Since bond yields in more than one country fell to “subzero” in August this year, the U.S., which has always liked to borrow money, has claimed to be studying the “a hundred-year-old debt”. However, after the “a hundred-year-old debt” was rejected by a large number of Wall Street investors, the U. S. financial market has also seen a “dollar shortage”. In order to solve the problem, the Federal Reserve has announced a restart of the currency counter. However, the latest report shows that fed economists have begun to deny the practice.
Once upon a time, US debt was popular all over the world, because the comprehensive strength of the United States was strong and the position of the US dollar in the world was unshakeable. The United States was also willing to issue US debt in order to promote economic development. However, as the US economy was tired of debt, and the credit of the US dollar gradually declined, there was a chain reaction, and the United States was also “addicted to debt,” and the overseas creditors holding US debt could no longer sit down. Worried about being affected, so they began to choose the same choice to sell American bonds. China, the largest foreign debt country of the United States, however, did not realize that China was also beginning to reduce its debt as its debt gradually expanded. Now, after selling 81 billion US dollars, China is no longer the largest creditor of the United States, but compared with Russia, China is still more conservative, because Russia has almost “cleared” the US debt, and when the US debt was “abandoned” by many countries, the increase in the US fiscal deficit also made life difficult for the United States!
Many people may not yet know that the fiscal deficit of the United States has reached $866.8 billion and the fiscal deficit has not kept pace with the growth rate of spending, so the United States is “unable to make ends meet”, and even more terrible things have happened. The United States also expects the fiscal deficit to exceed $1 trillion in 2022. The United States, on the other hand, looks light. In the words of experts, as long as the dollar is still the reserve currency of the world, then the United States does not have to worry! In fact, the United States has also come up with measures to deal with it, that is, to extend the maturity of bond issuance!
Global negative yield debt reached $17 trillion in August, getting closer and closer to the 2018 GDP, when bond yields in six countries, including Germany, Switzerland, Sweden, Denmark, Finland and the Netherlands, were completely “fallen” into negative yields.
The move, though raised speculation about the global recession, seems to be the best time for the country’s low-cost borrowing to be a low-cost debt to the US. The Treasury has said it is working on a 50-year or even 100-year debt. The move, however, is not only against the opposition of many Wall Street investment banks, and even economists call it a “Ponzi scheme”.
That seemed to dispel the idea of a longer-term Treasury bond, but soon after, U.S. financial markets suddenly plunged into a “dollar shortage.” The problem has not been effectively resolved after the New York Fed rushed to release water and bought $176 billion in U.S. debt for three weeks. As a result, the Fed officially announced that it would restart the banknote printing machine, ready to print 540 billion dollars to transfer the crisis. The move has led to a renewed decline in credit for the dollar, and countries have lifted the risk of shrinking dollar assets by selling US debt or transporting back gold. A recent report by foreign media showed that after 13 countries, including Germany, had requested the return of gold from abroad, the Polish International Bank said on 25 November that it had shipped its 100 tons of gold in the United Kingdom back to Poland.
After Germany and Turkey, another country that has successfully returned to gold from abroad, what about China? Although China has not yet joined the actions of countries to return to gold, the central bank of China has also broken the silence to make it clear through the selling of US-debt and gold-holding.
In recent days, the Fed’s approach seems to have an impact on the U.S., which has no scruples about currency issues. Since September, the Federal Reserve has been reported to have bought some $25 billion of US debt, expanding its balance sheet from $3.8 trillion to about $4.05 trillion. The Fed, however, has suddenly closed its hands.
The Fed’s balance sheet, close to Nov.20, has contracted to $4.03 trillion, the first contraction of the Fed’s balance sheet in the last three months, the data said. Why didn’t you make a sudden impression of the fed “Salvation” ‘s fed? Perhaps the latest statement from the fed’s economists could be explained.
Fed economist Scott A. Wolla and Kaitlyn French on Nov.26, in his latest paper, said it would be a disaster for the country to make up for deficit spending by printing money. The two economists say some highly indebted countries have tried to solve the problem by printing money by issuing bonds to borrow money and buying them from central bank notes.
This is what the Fed’s QE does. They say historical experience shows that this approach will eventually lead to hyperinflation, ending in an economic collapse, with Weimar-era Germany, Zimbabwe in 2007 and Venezuela today learning from it. In fact, in addition to Wola and Frekin, the practice of printing money to fill the deficit has also been opposed by many Wall Street pundits. Debt King Jeffrey Gundlach has previously said this is a “whimsical idea.”
Thus, there may be two factors that may have caused the Fed to suddenly stop printing money in the near future, perhaps because it is realized that it is not feasible to transfer the crisis by printing money, or because it is concerned that continued printing will aggravate the de-dollarization of countries. However, U.S. economic data are slowing, and if the Fed does not continue to print money, the country’s economic growth is likely to continue to slow, so the Fed may be in a dilemma.