Hello everyone, I am America, a 'rich man' living off borrowed money. Recently, I've been a bit troubled—economic contraction of 0.2% in the first quarter of 2025, the first time in three years that I've 'lost weight'. More painfully, a large wave of U.S. bonds is maturing in June, and the scale is so large that even I was shocked. Today, let's chat about how I can cope with these 'creditors at the door' days. What kind of trouble might arise?
Let's talk about economic contraction. Don't be fooled by my large GDP; it is 'inflated'. In the first quarter of this year, consumer spending, which accounts for 70% of the economy, only rose by 1.2%. Corporate investment was quite robust (non-residential investment increased by 10.3%), but government spending decreased by 4.6%, and net exports dragged down GDP by nearly 5 percentage points.
Why is consumption struggling? It's all about tariffs! The tariffs added by the Trump administration last year were increased again on January 1 of this year. Companies afraid of rising costs stockpiled goods like crazy, leading to a surge in imports. The result? Corporate inventories piled up, but consumers' wallets shrank. Ironically, the tariffs intended to suppress China ended up overwhelming domestic companies, leading to a decrease in global trade.
Next, let's focus on the U.S. bonds maturing in June. There are rumors online about '6.6 trillion dollars maturing', scaring many into thinking I'm going bankrupt. But actually? U.S. Treasury data refutes that—about $2.3 trillion is set to mature in June, with a total of only $9.2 trillion maturing for the year. However, that number still sounds frightening since my total fiscal revenue last year was only $4.4 trillion, and the interest alone would cost $1 trillion.
Where is the key issue?
The pressure of borrowing new to pay off old: I need to issue $6 trillion in new bonds to pay off old debts, but the market appetite has shrunk. Foreign buyers (like China and Japan) are selling off bonds like crazy, forcing me to rely on my own (the Federal Reserve) to absorb the losses, resulting in increasingly shaky dollar credit.
Interest snowballing: New bond interest rates are higher than old ones, causing interest expenses to surge. Last year, interest was $1 trillion, and if it continues to rise like this, it will eventually eat up half of fiscal revenue.
Inflation complicating matters: Issuing new bonds requires printing money, but prices have already risen to 3.8%. If I keep printing, the dollar might turn into 'toilet paper'.
How does the international community see me? 'Deadbeat' or 'paper tiger'?
The creditors are collectively giving up:
China is selling off U.S. bonds and buying gold (now holding 2,300 tons of gold), while Middle Eastern tycoons have also wised up, trading dollars for planes and missiles, as they don't trust me anyway. Japan and the UK, these 'hardcore creditors', seem to be increasing their holdings on the surface, but are secretly reducing their positions, fearing that I might default one day.
Allies stabbing in the back:
The EU and Japan are taking the opportunity to push for local currency settlements, and even South Korea has started using RMB to buy Chinese goods. My 'dollar hegemony' is increasingly losing its luster. Trump even threatened to impose tariffs on allies, only to have agricultural tariffs slapped back on him, leaving him in a tough spot.
In the face of the crisis, the Trump administration did three things:
Tax increases: Increasing tariffs on imported goods to 125%, under the pretext of 'protecting American manufacturing', but the result is that corporate costs double, and consumers are furious.
Printing money for survival: Pressuring the Federal Reserve to cut interest rates, even hinting at restarting QE (quantitative easing). But the market isn't buying it; the yield on 10-year Treasury bonds surged to 4.5%, and the stock market rode a roller coaster.
Shifting blame to China: blaming poor economic performance on China 'stealing business', while at the same time asking China to buy U.S. bonds. Tough talk, but the reality is very honest.
A prediction of the outcome that ordinary people can understand:
Short-term: A technical default to scare people. Although there are many debts maturing in June, the U.S. Treasury still has $570 billion in cash on hand. If they issue some new bonds, they will likely be able to fool their way through. However, the credit rating might drop another notch, and the dollar exchange rate could fall below 90.
Medium-term: Inflation + recession double whammy. If I continue to print money, inflation could soar to 5%, with prices skyrocketing; if I stop printing money, the corporate funding chain will break, and unemployment will soar. Either way, it's a dead end.
Long-term: The collapse of hegemony, and the acceleration of multipolarity. BRICS countries are pushing for local currency settlements, the rise of the petroyuan, and even Saudi Arabia has started using RMB to buy Chinese weapons. The dollar will eventually become a 'regional currency', and I can only cling to government bonds and the money printer to live a poor life.
In the end, my economic problem is like a 'Ponzi scheme'—borrowing new money to pay off old debts, with interest compounding larger and larger. In the short term, printing money and shifting blame can help me get by, but the long-term collapse of credit is only a matter of time. For us ordinary people, focusing on dollar assets and buying more gold and RMB assets is definitely the right move.
Finally, let me send America a message: The days of profiting off global hegemony are over, and it's time to pay the debts!
Do you think the U.S. can escape this debt crisis? Let's discuss your views in the comments!