LEO
Oct 25, 2021 14:05
History
The United States has had national debt since its founding. It was proposed by Alexander Hamilton, the first U.S. Treasury Secretary, that in the first year the U.S. Congress passed the national debt, it raised 75 million in national debt.
In addition, the national government does not have the right to issue currency. If the government wants to obtain U.S. dollars, it must issue national debt with future taxes as collateral, and then use the national debt as collateral to the Federal Reserve to issue currency through the Federal Reserve.
War and financial crisis stimulated national debt
The first surge in the size of US Treasury bonds was during the Civil War. In 1860, the size of US Treasury bonds was only 65 million U.S. dollars. By 1863, it had exceeded 1 billion U.S. dollars. After the war, it further surged to 2.7 billion U.S. dollars, and then slowly and steadily increased. The second surge was World War II. The US Treasury debt soared from 51 billion US dollars in 1940 to 260 billion US dollars after the war.
The financial crisis is another starting point for the sharp rise of US Treasury bonds. In order to stimulate the US economy to get out of the crisis, the US government had to allocate trillions of dollars. As a result, the scale of Treasury bonds expanded sharply. On September 30, 2008, the US Treasury bonds exceeded 10 for the first time. Trillions of dollars. By May 2011, U.S. Treasury bonds reached the upper limit of US$14.29 trillion allowed by Congress. As of February 11, 2019, the size of U.S. Treasury bonds has exceeded $22 trillion.
The epidemic this year has also greatly stimulated the national debt. According to the US Treasury Department, since the beginning of 2020, the total US Treasury debt has increased by nearly US$3 trillion, exceeding US$26 trillion for the first time in history, setting a new record. Economic analysts predict that by the end of 2020, US Treasury bonds may rise by more than $30 trillion.
Long-term low yields drag down debt-holding companies
After the yield rate drops sharply, it will be difficult to return to the previous high. The current U.S. Treasury bond yields have not returned to the level before the central bank cut interest rates in the past two decades. Under the epidemic, the long-term low yield rate will put banks, pension funds and insurance companies in a difficult situation for overseas securities investment.
The huge US national debt not only affects the economies of other countries, but also casts a shadow on the prospects of the US economy. If the size of the US Treasury debt continues to expand significantly, and the US cannot take effective measures to ease the debt situation, it will cause the international community to worry about the dollar.
The worst-case scenario is that U.S. bond holders dumped large amounts of U.S. Treasury bonds in the financial market, leading to a substantial depreciation of the U.S. dollar and even triggering a dollar crisis. In the current situation where the global financial system is dominated by the US dollar, the US dollar crisis will cause global financial panic and stock market shocks, and endanger global finance.
Oct 25, 2021 14:05
Oct 25, 2021 14:05