Question 1: Answer: The institution that issues US Treasury bonds is the US federal government. The institution with the right to print dollars is the central bank of the United States, that is, the Federal Reserve. According to American law, the Federal Reserve is an independent institution, not a subordinate or part of the federal government. Therefore, legally speaking, the US federal government cannot order the Federal Reserve to print dollars. This leads to the next question-question 2: Why does American law stipulate that the Federal Reserve is an independent institution and is not under the jurisdiction of the government? Answer: In the final analysis, this design is to prevent the government from indiscriminately issuing money to plunder the people and lead to inflation. In other words, if the government needs to borrow money, it must go to the open debt market and borrow money from the private sector by issuing bonds. The party that buys bonds, including the Federal Reserve, becomes the creditor of the federal government. Some countries, as well as some states in the United States, stipulate in their constitutions that their governments must balance income and expenditure every year. In other words, you can't owe money every other year. The federal government of the United States does not have this legal limit, but the debt of the federal government has a legal ceiling. To raise the debt ceiling, it must be approved by Congress. This design is to prevent the government from plundering the people. But at the same time, it has greatly enhanced the confidence of creditors, including China, in the US government debt. Because as we all know, this government can't borrow money at will, and can't issue money at will to avoid debt. Question 3: Then why didn't the Federal Reserve print dollars to repay the national debt owed to China? A: The primary task of the Fed is to prevent inflation. Infinitely triggering the dollar will lead to inflation and lead to the depreciation of the dollar in people's hands. In addition, a large number of additional US dollars will cause other creditors of the US government to lose confidence in the US dollar and thus sell the US dollar. However, another task of the Fed is to protect the economy and jobs. Therefore, when the economy is depressed, the Federal Reserve will issue US dollars, buy US Treasury bonds in the open debt market, and inject funds into the entire economic system, thus stimulating the economy. This year's so-called quantitative easing (QE, QE2) is this process. There is an inherent logical contradiction between these two tasks of the Federal Reserve. The best way to avoid inflation completely is not to issue new money at all. But this will inevitably lead to the interruption of the capital and credit chain during the economic downturn. On the other hand, stimulating the economy by issuing money or increasing liquidity will inevitably lead to a certain degree of inflation. Question 4: Why did China buy US Treasury bonds? Answer: China officials have a lot of dollars. Such a huge amount of dollars must be invested in low-risk assets. In today's world financial market, US Treasury bonds are generally considered as "zero risk" assets. Question 5: Why does China have so many dollars? A: China has accumulated a lot of dollars through its foreign exchange surplus. Together with other investment-oriented foreign capital (FDI, and so-called hot money), these dollars finally flow to the People's Bank of China, the central bank of China, through China's compulsory foreign exchange settlement system. Question 6: Why are US Treasury bonds so-called "risk-free" assets? Answer: The answer in a word is that this is the embodiment of American national strength. The so-called national strength includes America's huge market, developed economy, advanced science and technology, and the military strength of a superpower. On the other hand, it also includes its legal and institutional system. For example, the separation of the Federal Reserve from the government has greatly limited the possibility of the government issuing money indiscriminately, curbed government expenditure, and enhanced investors' confidence in US Treasury bonds, including the China Administration of Foreign Exchange. Question 7: Are US Treasury bonds really "risk-free" assets? A: There are two aspects to this question. First, the possibility of bankruptcy of the US government is close to zero. The US government can repay the old national debt by exchanging new debt for old debt, issuing new national debt and exchanging dollars. The main risk in this regard is the domestic political risk in the United States, because the federal government must approve the issuance of national debt through Congress. Last year, * * * and the party showed a strong political will to restrict the issuance of treasury bonds, which led S&P to downgrade the rating of US treasury bonds ... However, in the end, * * * and the party made concessions. In the long run, American domestic politics will eventually succumb to the pressure of international debt and national interests. Therefore, the risk in this respect is minimal. In other words, the United States will certainly, and has printed money to repay the national debt. Second, in the long run, the United States will eventually repay its debts by raising the government debt ceiling and issuing additional US dollars by the Federal Reserve. This will lead to inflation and the depreciation of the dollar, so that the nominal face value of the national debt in the hands of creditors remains unchanged, while the real value decreases. This kind of risk is not only considerable, but also inevitable. In the 1980s, the United States used the Plaza Accord to force the yen to appreciate against the dollar. In short, the risk of US Treasury bonds does not come from the bankruptcy of the US federal government, but from the long-term depreciation expectation of the US dollar. Question 8: OK, so China exports a lot to the United States and must have accumulated a lot of dollars. And if you accumulate a lot of dollars, you will inevitably buy a lot of US Treasury bonds. And a large number of US Treasury bonds will inevitably lead to the issuance and depreciation of the US dollar, so why should China export to the United States in large quantities? Answer: Looking for a job. The production capacity of China's manufacturing industry is surplus to the domestic consumption level, so it needs to export to ensure employment. If you want to export, of course, you will export to the market with the lowest risk and the largest consumption capacity. No one wants to sell a lot of things to Iraq in exchange for a pair of Iraqi dinars that will be reimbursed later. Question 9: Why does the United States import from China when it knows that it will owe China a lot of money? Answer: Market economy. Low domestic costs lead to low product prices. American consumers, like consumers in other countries, will choose to shop cheaply. Question 10: If the United States continues to owe money like this for a long time, will it happen in Greece? Answer: No. Greece cannot issue its own euro, while the United States can issue its own dollar. The fundamental contradiction of the Greek issue is the separation of fiscal sovereignty and monetary sovereignty. This contradiction does not exist in the United States. Question 1 1: How many US Treasury bonds does China hold? Answer: China holds US Treasury bonds, accounting for about 8% of the total debt of the US federal government. Most US Treasury bonds are held by domestic creditors, including social security funds, the US Treasury (yes, it borrows its own money for financial purposes), investment institutions, enterprises and individuals. Question 12: What will be the final result of this matter? Answer: Unless there is war and turmoil, China will continue to export to the United States in large quantities, and domestic consumption will continue to grow. Eventually, due to the growth of domestic consumption, rising production costs and appreciation of RMB, China's import and export keep pace with the United States. At the same time, the dollar will depreciate relatively against the RMB for a long time. In order to balance government expenditure and reduce debt, the US government will increase taxes and cut public expenditure, mainly social welfare. In short, the production and consumption of the two countries will be at a relatively balanced level. This is the necessity of market economy.