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"China Buys 70% of US Debt, Surpassing Japan, UK"
At present, the U.S. debt has reached a new high, amounting to an unprecedented 35.2 trillion.
Faced with this enormous debt, the U.S. government has clearly lost the ability to repay.
According to the normal laws of economic development, U.S. debt is at risk of default at any time.
Therefore, countries with a large amount of U.S. debt, such as Japan and the United Kingdom, are also starting to sell U.S. debt to reduce their own economic risks.
However, during this period when countries around the world are pessimistic about U.S. debt, the United States has found a temporary solution to the U.S. debt default.
That is to mobilize its own people and economic institutions to buy U.S. debt.
According to relevant data, the largest "buyer" of U.S. debt has now become the American people themselves, holding 70% of U.S. debt.
So, how has the United States resolved the crisis of U.S. debt default?
1. China, Japan, and the United Kingdom sell U.S. debt
Let's take a look at how U.S. debt has piled up.As the world's police force, the United States has indeed done a lot in recent years, but it has also led to its own spending like water for many years.
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The military expenditure in Afghanistan alone has reached as high as 2.3 trillion US dollars, and solving other conflicts, the total expenditure may reach as much as 5.8 trillion US dollars.
In addition, during the Trump era, in order to solve the US economy that was stuck due to the epidemic.
Trump was continuously printing money and "flooding", causing the US debt to increase by 7 trillion US dollars in just a few years.
Plus the continuous issuance of US debt by other US presidents, this has led to the current situation of the United States being heavily in debt.
Regardless of whether the United States has the ability to repay, the expenditure on interest alone every year makes the US finance tight.
Taking the first half of 2024 as an example, the United States has already spent nearly trillions of US dollars on interest alone.
According to common sense, the US dollar, as a world currency, can transfer crises and to a certain extent, solve the risk of US debt blowing up.
This method may have been effective in the past, but the story of "the wolf is coming" has been told too many times, and anyone will be alert.
Those who used to buy the most US debt, the "big households", are now also hesitant when facing US debt.In terms of China, in 2008, the holding of U.S. Treasury bonds exceeded one trillion U.S. dollars for the first time, and by 2013, it had set a record of holding 1.32 trillion U.S. dollars in Treasury bonds. However, with the continuous development of the situation, by 2024, China's holding of U.S. Treasury bonds has remained at over seven hundred billion. To put it bluntly, China has seen the true face of the United States. By continuously selling U.S. Treasury bonds, it has improved its own risk resistance, which is the same principle as "not putting all eggs in one basket." Secondly, let's look at Japan, as a staunch military ally of the United States in the Asia-Pacific region. Since June 2019, it has always been the largest holder of U.S. Treasury bonds. However, the United States has been exploiting Japan to solve its own economic problems. To stabilize the domestic economy, Japan has also had to start selling U.S. dollars continuously this year to stabilize the yen exchange rate. Even the third-largest holder of U.S. Treasury bonds, the United Kingdom, is also continuously selling U.S. Treasury bonds. As of May this year, the United Kingdom holds about six hundred billion U.S. dollars in existing U.S. Treasury bonds. The three countries with the most U.S. Treasury bonds in the world are all selling U.S. Treasury bonds, which inevitably causes some investors to worry. If this leads to a global wave of selling U.S. dollars, it will inevitably lead to a U.S. Treasury bond crisis, which is a situation that the United States absolutely cannot accept.So, as the world's leading financial power, does the United States have no preparation for this issue at all?
The answer is undoubtedly affirmative.
2. Methods for the United States to deal with the U.S. debt bomb
The best solution the United States has come up with to solve the problem of the U.S. debt bomb is for Americans themselves to mobilize the American people and major domestic financial institutions to purchase U.S. dollars.
After all, there is a saying that goes, as long as the debt is on the shoulders of one's own people, it can solve the debt repayment issue to a certain extent.
And the American people seem to have accepted this reality, taking out years of savings and starting to buy U.S. debt.
The reason for this is, on the one hand, the interest rate of U.S. debt, which is as high as more than 5%, is simply too attractive, almost a surefire deal.
On the other hand, if the U.S. debt really explodes, it will have a huge impact on the United States, leading to a massive economic crisis and triggering a wave of unemployment.
Therefore, the American people choose to buy U.S. debt out of necessity.
Although the impact on ordinary Americans is ultimately limited, it is completely different for those financial institutions in the United States.It seemed as if they had all conspired together, as they all began to invest their temporarily idle funds into purchasing U.S. Treasury bonds.
Among them were the figures of major American banks, pension funds, and financial titans.
The most influential of all was none other than Warren Buffett, known as the "Oracle of Omaha."
He almost invested all the funds he could mobilize into the U.S. Treasury bond market, and currently, he holds a staggering $150 billion worth of U.S. Treasury bonds.
With the intervention of this well-known financial giant, U.S. Treasury bonds have been given a strong boost of confidence among many American investors.
Not only did it dispel the panic caused by the sale of U.S. Treasury bonds by China, Japan, and the United Kingdom, but it also enhanced their investment confidence.
After all, Buffett has always been renowned for his sharp investment vision.
Under his influence, an increasing number of investors within the United States have become confident in U.S. Treasury bonds, much like how the Chinese have long believed that housing prices only rise and never fall.
In their eyes, the United States is the center of the world, and thus U.S. Treasury bonds have become the best financial haven.
As a result of these maneuvers, the proportion of U.S. Treasury bonds held by Americans has been steadily increasing.Perhaps some may doubt this situation, but a single piece of data can dispel your concerns.
Currently, the total amount of overseas U.S. debt is only $8.2 trillion, accounting for less than a quarter of the total U.S. debt.
The rest has fallen into the hands of Americans, holding a proportion of more than 70%.
According to relevant data, the four major U.S. funds hold as much as $12 trillion in U.S. debt, in addition to which the Federal Reserve has also purchased about $4.4 trillion in U.S. debt.
But even if all Americans are full of confidence in U.S. debt, is there really no risk of it blowing up?
In fact, there have been many such examples in history, such as the United States in the 1930s last century.
At that time, the U.S. economy was booming, and stocks were reaching new heights every day.
Just as Americans thought the U.S. would continue to prosper, Black Tuesday suddenly erupted, and the stock market began to plummet.
Although a group of Wall Street sharks put out a large sum of money to save the market, it was still a drop in the bucket.
Soon it came to Black Friday, the day when the U.S. stock market completely collapsed, leading to the Great Depression that swept the world.Despite the fact that today's U.S. debt can no longer trigger an economic crisis of such a scale, it still has a significant impact on the global economy. U.S. debt, at its core, is the debt of the United States, and any debt carries a certain degree of risk to some extent. No matter how well the United States embellishes its debt, there will still be considerable risks. Therefore, to reduce this risk, an increasing number of countries around the world are beginning to follow the example of China, Japan, and the United Kingdom to adjust their foreign exchange reserves. They are trying to minimize U.S. debt and focus on hard currencies such as gold. This move will invisibly shake the international status of the U.S. dollar, which in turn will affect U.S. debt. What's more serious is that if the U.S. adjusts its monetary policy due to U.S. debt, such as significantly reducing the money supply in a short period of time, it may further trigger a U.S. debt crisis. In short, if the United States does not find a way to resolve the U.S. debt issue as soon as possible, it will eventually hurt itself in the end.
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