Standard & Poor's downgraded US sovereign credit rating
At 20 1 1 local time on August 5th, USA, the international rating agency Standard & Poor's announced that it would downgrade the long-term sovereign credit rating of AAA to AA+. The loss of AAA sovereign credit rating for the first time in American history immediately attracted the attention of the international community. Just like a "window paper", the myth of "risk-free" of US Treasury bonds was shattered with the downgrade of its rating. Investors' worries about the uncertainty of the US economic outlook have intensified, panic has spread and global stock markets have fallen.
Standard & Poor's downgrade of US sovereign credit rating means that US debt no longer has low financing cost. This may be a landmark event in the history of global finance. The dollar standard system has already evolved into the American debt standard system: the United States uses printed dollars to buy global labor, goods and resources, while the world uses the exchanged dollars to buy American treasury bonds and financial assets, financing American debt, and fully integrating the global economy into the American debt cycle. If the debt problem is not handled well, it will disintegrate America's credit and leading position in the world, and the era of American debt dominating the world will begin to end.
Standard & Poor's downgraded the US sovereign credit rating, and the global financial market staged a catastrophic blockbuster. Why is the world so overreacting to the downgrade of US sovereign credit rating? All along, the United States has relied on the highest credit rating in the world and borrowed heavily, disrupting the global credit creation, total credit and wealth distribution mechanism. Standard & Poor's downgrade of the US sovereign credit rating is actually a very fair evaluation.
For the first time in history, US Treasury bonds lost their AAA rating, which means that US debt no longer has low financing costs. Because American debt, as a risk-free asset, has always played a benchmark for demanding returns in the global capital market, it also means that the absolute valuation of global risky assets requires an increase in returns, and asset bubbles in emerging economies may be punctured, which may lead to global financial turmoil. But in the long run, this is likely to be a landmark event in the history of global finance.
The United States relies on bonds to implement asset replacement.
Dollar and American debt have long been the two wheels of American economy. The U.S. government can't issue dollars, and government financing is realized by issuing U.S. treasury bonds. The Federal Reserve can't issue dollars at will. The Fed must decide how many dollars to issue by buying government bonds. Therefore, in this sense, the dollar standard has already evolved into the American debt standard: the United States uses printed dollars to buy global labor, goods and resources, while the world uses the exchanged dollars to buy American treasury bonds and financial assets to finance American debt, so that the United States firmly binds the global economy through dollars and debts.
In fact, with the replacement of the international monetary system, the United States has already completed the transformation of its role. In the era of Bretton Woods system, the United States plays the role of a bank capitalist in the global financial structure: that is, it maintains its trade surplus by providing liquidity to the world, and obtains corresponding trade and credit benefits while realizing its comparative advantages. In addition, the United States shares the trade and investment income of other countries through the capital output driven by commodity exports, which is the main way for banks to obtain profits from commercial capital.
According to the latest data from the Bureau of Economic Research, the United States currently holds foreign assets as high as 10.4 trillion US dollars, while foreign-owned American assets are 17.4 trillion US dollars. In other words, 10.4 trillion dollars can be attributed to the asset replacement with the United States, and the remaining 7 trillion dollars can be attributed to the dollar wealth earned by foreign countries through trade surpluses.
Gradually form a "reservoir" of global capital
Why did this asset replacement happen? In fact, the United States has gained huge economic benefits through a large number of long-term overseas investments. Compared with the average yield of US 10 national debt of about 3.5%, overseas investment has formed a higher profit return. The income of American foreign assets and liabilities is large, and the risk value is also very different, which shows that American foreign investment is mainly concentrated in high-yield risky assets, while foreign debt is still mainly concentrated in low-yield assets with good security.
The data shows that during the 30 years after the collapse of the Bretton Woods system (1973 to 2004), the average rate of return on foreign assets held by the United States was 6.82%, while the rate of return on foreign assets held by the United States was only 3.50%, a difference of 3.32 percentage points. Based on the current asset replacement scale of $65,438 +00.4 trillion, the United States has an annual net income of $345 billion. The added value of wealth from financial channels has far exceeded the added value of gross domestic product (GDP) from real economic channels. Relying on the strategic advantage of the US dollar as an international central currency and the global financial division of labor, the United States has gained the greatest benefit in the global wealth distribution, and capital gains have become the largest channel for the United States to obtain global surplus value.
In the past 20 years, the world economy and financial structure have undergone fundamental changes. The world economy has entered the era of financial capitalism, and the United States has completed the role transformation from "bank capitalist" to "venture capitalist". With its developed financial market and absolutely dominant monetary system, the United States continuously provides the world with financial assets needed by other countries. Emerging economies need to find safe allocation and liquidity channels for their accumulated foreign exchange reserves, so the United States has become a "reservoir" of global capital.
The era when American debt dominated the world began to end.
There are irreconcilable deep contradictions behind the American debt crisis. In the mid-1980s, American economy gradually evolved into a debt-dependent economy system, in which government deficit finance, national consumption in advance and bank financial support were all the contents. 1985, the United States changed from a net creditor to the largest net debtor in the world, ending the 70-year history of net creditor since 19 14. Since the beginning of 2 1 century, the scale and proportion of American bonds held overseas have increased year by year, and the bond issuance accounts for 32% of the world. From 2003 to 2009, the foreign debt rate of the United States was 62.3%, 70.4%, 75.0%, 83.6%, 95.4%, 95.2% and 95.9% respectively. At present, American national debt has accounted for about 24% of the global debt balance.
According to the estimation of David Volcker, former auditor-general of the US government and president and CEO of the peter peterson Foundation, if all hidden debts of the US government, such as social security debts to nationals, are added together, the actual total debt of the United States in 2007 has reached 53 trillion US dollars. In 2007, the global GDP was 54.3 trillion, that is, the debt of one country in the United States has made the global debt ratio close to 100%. David Volcker once summed up the threat of debt dependence on the American economy: "Budget deficit, savings deficit and trade deficit together constitute the biggest challenge of the American economy, and their combined result is the leadership deficit." In other words, if the debt problem is not handled properly, it will disintegrate America's credit and leading position in the world.
The downgrade of US sovereign credit rating and the inability of US Treasury bonds to enjoy the privilege of risk-free assets will be the beginning of the end of the US debt growth system, and the golden age of US Treasury bonds dominating the world may never return. The true rating and pricing of US debt will help to force China to reform its foreign reserves, change China's wealth management model, correct the economic imbalance, reverse the mismatch of resources and get rid of excessive dependence on US debt, which is of far-reaching significance to the United States itself and the global economy. [ 1]