US Bonds May Turn into Useless Pieces of Paper at Any Time

Published in Sin Chew
(Malaysia) on 18 October 2013
by Xia Taining (link to originallink to original)
Translated from by Daniel Chow. Edited by Jane Lee.
The Democratic Party and Republican Party in the U.S. fought until the eleventh hour on raising the debt ceiling before finally reaching a compromise before the final deadline this Thursday, thus avoiding a U.S. technical default. But the U.S. debt crisis this time has caused the international community, including creditor nations such as China and Japan, to break out in a cold sweat. Now, while the international community and America's creditor nations are secretly rejoicing, they have been forced to be wary once again. U.S. finances are seriously imbalanced, sparking a completely “politicized” war over the debt ceiling between the two parties, which also has the risk of being “prolonged.” The U.S. bonds in their hands, worth hundreds of billions or even trillions of U.S. dollars, can turn into useless pieces of paper at any time.

The Major Foreign Holders of Treasury Securities data recently published by the U.S. Treasury shows that as of July this year, China owns $1.28 trillion of Treasury securities and is the biggest foreign holder of such bonds, with those bonds making up a third of China's foreign reserves of $3.66 trillion. So, as the U.S. government was shut down and the Democrats and Republicans were unable to come to a compromise on the debt ceiling negotiations quickly, China’s worries increased with each passing day. During the East Asia Summit in Brunei, Chinese Premier Li Keqiang used the opportunity to meet with U.S. Secretary of State John Kerry to express China’s worries, stating that China was following the U.S. debt ceiling problem closely. Chinese Vice Finance Minister Zhu Guangyao stated that China had asked the U.S. to take practical measures to solve the fight over the debt ceiling, thereby preventing the U.S. from defaulting, ensuring the safety of Chinese investments in the U.S.

So, it was a good thing that the Democrats and Republicans finally reached a compromise before Thursday’s deadline, ending this “political farce” that has very much annoyed the international community and the American public. At the same time, as President Obama appoints Vice Chair of the Board of Governors of the Federal Reserve Janet Yellen to succeed Ben Bernanke as chairperson, outsiders believe that U.S. currency policy will not change suddenly and that the U.S. as a funds “shelter” and the position of the U.S. dollar as a reserve currency will not change.

However, the game being played by the two parties directly affects next year’s House of Representatives midterm elections, so when the debt ceiling is reached next year, the two parties may once again fight tooth and nail over this topic, and the global financial market will fluctuate once more. From the prolongation of the fight over the U.S. debt ceiling, the international community, especially America's creditor nations such as China, must learn from past lessons and be prepared beforehand to seek a safe way out for their foreign reserves.


美國民主、共和兩黨為提高債務上限談判惡鬥至最後一刻,終在本週四最後限期前方達成妥協,避免了美國技術性債務違約。但此次美國債務危機卻令國際社會、尤其是中國、日本這樣的美國債權國捏了一把汗。如今,國際社會和美國的大小債權國在暗自慶幸之餘,亦不得不再度提心吊膽,美國財政嚴重失衡,引發兩黨在債務上限之爭徹底“政治化”,並有“長期化”之憂,自己手中的數以萬億、千億美元計的美債,隨時可成為廢紙。

最近公佈的美國財政部公佈的國債持有者資料顯示,截至今年7月,中國持有1.2773萬億美元美國國債,為這類債券的第一大美國國外持有者,佔其3.66萬億美元外匯儲備約三分之一。故此,隨著美國政府停擺,民主、共和兩黨遲遲未能就債務上限談判達成協議,中國的擔憂日趨加重。中國總理李克強日前在汶萊出席東亞系列峰會時,借會見美國國務卿凱里表達了中國的擔憂,稱中方高度關注美國債務上限問題。而中國財政部副部長朱光耀說,中方要求美方在10月17日之前採取切實措施,及時解決國債上限爭執,防止美國國債違約,確保中國對美投資安全。

好在美國民主、共和兩黨終於在週四的大限之前達成協議,結束了這場令國際社會與美國民眾皆極其厭倦的“政治鬧劇”。同時,隨著美國總統奧巴馬選擇聯儲局副主席葉倫接替伯南克擔任聯儲局主席,外界亦相信,美國的貨幣政策不會突變,美國成為資金“避風港”以至美元作為儲備貨幣的地位亦暫時不會改變。

然而,由於今次民主共和兩黨的博弈直接影響到明年中期議院選舉,故而到明年債務上限到期時,兩黨恐怕又將藉此話題鬥個你死我活,皆時全球金融市場又將波動。對美國債務上限爭拗的長期化,國際社會、尤其是中國這樣的美國債權國,必須接受以往教訓,未雨綢繆,為自己的外匯儲備另尋安全出路。
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