After continuing the previous article, the brothers raised many logical questions: Why should we issue treasury bond instead of printing money directly to the people? Why can Trump be afraid of selling US bonds? What is the logic behind it? What key role does the Federal Reserve play in treasury bond bonds? Why doesn't the US lose 36 trillion treasury bond? I still use plain and easy to understand language to popularize science for my brothers 🟧 Question 1: Why should we issue treasury bond instead of printing money directly to the people? Firstly, the issuance of government bonds is an economic matter. Many brothers are confused about how currency is released, thinking that banks print money and deliver it directly to everyone's hands. This is impossible, currency injection must correspond to demand and goods. give an example: There are ten Mantou in the market, one for one yuan. Mantou remain unchanged. If you put another ten yuan into the market for no reason, the price of Mantou will rise to two yuan. Under what circumstances should currency be released? People can't eat enough Mantou and need two Mantou, but they can't afford to buy them. So who will invest the currency? The central bank prints money and releases it through credit. Yes, it won't send money. If it sends money to you for no reason, will you still work and produce? Without labor, where does the value of production correspond to currency? Who will borrow money? official. Officially issued treasury bond, which were purchased by banks, investors, institutions, etc. The official receives the money, carries out infrastructure construction, subsidies, and even investments, and the money flows into society. The government wants to build a bridge, including materials, machinery, labor, etc., so that everyone can earn money and then buy two Mantou to eat. The Mantou shop found that the demand is growing and the supply exceeds the demand, so it recruited workers to buy equipment to increase production capacity. The economy has grown, a bridge has been built, Mantou has increased, jobs have increased, people's income has increased, GDP has increased in recent years, and official and local debts are increasing, which is why. So when the economy is not doing well, the authorities will go crazy with debt and then invest the money in the market. In fact, official debt is inevitable and necessary. It bears the responsibility of investing money to promote the economy. When people dare not to borrow money, no one is willing to borrow money, and the market is short of money and vitality, the government must borrow money to invest. The explosion of US treasury bond also occurs when the economy is in crisis. I correct the perception of many brothers (misled by some incomprehensible We Media) that the explosion of treasury bond is not that the government has no money to spend, but that the economy is in crisis. 🟧 Question 2: How to repay treasury bond? The country has taxes, profits from state-owned enterprises, and investment income. Almost all of this money comes from ordinary people, which means that the government will collect the released currency in time periods and return it to banks and investors. But there is a problem here. When the government gives money, people have more money and buy Mantou. If the government takes money back and people have less money, how can they buy Mantou? So, the government cannot blindly collect money. It needs to work with the central bank to maintain a certain amount of money in circulation in the market. Otherwise, when goods increase, people will run out of money, and they will not be able to sell their goods. This will lead to deflation, layoffs, and salary cuts in companies, making it difficult for everyone to survive. Logic is easy to understand, money cannot be returned blindly. The government wants to maintain a certain amount of currency circulation in the market. It only needs to pay interest every year, and when the debt matures, it can be borrowed to repay the old. This way, the money in the market will hardly decrease due to official debt repayment, but will be directed to new places (circulation) through a series of policies. So you see, it's reasonable for the authorities to have money but not repay debts. 🟧 Question 3: Will treasury bond still be paid? Everyone has been misled by the media, resulting in cognitive errors. After understanding the above two points, you should be able to understand that the official and central bank goals are consistent. Whether US bonds can be repaid depends on the Federal Reserve's attitude. The US system determines that the Federal Reserve does not care about so-called federal debt and only focuses on currency. Inflation, Federal Reserve raising interest rates and reducing balance sheets, recycling money from the market, and reducing money outflows. Deflation, the Federal Reserve cuts interest rates to expand its balance sheet, injects money into the market, and increases liquidity. When inflation in the United States comes down, the Federal Reserve will relax, lend money to the Federal Reserve and buy US bonds. Before that, the Federal Reserve would not pay any attention to how poor it was. Trump has asked for it many times, which is totally useless, because the independent agency of the Federal Reserve (or consortium control, to avoid the constraint of the President). So if the US economy doesn't collapse, you won't be able to see the US debt not being repaid. The Federal Reserve has the power to print money, theoretically as long as the economy allows, it can print as it pleases. In addition, everyone should be aware that the US Treasury is not about repaying 36 trillion yuan in one go. It has a three-year, five-year, ten-year, or even longer term, with a little repayment this year and a little repayment next year. The pressure is much smaller than you imagine. If you really don't have money, you will live a difficult life. The White House has closed down many times without paying salaries, and there has been no default on US Treasury bonds so far. Some brothers must have said that if the Federal Reserve prints money, won't the credibility of the US dollar collapse? Currency credibility is the value behind it, not the quantity. If the Federal Reserve prints trillions of dollars, as long as the purchasing power of currency does not collapse, how can credibility change? What are you losing if you still buy American products and services at this price? You didn't lose anything, where did your reputation collapse? Now do you know why the Federal Reserve, like a madman, raises interest rates in inflation, even if it means risking the lives of its own banks? I took the US dollar and bought one gallon of gasoline this month, but I can only buy half a gallon next month. What the hell are you doing with me? Who would want your junk currency? 🟧 Question 4: Will the US Treasury collapse? Any debt has the possibility of collapse, and the default of non-standard urban investment bonds in China has also scared a group of people. But you need to know, who is the largest holder of US Treasury bonds? Foreign central banks hold only about 30% of US debt. The largest creditor in the US is the institution and investor of American scholars. The official repudiates the debt to the local people. Do you know what the concept is? Do you still dare to refuse to pay when the epidemic wants to be controlled and the people bring weapons directly to the mayor to reason? Big courage! You may not know that several years ago, Argentina relied on Wall Street's accounts and its warships were deducted from their accounts, almost never going back In fact, in addition to our We Media and netizens, the world only said that the US debt was dangerous and should be handled carefully. No one said that it was going to die or renege. Even if there is friction between us, the risk of conflict, and the possibility of being kicked out of the US dollar settlement system, while we buy gold, we also hold over 700 billion US bonds. Do you think think think think think think think tanks are better than you and buy a default bond? 🟧 Finally, spread two knowledge, why can Trump be afraid of selling US bonds? What is the logic behind it? The US federal government needs 100 yuan to repay the debt, and has issued 100 yuan US bonds for three years, with a total interest of 6 yuan. I have 100 US dollars in debt, with three years to maturity and a total interest of 3 dollars. To disgust the United States, I went to take out food at a price of 96 dollars. That is to say, if you buy mine for 96 yuan and receive 103 yuan upon expiration, you will earn 7 yuan, which is better than the one from the Federal Reserve. I used a loss of four yuan to snatch the deal, causing no one to buy the federal bonds. If it couldn't borrow money, it wouldn't be able to repay its debt. If the Federal Reserve didn't save it, it would inevitably end up playing. Therefore, selling US bonds is a way to kill an enemy and lose a thousand. Don't get excited when you see the sale of US bonds, it's a loss, let alone a global sale of US bonds. If you sell, someone will buy. If no one buys, how can you sell? In addition, the US Congress has made a stumbling block for the federal issuance of treasury bond, which is not only an economic problem, but also a political problem. As mentioned earlier, the US debt is not paid immediately, it is due in time. The US is an electoral system. I allow you to issue debt this year, and you have the money to do this and that. When I come to power, it is all debt, can't afford to do anything, and people say I can't do anything. What should I do? So in the United States, which one can issue how much debt is also a game of interests. We need to ensure normal economic growth in the United States while not allowing our opponents to enjoy themselves. This is a technical job.