Before reading this article, I sincerely invite you to click "Follow", which is not only convenient for you to discuss and share, but also brings you a different sense of participation, and it is more convenient to come back at any time to read more exciting content, thank you for your support.
Over the past many years, the U.S. government has relied on the borrowing model of development. The U.S. government's borrowing method is mainly through the issuance of Treasury bonds, through which large amounts of dollars are obtained from investors.
The U.S. government has a dedicated Treasury Department that is primarily responsible for the auction and issuance of these Treasury bills. As the scale of the U.S. operation continues to expand, the scale of debt is also showing a straight upward trend.
At present, there are different types of Treasury bonds issued in the United States, and the main reason why investors choose American bonds is that this investment method is relatively safe.
Add to this the importance of the dollar in the global monetary system, and the fact that the United States has not yet deliberately failed to pay its debts. It is precisely because of this that when the economic situation is not optimistic, investing in US Treasury bonds is the safest and most reliable way.
Due to the high credibility of U.S. Treasury bonds, they have become the choice of many investors and provide a steady stream of financing methods for the U.S. government.
The U.S. government can use this financing method to raise money aggressively, and it also allows the U.S. national debt to continue to expand. It is understood that the current US Treasury debt is close to the previously set ceiling, reaching $34.7 trillion.
In the past, U.S. bonds have been regarded as the cornerstone of the global financial system, and many investors will think about the investment object, investment time and risks when choosing an investment project. Risk is the factor that determines whether investors will ultimately choose.
In fact, any investment project has a certain risk, but most investors will use U.S. Treasury bonds as a basic judgment criterion to judge the risk of other investment projects.
For example, in the United States, some companies use U.S. Treasuries as a benchmark for judging risk. After Apple issued its bonds, some investors compared Apple's bonds to U.S. Treasury bonds.
It is believed that the bonds issued by Apple are much higher than the US Treasuries. Therefore, when it comes to investing, people are more willing to choose U.S. Treasury bonds as an investment object.
Compared with other investment projects, the biggest risk of U.S. Treasury bonds is actually inflation, which may affect investors' returns. Of course, as the size of U.S. Treasury bonds continues to expand, more and more investors are worried about whether the U.S. will default on its debt.
The impact of a U.S. debt default
The current level of U.S. debt has reached an unprecedented level, and at the current state of growth, the U.S. national debt continues to expand.
Forecasters point out that the scale of US Treasury bond issuance will increase significantly in the future. What would be the impact on investors if the U.S. Treasury bonds defaulted?
In view of the current situation in the United States, some analysts have pointed out that the biggest threat to the current US Treasury bonds is the government's inability to pay the interest generated by US Treasury bonds.
If the U.S. government misses the payment deadline, it could lead to a default, financial markets will materialize, and Social Security bills will be postponed. Eventually, the U.S. economy will fall into crisis, leading to a regressive situation.
In addition to these impacts on the U.S. government, the impact on consumers is also relatively large, which will not only exacerbate the cost of loans for consumers, but also cause consumers' daily expenses to rise again.
From this point of view, it is likely that US Treasuries are a riskier investment. Against this backdrop, it is possible to raise the interest rate on loans tied to U.S. Treasuries, which will further increase the cost of borrowing for the U.S. government. And the pressure on taxpayers will increase.
The fact that the United States has been able to create so much debt is actually the hegemony of the dollar. Because of the hegemony of the dollar, the US government can do whatever it wants when it comes to economic policy.
The monetary policy formulated is also very radical and changeable, constantly causing turmoil in the international financial market, and even affecting the illegal construction of other countries' financial aspects.
A vicious circle has been created in the case of the United States maintaining a foreign trade deficit for a long time, as well as the problems of exporting dollars and inflation. Since it does not need to pay high borrowing costs when borrowing, the US government is increasingly obsessed with a model of hegemony and borrowing for development.
Prior to this, relevant international organizations had downgraded the credit rating of the US Treasury bonds and pointed out that the US fiscal situation would continue to deteriorate. Now, the IMF has once again lowered its GDP growth forecast for the United States based on the current economic growth situation in the United States.
The IMF lowered its forecast for US GDP growth
As the United States abused its hegemony and became addicted to it, the various economic policies launched by the US Government not only triggered economic crises in other countries, but also caused the scale of the US national debt to rise by a large margin because of its abuse of hegemony and wanton borrowing for development.
However, judging from the recent GDP growth data of the United States, the current economic growth of the United States is already in a state of slowdown.
Originally, the U.S. government thought that it would absorb huge capital from other countries through the dollar, but it also caused the U.S. to run a huge trade deficit.
Judging by the data released by the US government, the fiscal deficit problem will rise by $1.9 trillion in 2024. Compared to previous forecasts, the U.S. fiscal deficit continues to widen.
In particular, after next year, the U.S. fiscal deficit will rise sharply, and the key reasons for the rise of the U.S. fiscal deficit are not only foreign military aid, but also student loan forgiveness.
As the U.S. fiscal deficit grows, so do the risks to global financial markets. Forecasts made by professional institutions in the United States show that in the next 10 years, the debt inflation rate in the United States will rise sharply, and the proportion of debt held by the people in the United States GDP will rise from the current 99% to 122%.
The pace of GDP growth in the United States has slowed markedly relative to the growing size of debt. In view of the current debt situation and economic growth of the United States, the International Monetary Fund has decided to lower its GDP growth forecast for the United States. It was revised to 2.6% from 2.7% in April.
In recent years, the U.S. fiscal deficit has reached about 9% of U.S. GDP, once again creating the first three growth levels in U.S. history.
The expansion of the US fiscal deficit will only further exacerbate the risks on the US finances. This, combined with the fact that the United States needs to spend mainly on public services, defense spending, and high-scale debt interest payments, will further exacerbate the instability of U.S. debt and bring greater risks to global financial markets.
What do you think about U.S. Treasuries? Welcome to discuss in the comment area!
Information sources:
China Economic Net: Why is the "dammed lake" of U.S. bonds worrying the world