Reverse financial defense war, is China starting a project to blow up U.S. treasuries? The most feared thing by the U.S. is happening.
In the unevenly matched Russia-Ukraine conflict, no one expected that it still hasn't ended until now. However, recently, Russia, Ukraine, and the Western countries behind them are showing signs of fatigue.
The U.S. did not expect that by using Ukraine to dismantle the Russian-German alliance or to dismantle the Russian-European Union alliance, it would indeed succeed in the end. However, the U.S. itself is also somewhat fatigued due to this conflict.
At the same time, with the U.S. debt soaring and the deficit worsening, the U.S., which is trying to show its strength to China on tariff issues, did not expect that China is using its own way to fire the first shot in blowing up U.S. treasuries.
Reverse financial war
As the Russia-Ukraine conflict reaches its conclusion, the head of the Russian central bank has come out to say that Russia's economic resources are almost depleted, while Ukraine's missile stockpiles obtained from the U.S. are also scarce. They want to get more from the U.S., but the U.S. bluntly says it doesn't have much left either.
As for the EU, which bullies others, it is always on guard against Russia's nuclear weapons; after all, they have gone too far before, and now they want to demand that Russia not do the same, which is indeed a bit self-inflicted.
If this drags on, it is really hard to say who will laugh last. After all, a protracted war consumes too much material and financial resources. From Putin's recent announced budget, it is clear that preparations for a protracted war are still being made.
Although the U.S. did not directly participate in this conflict, it provided significant assistance to Ukraine, whether in terms of weapons or funds. It was already running at a deficit, and with the added unnecessary expenditures, the standard of living for Americans seems unaffected. On the contrary, American consumer spending remains strong, supporting economic development.
From another perspective, this cannot be separated from the support of the Chinese people.
As the world's factory, China not only competes in quality but also in price. China's exports generate income, and the cost-effective products also bring benefits to the U.S.
However, the dollars we earn cannot be used to buy high-tech products from the U.S.
The U.S. has launched a financial war against China, while China is putting the money it earns into the U.S. financial system to earn interest, which, in essence, is still helping the U.S.
Clearly, under the strong dollar and the maintenance of hegemony, this world seems to revolve around the U.S.
The only benefit gained is that China is using the money it earns to upgrade its industry and layout globally while purchasing materials with dollars.
Under such circumstances, since dollars cannot be exchanged for what we want, why not use the remaining dollar dividends to gain benefits from other countries or even the U.S.?
This seems to have become the logic of China's reverse financial war.
Is the first shot in blowing up U.S. treasuries being fired?
In fact, China is doing this, and the United States is naturally unwilling, but the U.S. debt has become the biggest obstacle to competing with China.
Before Trump even took office, he was already planning to establish a Department of Government Efficiency to cut spending, fundamentally because the U.S. government has no extra money to do other things.
However, looking at China, it suddenly launches an intercontinental missile and plans to build houses on the moon, while the U.S. says it wants to turn India into the second China. Under such circumstances, where does the U.S. have extra money to assist India, not to mention reshaping a new pattern in Asia?
Now, China has laid out this grand strategy: using the dollars it earns to gradually occupy an important position in the global supply chain. If the U.S. wants to compete, it means the U.S. has to spend money.
In the past, Americans could exchange a few dollars for Chinese goods. Now, Trump has cut off the back path and wants to impose taxes on China. From another perspective, Americans have rejected profits that came to their doorstep, and the final result is that U.S. inflation has reignited.
However, under high inflation, how can the U.S. compete with China for manufacturing jobs?
The manufacturing industry pursues high-quality delivery at extremely high cost-performance ratios.
Where does the U.S. get the money to develop its manufacturing industry?
Unless the U.S. continues to borrow, playing this game will only cause the scale of U.S. national debt to continue to soar. In the end, who will still believe in this kind of Ponzi scheme?
The U.S.'s financial war against China aims to strike at China's demand side, while China's reverse financial war is to accelerate the soaring scale of U.S. national debt and resource misallocation.
In the past, the U.S. acted recklessly because it could issue bonds to obtain a large amount of funds. Once the debt soars and the Ponzi scheme grows larger, who will foolishly invest in U.S. treasuries?
China spends money to compete for the price setter of the next industrial technology revolution, while the U.S. spends money to maintain its hegemony.
The more critical question is whether the so-called democratic U.S. can reach a consensus on financial issues. I am afraid it is only each capital for its own interests.
Sullivan has called on Trump to increase defense spending, specifically citing China as an example, bluntly stating that in a war with China, the U.S. ammunition will soon be depleted. Clearly, the greater the anxiety the U.S. has about China, the more money it will inevitably pour in, which will only make U.S. debt grow larger.
In modern history, the game between great powers often does not end with force. Instead, it is often through cunning strategies that the opponent encounters problems, leading to decline or disintegration. The U.S. is well aware of this, as the Soviet Union serves as an example.