signs that the U.S. economy may be facing a potential debt crisis. On the one hand, Reuters reported on July 7 that the latest release of the Federal Reserve policy meeting minutes from June 14 to 15 showed that the inflation situation in the United States is deteriorating, and policy makers unanimously agreed that may raise interest rates again in July 275 basis points. This will face an increase in debt interest costs for the US economy, which was originally heavily in debt.
U.S. Congressional Budget Office (CBO) estimates that the interest on U.S. debt is estimated to be $305 billion as debt increases. And by 2031, the cost of net interest on U.S. federal debt expenditure will double and by 2051.
On the other hand, the international rating agency Fitch has downgraded the outlook for the US sovereign credit rating from "stable" to "negative". And warned that the US debt repayment ability is worrying. Wall Street Senior expert Peter Schiff said that the U.S. debt crisis is imminent. At present, the CBO has revised the US deficit figure in 2021 to $3 trillion. The CBO also expects the cumulative deficit to be $12.1 trillion in 2022-2031, or an average of $1.2 trillion per year. Schiff said that as the U.S. budget deficit surged to more than $3 trillion two years ago, more than double the previous record deficit, the U.S. Treasury is empty, it is just the secretary of debt. The real responsibility of the debt secretary is to increase debt and ensure that people who are lending to the United States around the world do not stop. It is worth noting that in the past 36 months, the U.S. fiscal has repeatedly hinted that it may consider issuing 100-year U.S. Treasury bonds.
This is also mentioned by BWC Chinese website many times. Through the US Treasury Department's continuous issuance and selling US bonds to the world, the US economy has easily transferred the huge annual deficit risk. As shown in the figure below, as of July 7, the total US federal debt has reached about $30.56 trillion, setting a record. Every U.S. citizen (man, woman, child) bears $91,727 debt for this, while every U.S. taxpayer bears $242,986 debt for this. Schiff said the U.S. Treasury Department and the Federal Reserve robbed American people of money like criminals.
Indeed, according to data released by the U.S. Treasury Department in June, the U.S. Treasury Department and the Federal Reserve have released a total of $36 trillion in basic liquidity (M1, M2), increased debt ceiling, Fed balance sheet, fiscal budget deficit and a package of economic stimulus plans to make up for the fragility of the system in just 38 months, but this has not changed the fact that the U.S. economy has fallen into a depression.
For example, the U.S. inflation increase index from March to May this year both exceeded 8.2%, 8.5%, 8.3%, and 8.6%, respectively, and hit a 40-year high. In the latest GDPNow model on July 1, the Atlanta Fed estimated the real GDP growth (seasonally adjusted annual rate) of the United States in the second quarter of 2022 at 2.1%. In other words, the Federal Reserve predicts that the US economy will have negative growth.
"New Debt King" Gundrak said that if there is no debt, the US economy will grow negatively. The US financial website Zerohedge reported on July 3 that in 2021, the social security benefits paid by the United States exceeded investment income for the first time since 1982. The U.S. Social Security Commission estimates that by 2033, the U.S. Social Security Trust Fund will be exhausted. Among the debts cashed or repaid in the United States, part of the funds come from the above-mentioned funds in the United States.
US media believes that this may be the critical point of the US debt crisis. There may be an Ponzi scheme in the current US dollar debt market. In the past few months, a large number of wealthy people have suddenly fled in cities in the United States due to debt reasons.
As of the end of June, about 12,000 millionaires in the United States are performing a real-life version of the Exodus of Egypt. And in Illinois , about 110,000 people have left. The reason people left was due to the increase in tax revenue and the state’s severe debt crisis. This shows that more and more Americans are paying a high price for being heavily in debt.
Also, according to the latest homelessness assessment report released by the U.S. Department of Housing and Urban Development (HUD), more than 326,000 people are homeless every night in the United States. This shows that 1 in every 1,000 Americans is homeless. The latest survey data released by the U.S. Census Bureau shows that about 30 million Americans have been hungry in the past week. More and more Americans are heading towards food bank (also known as the Food Relief Department).
International Revenue Service believes that the prospect of US economic recovery is very pessimistic and the depression may continue until 2027. All of the above phenomena mean that in the context of the Federal Reserve entering a cycle of interest rate hikes, it is difficult to truly redeem the depressed US economy. From a realistic perspective, the US economy needs to face the world more, find more creditors and issue more US Treasury bonds to cope with the crisis.
However, despite the U.S. Treasury Department's hint to issue ultra-long-term U.S. bonds, as the U.S. economic credit rating is downgraded and inflation is high, global buyers may become increasingly reluctant to lend money to them. Thebalance, the latest report from the US media, said global buyers may eventually hesitate to buy U.S. Treasury bonds because they are worried that the United States may not be able to repay its debts.
Therefore, for the US economy, the risks are self-evident once global buyers stop buying or sell US Treasury bonds significantly. However, at this time, it is worth noting that according to the latest TIC data released by the US Treasury Department on June 16, the data was delayed for two months, and foreign official institutions sold a total of up to $158.3 billion in U.S. Treasury bonds in April this year. At least 27 countries sold U.S. debt.
Take Japan, the largest overseas holder of U.S. bonds, as an example. Japan sold U.S. bonds for two consecutive months in March and April, selling a total of US Treasury bonds of US$87.8 billion. 's holdings of fell to US$1.2185 trillion, the lowest level since January 2020. US financial website Zerohedge said that Japan is selling U.S. bonds on an epic scale.
It is worth noting that the latest data from the US Treasury Department shows that as the second largest overseas holder of US bonds, China reduced its holdings of US bonds by US $36.2 billion in April, and China's selling force in April was the biggest, and US bond holdings have dropped to the lowest since June 2010 to US $1.0034 trillion. From the figure below, we can see that China held US$1.1849 trillion in US Treasury bonds in December 2017, and was the largest overseas holder of US Treasury bonds with a higher holding than Japan. In the past four years, China has sold US$181.5 billion in U.S. Treasury bonds in advance.
US financial website Zerohedge quoted relevant media and experts as saying that as the US federal deficit surges and increases default risk and other factors, China may gradually reduce its holdings of US Treasury bonds from the current more than $1 trillion to about $800 billion. Under normal circumstances, China may "gradually" sell 20% of U.S. Treasury bonds, and if the risk factors increase, it may also give up.
American media CNBC and Russian media RT have analyzed that if multiple US bond buyers around the world continue to sell US bonds, the US debt deficit economic model will have an impact. Repaying US Treasury bonds as promised has become an obligation that the US economy must fulfill, and it is also the only way to maintain its position as a US dollar reserve currency.
In this regard, White House former chief economic adviser Kudlow said, "The integrity of the United States in repaying debts is sacred and inviolable, and the same is true for our commitment to maintaining the US dollar as the world's reserve currency." Experts from the Carnegie Institute of International Peace in the United States have analyzed that the United States will continue to sell more bonds to the world, but it cannot violate its obligation to repay debts. Once the United States has any debt breach of trust, the credibility of the US dollar as a global currency will be greatly damaged.
Wall Street commodity king Jim Rogers repeatedly said with concern about the huge US debt that debt is everywhere, and printing money is everywhere, and ultimately, there will be a price for the heavy debt. The United States may experience a more serious financial crisis than the 2008 financial tsunami. The debt crisis may be the financial nuclear bomb that triggered this crisis. (End)
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