Where will U.S. debt go when the debt ceiling takes effect?

　　(Financial World) What will happen to US debt when the debt ceiling takes effect?

　　China News Service, Beijing, July 27th. Question: Where will US debt go when the debt ceiling takes effect?

　　Author Liu Wenwen

　　Recently, life in the United States has been very difficult due to the attack of inflation and the debt crisis.

At present, the scale of US debt has reached an all-time high.

From August 1st, the debt ceiling will be reinstated. What will happen to the US debt?

　U.S. debt reached a record high

　　Since the outbreak of the new crown pneumonia epidemic in the United States, the United States has frantically printed money and implemented unlimited quantitative easing policies, which directly caused the U.S. debt to skyrocket and inflation reached a new high.

　　At present, the total public debt of the United States as a percentage of GDP has reached a historical high since World War II.

Data show that in fiscal year 2020, the US federal government's fiscal deficit is 3.1 trillion US dollars; today, the US Treasury debt has exceeded 28 trillion US dollars.

At the same time, the inflation situation in the United States is also very severe: In June, the US consumer price index rose at the fastest rate in the past 13 years, and even exceeded the highest expectations. The Fed's so-called "temporary inflation" seems to be untenable.

　　Although Fed Chairman Powell has repeatedly emphasized that he is not worried about the "bursting" data in the United States, saying that as long as the economic recovery enters a mature stage, the situation will improve, but this does not seem to be enough to stabilize the people.

　　From August 1st, the debt ceiling will be restored to take effect.

In the face of huge US debt, US Treasury Secretary Yellen urged the US Congress on July 23 to raise the federal government debt ceiling as soon as possible to avoid the risk of government debt default.

The U.S. Congressional Budget Office has previously warned that if Congress does not pass new legislation to raise the debt ceiling or suspend its effectiveness, the United States is likely to face the risk of defaulting on government debt in October or November of this year.

　Will U.S. debt collapse?

　　Why is the United States so in debt?

Yang Xiyu, a researcher at the China Institute of International Studies, said in an interview that there are two reasons for the high debt of the United States.

　　One is the structural contradiction accumulated over a long period of time.

The United States has a deficit fiscal year-round, with a deficit of hundreds of billions of dollars.

The higher the total debt, the greater the annual interest rate on debt repayment. As a result of long-term accumulation, the total public debt accounts for a higher and higher proportion of GDP.

Second, the sudden outbreak of the epidemic and the economic recession have forced the US government and Congress to borrow heavily to stimulate the economy, making the originally accumulated structural contradictions more prominent.

　　"The superposition of the two factors has brought the long-term accumulation of US debt to a critical moment in danger." Yang Xiyu said.

　　There are only four days before the debt ceiling takes effect on August 1.

Will U.S. debt collapse?

　　In this regard, Yang Xiyu gave a definite answer: no.

　　He said that in addition to the United States, some countries, such as Japan, have a high proportion of public debt to GDP.

Under the trend of modern economic debtization, the world is in a debt economy, and the possibility of US debt collapse is not outstanding.

　　"More importantly, due to the long-term accumulation of solid credit, the United States can still borrow again." Yang Xiyu emphasized that not only the specific figures of debt risk must be seen, but also the hidden soft power beyond the digital statistics. That is, dollar credit.

Although the United States has reached the highest level of debt risk, its credit foundation remains solid.

　　He believes that although U.S. debt will not collapse, it will be hard to return.

The only way out at the moment is to continue borrowing on the credit of U.S. dollars and to raise debts with debt.

　Who flooded the dollar?

　　With debts to raise debts, unlimited allowances, and the continuous release of the US dollar, who will be flooded?

　　Chen Fengying, former director of the Institute of World Economics at the China Institute of Modern International Relations, told reporters: "Debt is certainly an important issue, but what is more serious behind the debt is the responsibility of the U.S. dollar as the dominant currency. This may be the most critical."

　　As the most extensive international currency, the rise and fall of the US dollar have important effects on many countries, including emerging market countries.

The depreciation of the U.S. dollar will inevitably shrink the U.S. dollar assets held by some countries; the appreciation of the U.S. dollar will cause these countries to face capital outflow.

　　Chen Fengying bluntly said that we must see that behind the US debt crisis, the potential risk is the emerging market crisis.

"At that time, the United States will be like a pit, siphoning other capital into it."

　　Yang Xiyu also said that the flooding "harmed the United States and the world": it not only caused the American people who have been enjoying a low-inflation life for many years to suddenly face a situation of rising inflation, but also created a crisis of US fiscal uncertainty, or affected the entire international currency. system.

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