The most important news recently is probably the U.S. debt default. Here I will help you sort it out and attach my views to simply let you understand the whole thing.
-First of all, what is a U.S. debt default?
To put it simply, if the United States has no money to pay its debt, it will have to wait for Congress to raise the debt ceiling before it has the money to pay. Raising the upper limit will allow more funds to be used, otherwise the treasury will be out of money. It's like if you owe a lot of money to the bank, and you are able to work but haven't come out yet, the bank will definitely find a way to negotiate with you, or let you apply for an additional credit card, and it will take time to pass a bill to raise the debt limit. , and time is getting less and less! The last date is 6/1!
-What happens if you breach the contract?
It can be said that it will be the biggest bomb in the global financial world. Many countries rely on U.S. debt for their assets or consideration, just like you built a lot of cars today and suddenly said that the oil wells have dried up. After all, it is a 3A for investment targets. level, and Article 14 of the U.S. Constitution specifically states that debt cannot be defaulted, and Biden has also considered amending this article of the Constitution. The worst thing is actually the action of de-dollarization. After all, this function can be said to be like playing games. People have to buy resources in exchange for money, but you can print your own money to buy equipment. If there is a real default on the subsequent debts and the financial systems of various countries will definitely collapse.
-Will there be a breach of contract?
In fact, after the change from the gold standard to the credit consideration in dollars, the debt ceiling has been raised not only 70 but 80 times, and the largest buyer of U.S. debt is China. This time Congress wants to use this to make the government spend so much needlessly, so using this bill is a bit like a check and balance. I think there are two possibilities. One is that the probability of default is relatively high, because this is not the first time that the ceiling has been raised, and it is not as scary as many people say. The other is that reducing expenditure can make the treasury be emptied later. At this time, another One possibility is that the debt delivery time is delayed, giving more time to print money or pass regulations. Otherwise, the credit of the U.S. debt will be lowered or the credibility will be damaged, which will have a chain reaction.
-Of course not everyone is so optimistic
What’s interesting is that gold is close to the price of 2000, while Bitcoin is falling. You will find that although Bitcoin is likened to electronic gold, its attributes are more like those of technology stocks. Of course, this also means that holding BTC is worth The increase will also be higher than that of gold. At the same time, JP Morgan also started buying $VIX. You can think of this index as similar to the GFI panic index in the currency circle. At the same time, the VIX index also hit a peak since May. It seems that everyone is starting to panic.
-my prediction
I think Congress should first try to postpone this issue by reducing spending, and then at the same time, it still needs to generate money. This method is not only to raise the debt ceiling, but also to use various methods to increase credit or print money. The current situation is usually two parties quarreling, asking the other party to reduce spending. As usual, the debt ceiling on the U.S. debt will be delayed until the last minute. So I stocked up on some short-term stocks!
