In less than four months, the national debt has risen by another $1 trillion.
On January 2, local time, the US Treasury Department released a report showing that the total US national debt reached 34 trillion US dollars for the first time.
According to the latest data released by the US Treasury Department, on September 18, 2023 local time, the scale of US national debt broke through 33 trillion US dollars for the first time, reaching 33.04 trillion US dollars. In June 2023, the size of the US national debt exceeded $32 trillion, and in just three months, the size of the national debt increased by another $1 trillion. Net Treasury issuance in the third quarter was also the highest on record for the same period.
Wen Bin, chief economist of China Minsheng Bank (3.760, 0.00, 0.00%), previously said that US Treasury bonds have always been issued on a rolling basis, but the current interest rate level in the United States is at a high level, resulting in rising debt costs for the US Treasury. From the perspective of fiscal revenue, it is very difficult for the United States to realize a significant increase in tax revenue in the near future, which makes the U.S. finance can only be financed by increasing the scale of debt, resulting in the situation that financing costs and debt scale are rising rapidly at the same time.
Experts say the debt issue and spending cuts have been the bargaining chips in the U.S. political game in recent years, and the two parties have long gone back and forth over these issues.
Lu Zhe, chief economist at Deppon Securities, has said that political chips are also related to votes, and both sides want to bargain for some favorable terms. However, from the previous situation, the projects to cut government spending are closely related to the people's livelihood of the United States, for pensions, health care funds and other projects, that is to say, the ultimate loss of benefits is the majority of ordinary Americans.
According to the Economic Daily reported on December 26, 2023, in 2023, with the US dollar index strengthened by the Federal Reserve's continued interest rate hike, the amount of US Treasuries held by overseas investors increased in volatility. However, as the scale of U.S. debt continues to expand under high interest rates, making it difficult for the United States to maintain financial stability, the recent trend of global parties to reduce their holdings of U.S. bonds to avoid risks has not changed.
Some analysts believe that although the report reflects the market situation two months ago, the oversupply of the US Treasury market has not changed, and the relationship between supply and demand of US Treasuries is undergoing structural changes.
From the domestic point of view of the United States, the lack of economic growth momentum, high inflation, and high government deficit ratio have made it difficult to stop the "pace" of debt issuance in the United States, and the scale of national debt has been expanding. At the same time, after 11 interest rate hikes, the Federal Reserve has pushed up the federal interest rate to the level of 5.25% to 5.5%, and in the context of the term spread inverted, the yield turned negative and the correlation between stocks and bonds turned from negative to positive, the demand of domestic banks, pensions and other institutional investors to allocate long-end US bonds tends to decline, and these factors have made the cost of US government debt soar. Currently, the U.S. budget deficit for fiscal 2023 is $1.695 trillion, an increase of about $320 billion, or 23%, from the same period last year. Some analysts point out that the U.S. is getting deeper and deeper into a vicious circle of fiscal deficit, issuance of Treasury bonds, interest payments, and larger fiscal deficit.
From the international perspective, although the US dollar still occupies the first place in global trade settlement, foreign exchange reserves of central banks, global debt valuation and global capital flows, the abuse of the US dollar's status and serious overdraft of US dollar credit have long planted seeds of mistrust in the hearts of countries, and the willingness to accelerate the diversification of the international monetary system is increasing. In this context, overseas investors' demand for US debt allocation is diverging. On the one hand, the scale of foreign investors' holdings of US Treasuries will increase overall in 2023, but the scale growth is mainly concentrated in Japan, the United Kingdom, Canada, France and other US Allies; On the other hand, more countries have continued to reduce their holdings of US Treasuries for the purpose of optimizing the structure of foreign exchange reserves and diversifying asset risks.
U.S. Treasury Secretary Janet Yellen has warned that a default by the United States would have severe consequences that would devastate both the U.S. and the world economy. Yellen said a default would threaten the hard-fought gains we have made in recent years in the economic recovery, which could plunge the global economy into recession or undermine America's global economic leadership.
Ms Yellen said the mere possibility of a default would lead to a downgrade of the US sovereign credit rating and a loss of confidence in the markets, which would cause "economic and financial catastrophe" if it happened. She proposed that the United States establish a new mechanism for determining fiscal policy, such as abolishing the debt ceiling altogether or changing the existing process for raising the debt ceiling
