U.S. Treasury bonds are the U.S. government's commitment to repay bond holders the funds on paper plus interest. China has 1.38 trillion U.S. Treasury bonds.
Tomorrow, what will happen if China sells $1.38 trillion of bonds in the secondary market?
• sharp decline in the value of treasury bonds - the valuation of treasury bonds will bear the brunt, and the supply of treasury bonds issued by the United States will exceed demand in the secondary market, leading to unprecedented panic. The economic crisis in 1929, the terrorist attacks in 2001, the economic crisis in 2008 and the epidemic in 2020 will be insignificant compared with the panic caused by the excess of national debt, because the United States holds 115% of its GDP, its public owes too much money in national debt, more and more bonds will be sold and their value will plummet.
• depreciation of the US dollar - the US dollar will plummet within 3-4 hours, and the derivatives related to the US dollar will collapse and be sold off. In the next 4-5 days, the US dollar will have a large surplus and depreciation, which will lead to the overall collapse of the US economy.
• the currencies of relevant countries fell - economies closely linked to the United States would collapse directly due to investment in US Treasury bonds. The foreign exchange reserves of the UK, France, Germany and Australia will decline significantly, which will cause panic in these countries and markets, leading to a general decline of about 35% - 45% in the stock market. In the next few days, sterling and the euro will begin to depreciate.
• appreciation of Swiss franc and RMB - the Swiss Franc will appreciate, gold and China's RMB will also appreciate, and the growth of its value will gradually stabilize.
• the destruction of the US economy - markets will be destroyed piece by piece. As the currency plummets, the public will feel upset and panic. Hundreds of funds will lose up to 40% of their value overnight and about 80% of their value in 3-4 days.
A large number of selling will flow into the market, and the overall impact and damage will be disastrous. U.S. debt will lose value and reputation, and other countries will sell U.S. debt or threaten the United States to make more concessions (for example, Russia, which has $137 billion in debt, will tell the United States that it will not sell debt in exchange for ending all Sanctions tomorrow)
Unfortunately, even China cannot be alone.
• troubled Chinese exporters - Chinese exporters have a natural affinity for the dollar and their exports will plummet in a few weeks. Since the US dollar is a common currency - unlike the rupee - more than 60-70 countries will feel the impact of China's choice, which in turn means the end of China's sharp export growth and huge losses for Chinese exporters.
• manufacturing center in deep trouble - China's manufacturing facilities construction and labor force will suddenly stop, American companies or companies in many countries will no longer be able to pay or invest, the manufacturing industry will decline and the demand will decline.
• China's foreign exchange reserves plummeted - China has a large amount of foreign exchange reserves, and its value will plummet. This will mean that Chinese projects will be affected all over the world, including bri and obor.
The end result: both the United States and China will suffer a heavy blow. The United States will suffer a heavy blow. This time trump can no longer borrow money from the public, because the American public may even barter for salt and vegetables, and Americans will completely lose confidence in the dollar.
Is it true that the $1 trillion debt owed by the United States to China is more beneficial to the United States than to China?
First, we need to clarify some things. The United States has no debt to China, not at all. China has more than $1 trillion in US Treasury bonds, but this is completely different from "debt to China".
Anyone can buy or sell securities. When the US Treasury Department or similar developed country governments anywhere in the world (Britain, Germany, France, Japan, Australia, the Netherlands, etc.) sell sovereign debt, the world will queue up to buy it. US Treasuries, especially the top of the sovereign debt food chain, are regarded as safe havens by global central banks and institutional investors.
Moreover, back to the question, the US Treasury bond itself cannot be frozen because it is anonymous. The United States will not distinguish whether the Treasury bond belongs to China, Japan, Citibank or the United States. Therefore, there is noneed to worry about China's holding of us bearer treasury bonds.
However, if it does break, the United States can freeze China's capital account in the United States (note that this does not mean freezing the repayment of US Treasury bonds, but if it does, the 1.2 trillion treasury bonds will not matter), and terminate China's US dollar settlement system, but as a sovereign equivalence, Obviously, China will also freeze the domestic assets of the United States and stop the exchange of RMB and US dollar (in fact, similar things have been done in China for 49 years). This money is also very critical to the United States, especially for a large number of high-tech enterprises in the United States.
Once such a hard decoupling happens, not only China but also the United States cannot afford it. Don't forget that once the official exchange channels are closed, underground banks will inevitably rise, especially anonymous e-money represented by bitcoin will be popular, and the United States can't afford the price of China selling dollars in underground banks.
We should know that China and the United States are not the only countries in the world. If China and the United States blockade each other and eventually lose both sides, it can only be a complete victory for the euro in the end. And don't forget, China and Hong Kong.
In addition, one thing in history will also frighten the United States: in the early days of the founding of the people's Republic of China, it announced the control and inventory of U.S. assets in China, and frozen the deposits of the U.S. government, companies and individuals in China.
At that time, Britain had the most assets in China, and Americans ranked second. When new China was founded, there were more than 1700 foreign enterprises in China, of which 299 were British, followed by 212 in the United States. These companies are mainly in Shanghai, and banks alone have opened 12 before and after.
After receiving the order from the administrative yuan, the governments of all localities immediately deployed to investigate and take action on the U.S. assets within their respective jurisdictions.
First of all, we will exercise military control over the power, public utilities, real estate and other enterprises in the United States, and hand over the shares and creditor's rights of Americans in these enterprises to the people's Bank of China to set up a special account for freezing.
The wharves, warehouses, ships and oil companies owned by Americans should be expropriated immediately, leaving aside the issue of property rights, and the management right of the enterprise should be returned to the government first. For some materials, real estate and other property that can be valued, the central Bank of China shall set the price according to the property, and the funds received shall be frozen by the central Bank of China.
At that time, many American enterprises closed down long ago. The government ordered them to clean up and sell all their property within a time limit, and the proceeds were also frozen by the central Bank of China. In addition, all the land, farmland, horse racing grounds and other places that the imperialists used to occupy by virtue of their privileges should be recovered.
Shanghai is the core of American economic power in China, and most of its assets are concentrated here. On December 30, the Shanghai Municipal People's government took the lead in implementing the regulation of US funded enterprises. The primary objectives are Shanghai electric power company, Shanghai telephone company and Shanghai Electric Company. These companies were originally British. Among them, Shanghai electric power company was established by British DESs and others in 1882. It is the first large-scale power plant in China.
After the successful implementation of the regulation of the three major companies of electric power, telephone and electricity, the Shanghai Municipal People's government has implemented the regulation of 115 American enterprises, including American commercial bank, Texaco and Mobil.
At the same time, Beijing, Qingdao, Chongqing and other places have also checked and frozen American enterprises and assets in accordance with the guidelines of the central government. This action lasted until the end of 1952 and was basically completed. A total of 304 US funded enterprises were received and controlled in all localities, with hundreds of millions of yuan of frozen deposits.
The US economic power in China has been devastated and wants to freeze China's assets? The United States does not have the courage.