The United States is about to face another "shutdown" crisis.
Is the U.S.government going to shut down again?
Recently,the U.S.federal government began to plan the fiscal budget for the next year,but this budget has been stuck in the U.S.Congress.According to a warning from U.S.Commerce Secretary Gina Raimondo,if Congress continues to block the budget and does not pass it,the U.S.government will "shut down" on October 1st.Government agencies will be unable to operate.
Raimondo warns: The U.S.government may shut down on October 1st
So,when the Chinese people are celebrating the National Day,will the U.S.government actually shut down?What is the cause of this dispute?Let's talk about this issue today.
The stuck fiscal budget and the rising U.S.debt crisis
Why might the U.S.government shut down on China's National Day?Mainly because the United States is running out of money.
Some people might say I'm talking nonsense,after all,not long ago,the two parties in the United States reached an agreement to give the U.S.Treasury enough authority to "ignore the debt ceiling" and issue U.S.Treasury bonds to fill the empty U.S.finances.How could there be no money?
In fact,the resolution of the U.S.debt ceiling issue only announced that the U.S.government has the qualification to borrow money,but to spend money,a "fiscal budget" must still be submitted.If this budget is passed in Congress,it will have the so-called "spending qualification".Otherwise,even if the government has more money,it's useless.Even spending 1 dollar in violation is unconstitutional.
Biden announced the latest fiscal plan,which includes military expenditure of up to $835 billion.However,the Biden administration has not been able to pass the fiscal budget smoothly this time.The U.S.Congress has not yet approved the debt budget for the latest fiscal year,which means that the U.S.government currently does not have the authority to spend money.Therefore,by October 1st,the U.S.government may be forced to shut down.
So,why doesn't the U.S.Congress approve the new fiscal year budget submitted by Biden?Mainly,there are significant issues with this budget.
To put it simply,the deficit scale of the new fiscal year budget submitted by the Biden administration will increase substantially.The new budget's government deficit will be twice as large as last year's deficit,with an approximate scale of a $2 trillion deficit.Therefore,U.S.Congress members find this number to be too exaggerated,as other countries' deficits only increase by 5%-10% to align with the scale of inflation.
In the first ten months of this year,the U.S.government's deficit has already reached as high as $1.6 trillion.
As a result,the U.S.has directly doubled its deficit increase,and this terrifying scale of deficit is basically only seen in countries that are heavily militarized due to war needs.
So,in my opinion,it is reasonable for the U.S.Congress to scrutinize this rather "excessive" fiscal budget,after all,who let the Democrats be so excessive?
Where does this extra doubling of the deficit come from?This requires us to start with the current state of the U.S.economy.
Why does the U.S.fiscal deficit need to double?
The root of everything still has to start with the Federal Reserve's efforts to combat inflation.Since the Federal Reserve began raising interest rates last year to address the inflation crisis,it has increased the domestic interest rate level in the U.S.from close to 0% to the current 5.25%-5.5%.This has led to the U.S.government having to bear a large interest expense whether it is issuing debt or borrowing money.
The U.S.needs to bear more and more interest.Especially in the months leading up to the debt ceiling deadline,
the U.S.government has essentially been living on borrowed money.Consequently,after June,the U.S.Treasury has been frantically issuing Treasury bonds to fill the "deficit" that the government's accounts had previously overdrawn.
According to data statistics,this year the U.S.government's debt interest expenditure has been $652 billion,accounting for 14% of the total federal expenditure.This figure is actually quite high,as the general standard is around 10%.Looking at a deficit of $2 trillion a year,it implies that the U.S.government's interest expenditure will significantly increase.Subsequently,surpassing 20% is not a problem either.
This means that the "snowball" of U.S.debt is getting bigger and bigger.Thus,we can see that although the Federal Reserve has curbed inflation within the United States through substantial interest rate hikes and managed a soft economic landing quite well,the continuously climbing interest rates are actually the "death warrant" for the U.S.debt problem.
The interest expenditure on U.S.Treasury bonds has already exceeded military spending.
So now the hot potato is back in the hands of the U.S.Congress: if Congress passes such an outrageous budget bill,then the U.S.debt crisis is probably beyond saving.
However,if they disagree and continue to block the budget bill,then the U.S.government will shut down on October 1st.This is quite ironic,as China celebrates its National Day,and the U.S.begins its own holiday.After all,with the government not working,many things simply cannot be done.
So what will be the final "fate" of the U.S.government?We can look forward to it during the National Day to see whether the U.S.government will actually "shut down." Of course,even if it does shut down,it's not surprising,as the U.S.government has shut down many times in history.In the past four years alone,it has "shut down" more than 20 times.
The escalating U.S.debt crisis is the real death warrant for the United States.
In fact,the ever-expanding U.S.debt has already begun to backfire on the U.S.economy.
Firstly,in order to maintain the development of the U.S.economy,the U.S.government has chosen to solve problems by issuing debt and increasing the deficit.Only by issuing more Treasury bonds and printing large amounts of dollars can low inflation and a certain economic growth rate be ensured,achieving a soft landing for the U.S.economy.The Treasury issues government bonds,and the Federal Reserve is responsible for purchasing them.
However,when the debt and interest accumulate more and more,this balance will be disrupted,and the Federal Reserve needs to start considering whether its interest rate hikes are putting too much pressure on the fiscal interest burden?The United States also needs to consider the issues of wages and inflation brought about by the core inflation rate.
So currently,the problem in the United States is that the Federal Reserve is still raising interest rates,but the core inflation rate remains high,the debt ceiling has been resolved,but the fiscal deficit has doubled directly,and interest expenditures are also increasing.
To be honest,will the U.S.economy have a soft landing?I think the probability is still very high,and even whether the United States can get through this shutdown crisis and inflation crisis,I think the probability is also very high.But for the debt problem,apart from cutting expenses,I really haven't thought of any good solutions.
Due to the previous savings and financing of residents,most American residents currently have funds to support life and consumption,but as these funds are depleted,the United States will inevitably experience a slowdown in the economy,leading to increased unemployment rates,decreased GDP growth rates,and other issues.
The number of poor people in the United States is increasing.The wealth gap is widening.
And according to surveys by the American media,63% of American employees are unable to cope with an economic expenditure of $500,and the number of Americans withdrawing cash from their retirement accounts is also on the rise.
After all,the current annual interest rate of more than 20% on credit cards in the United States has pushed all middle-class and poor people into a difficult survival situation.
Summary
From a macro perspective,it is very simple for the U.S.economy to maintain a "decent" state.Because according to the current mainstream modern economic theory,the U.S.government only needs to issue a large amount of debt,which can easily solve the crisis of a hard economic landing,and it can also have a huge fiscal expenditure to meet the welfare needs of American residents.The credibility of the US dollar is what supports the United States.
However,we all understand that this is all based on the United States printing dollars and overdrawing the credibility of the dollar.Once the credibility of the dollar is completely overdrawn,then the "fortune" of the United States will come to an end.Don't even talk about restricting China,it is estimated that the United States may not even be able to afford the operation and maintenance costs of overseas military bases.
Therefore,the United States is now criticizing China's economy for "dragging down the global economy." In contrast,we argue that the Federal Reserve's interest rate hikes and the previous quantitative easing that led to global inflation are the real culprits.
I believe that we will be the ultimate winners!
So,who will ultimately win between China and the United States?This depends on "endurance." The friction and inflation between China and the United States are not just about chip issues or military issues,but a thorough economic defense war.If China can endure until the credibility of the dollar hegemony is overdrawn,then China will be able to laugh last!
If China and the United States must determine a winner,then I believe that we will be the ultimate winners!
