is the result of joint efforts from all parties. China has taken advantage of the situation, made precise efforts, and hit the key points. The policy dividends have been fully released, and with strong consumer willingness, this has created such a hot National Day "Golden Week" consumer market.
It can be said that no matter who takes power in the White House next year, China will not be at a disadvantage. Because Harris is likely to continue Biden's approach, and Trump has already dealt with China, and China has experience in dealing with the two of them. Under these circumstances, Trump will only repeat past failures, and Harris is destined to fail.
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