The US went into debt since 1934, till 2019 the number of debt already reach 22000 billion dollars.
The international monetary fund predicts the debt of America will reach 1.6 times than GDP. If we only focus on data, which looks like no one will buy the treasury from the US. But actually the US treasury is the world recognized AAA grade investment products.
The United States is the poorest country in the world(High Debt). It is also the wealthiest country in the world(High Debt). The US becomes rich by borrowing.
So let’s take a look and study on why the US treasury is so popular and how it works.
The power of the dollar and The status of America(Take China for example)
China as a big export country, compare with the US, we are in the trade surplus situation. So there are plenty of dollars influx into China. But it is not allowed for companies to use dollar directly that earned by international trade, the bank will change the dollar into the Chinese Yuan for companies.
Therefore, the Chinese bank has more and more dollar, then we need to find a way to invest, the best way to invest the US treasury.
Till 2019, China as the biggest creditor holds 1.126 thousand billion dollars of treasury from the US.
America buys the goods from other countries by using dollars, then sign a credit note to get the money back.
That’s because of the status of the dollar in international trade. And international credit comes from the status of America.
To sum up, The US treasury is the most successful financial product. Various countries use their products trade with the US, then they use dollars they earned to buy the US treasury when the US treasury mature, these countries still get dollars back, they don’t have many choices, at last, they buy treasury again.
Actually, money is only a number, the only meaningful thing is what we trade for by using money. America keeps issuing new treasury, uses new debt to pay off previous debt, uses the treasury to change countless resources.
From my perspective, that’s the most successful investment product in the world. We can notice money for countries just a number. Even The US get into huge debt, they still as a strong country develop super fast.
When we talk about debt, which not about how huge is the debt? It’s about what we can produce by these money.
Only when the debt beyond our capacity of supply will inevitably lead to currency depreciation, inflation, government bankruptcy, and economic collapse.
So we should focus on how to raise our currency status and increase the strength of countries.
Certainly, If someday virtual currency like Bitcoin can replace other currency, The US absolutely will be anxious, people will start to sell the US treasury and buy into Bitcoin.