Spark Global Limited reports:
Since the end of World War II, Congress has changed the debt ceiling 98 times, mostly by raising it by a certain amount, according to the Congressional Research Service. Since 2013, however, Instead of directly raising the debt ceiling, Congress has set a time limit to suspend it, allowing the Treasury Department to issue debt without restriction during that time. As a result, seven suspensions of the debt ceiling by Congress took effect, most recently the $22 trillion debt ceiling in August 2019, when Congress allowed the Treasury to continue issuing debt until July 31, 2021.
So now the debt ceiling is back in effect, with a new debt ceiling of $22 trillion, plus new debt outstanding since August 2019, and an estimated debt of $28.5 trillion for the current year.
Concerns about the size and ceiling of the US debt and the next level of the deficit are raising concerns in the markets, and the us government itself is in dispute and ill feeling.
In the face of the world’s important influential currencies, as the world’s asset price and capital oriented currency, how to view the characteristics and special problems of the United States is an important perspective of thinking.
The first is that America’s debt is a cliche, and its borrow-to-live model is a feature of the dollar.
As the largest economic power in the world, it is precisely because of the DOLLAR that the EXPANSION of debt and deficit of the United States is not the focus that the United States cannot afford. On the contrary, the return on dollar assets and capital is the focus that the debt and deficit of the United States can be recycled or cannot collapse.
Therefore yellen, us Treasury secretary suggested the seriousness of the U.S. debt, and adopt flexible tactics to deal with the debt unable to cycle, it does not seem to be is that allay the other fears of the market, increasing market panic, conversely essence is contributed to the dollar, this is the price of the U.S. economy and structure distortion is very important operation indicator of vane and meaningful.
As an experienced and sophisticated country, the United States will not choose to destroy its future prospects because of the unsustainable borrowing model. This is an important mistake and blind spot for the market to underestimate the power of the United States.
The United States is a country where you borrow other people’s money to do your own thing. Raising the debt ceiling will not reverse or change it. The United States has raised the debt ceiling 98 times in history, and the United States will raise the debt ceiling 99 times this time. Especially in the special period of the epidemic and the complicated economy, the extreme of the Federal Reserve’s monetary policy is highlighted. The ample dollar liquidity has become the key point that the dollar is difficult to depreciate, which is just the core of the sustainable debt of the United States. The dollar is the advantage and special that the debt and deficit of the United States can not fall down or even can continue to circulate.
Secondly, the interest rate of us dollar is forethought, and the interest rate of US Treasury bonds is the advantage of us dollar.
Looking at the essence through the phenomenon, facing the serious situation of debt and deficit in the United States, the limitation of observation perspective restrains our thinking mode and logic. Aside from the debt and deficit focus, in fact, the key to debt and deficit solution is the dollar interest rate, the low interest rate makes the dollar less attractive, the ultra-low rate of return on Treasury bonds lead to the reduction of U.S. Debt, which is obviously detrimental to the current U.S. focus issues.
So we must demonstrate the sophistication and dexterity of America’s problems from the combination and foresight. This is high inflation data stimulates the fed to raise interest rates in the United States, the federal reserve to raise interest rates to drive higher yields, and stimulate to strengthen investment in U.S. debt, the United States financial funding and debt risk drops, its core is not the government, through it or not, the key is whether the U.S. strategic layout can still get through the financing channel is the key.
So what seems to be the focus of debt and deficit is actually the fed’s interest rate orientation and choice. However, the market focus and public opinion have been in favor of a rate hike in 2022-2024, and the current rate hike is completely negative, which makes it more worrying that the Federal Reserve may raise interest rates unexpectedly. After all, the reality of inflation data is unavoidable. The high oil prices and housing prices are dominated by intentionally designed trends, and the United States will not do anything unprepared. Foresight is the advantage and strength of the United States.
The more markets shy away from raising rates this year, the more likely the Fed will raise rates in the future. After all, it is a fact that oil or commodity prices have risen, and THE U.S. PCE policy parameters are more dependent on the operation of these two kinds of indicators, rather than the simple CPI parameters in general countries, which is the focus of judging the direction of the DOLLAR interest rate.
The final dollar quote is a horse, the future implied risk is the dollar layout.
The current position and influence of the DOLLAR has not changed, but has been further strengthened. With the demand of the dollar to depreciate, the rise of commodity prices has the auxiliary role of restraining the appreciation of the dollar. Therefore, the current rise of the dollar and the rise of commodities are synchronized, indicating that the decline of the dollar and the fall of commodities may show the rule and logic of the standard operation in the future. The confusion of the price of the dollar is particularly worth paying attention to. Policies and public opinion are contrary to facts and are not divided between right and wrong, which is subjective and deliberate and even manipulative. The aggressive tendency is intentional. Prices are now deliberately pushing up inflation by design, not by time or demand itself. In particular, the core impact of the housing price is prominent, but in the face of the epidemic or income pressure, the housing price has a direct impact on inflation, more or similar to the repression of China’s national policy nodes and sensitive points of the risk selection period, the pattern of one arrow multiple eagle manipulates clever not to be taken lightly. In particular, the particularity of the United States cannot be ignored. It is not a general country or a low level country. The excellence of a master lies in being thorough to himself and clear to the outside world.
What America needs and what the world faces is crucial. In reality, the United States needs capital, capital needs rate of return, the rate of return node is the interest rate, the most difficult for the United States is the interest rate, not the size of debt or deficit, but the rate of return on dollar assets capital. The return on dollar assets is low, and the return on dollar capital is high. One is the bond market. The other is the stock market.
Therefore, we especially need to adjust the thinking logic and thinking Angle when facing the American factor. The American orientation is not the fact or the future, on the contrary, the disposal or solution of the essential problem is the soul of saving the United States.
In the face of complicated and tense situation, the truth and falseness of time and situation need to sort out normal and extraordinary cognition and logic. The thinking method and discussion of non-reality of public opinion and structure are the weight of defense and risk prevention.
It is expected that the United States debt ceiling is raised and no doubt, but the United States economy fluctuations or changes, the dollar depreciation is extremely possible, the United States stock adjustment of the combination of countermeasures, especially the real demand for the dollar interest rate is the key or key cut.