Last night, the White House and Republican negotiators reached a preliminary agreement to raise the U.S. debt ceiling and avoid a default that could shake the global economy.

U.S. President Biden and U.S. House Speaker McCarthy must now guide the framework agreement reached after lengthy discussions to final legislative passage, despite opposition from hard-line lawmakers in both parties.

To sum up in one sentence: U.S. debt will not default, and the United States will borrow more money from the world; U.S. dollar liquidity will become more abundant, which can stimulate the recovery of international trade to a certain extent; and various countries' currencies may appreciate slightly against the U.S. dollar.

Let’s talk about reaching the debt ceiling first.

In essence, this is a contest between the opposition and the ruling party in the United States, and the default on U.S. debt is just a weapon used by the opposition to attack the ruling party.

Assuming the White House does not agree to raise the debt ceiling, the United States will default on its debts in a historic move, and the ruling party will lose face.

If the ruling party agrees to raise the debt ceiling through negotiations, although the problem of US debt default can be avoided, it is also a disguised admission of its own incompetence during its administration and the continued expansion of US debt.

The opposition party only needs to keep targeting the White House, expose the problems to the public as much as possible, and at the same time create an image of a good political party for itself, so that it can gain more favor from the American people in the next election.

Of course, the White House is not entirely made up of fools, right? They know the problem is thorny, and if they follow the opposition party's pace, they will definitely be in a passive position.

How did they do it?

First, they put the blame on the opposition party, and then the two sides exchanged verbal attacks, showing an attitude that neither would give in.

The most panicked people at this time are the American people, because if the U.S. debt defaults, these politicians will still be the superior ones, but millions of ordinary people will be unemployed.

When people panic, their mentality will change.

Most people’s initial mentality is: Great, you politicians have messed up again!

Seeing that the problem has not been solved for a long time, the mentality is: it won’t really be a breach of contract, right?

As the default deadline approaches, my mentality is: Why are these people still passing the buck? If the problem is not resolved, I will be out of work!

There are only a few days left and I am mentally collapsed: No matter who it is, just come out and do something, I beg you.

As soon as the White House saw that the public was in the right mood, it made arrangements: After unremitting efforts, we have finally reached an agreement on the debt ceiling, and everyone no longer has to worry about having no food to eat.

American leeks cheered.

This script is not new at all, it has been repeated more than a hundred times in the past hundred years...

But it works every time...

Every time, American leeks have to go through the cycle from anger to panic to begging, and finally to a sigh of relief.

After all this, people no longer have the energy to blame the White House, for fear that once they do, the White House will do something weird to mess with everyone's mentality.

Even the ruling party and the opposition party can promote themselves as heroes who have solved a huge crisis.

A typical Hollywood movie plot routine.

In the past, it seemed that there were few large-scale domestic reports on the US debt default and the increase in the debt ceiling.

But this time, both official media and self-media have reported extensively.

But in fact, this is a commonplace thing in the United States.

U.S. debt will not default, not because of how strong the U.S.'s repayment capacity is.

This is because the US dollar is the global transaction settlement currency. The White House only needs to keep signing to increase the debt ceiling, and the Federal Reserve only needs to keep printing dollars to avoid this problem.

Therefore, if you want to make the U.S. debt default, you must first shake the status of the U.S. dollar.

my country's efforts to internationalize the renminbi, Europe's long-standing efforts to establish the euro zone, and Russia's attempts to settle energy payments in rubles are essentially aimed at getting rid of dependence on the U.S. dollar.

If you don’t use the US dollar, you won’t be able to trade with more countries; if you use the US dollar, you will always be sucked dry by the United States.

As McCarthy said the other day: "I don't think it's right that we're borrowing money from China to allow able-bodied people who don't have to take care of their families to sit on the couch and enjoy themselves."

What this means is that the United States has been borrowing money from countries around the world to provide welfare to its own people, and then turning around to condemn human rights issues in other countries.

Okay, let’s briefly talk about the issues of US dollar liquidity, international trade, and the relative appreciation of currencies of various countries.

It should be easy to understand that the US dollar liquidity is abundant, right?

Now that the US debt ceiling has been raised, can it borrow more money from other countries?

If we borrow more money, do we have to print more US dollars?

Doesn’t this increase liquidity?

From last year to this year, international trade has been shrinking. In addition to the general downward trend of the global economy, another reason is the lack of liquidity of the US dollar.

Why is there insufficient US dollar liquidity?

Because the Federal Reserve has been raising interest rates, the returns from putting money in the United States may be higher than the returns from investing and trading, and there is little risk.

Therefore, a large amount of US dollars from around the world have flowed back to the United States, and there are not so many US dollars on the market.

The U.S. dollar is also the currency for international trade settlement...

This poses a problem. Suppose A wants to do a large business with B, but does not have enough US dollars on hand. There is nothing he can do but wait.

Therefore, when the US dollar liquidity becomes sufficient, it will stimulate international trade to a certain extent.

Of course, what is mainly released is the previously accumulated trading volume, which will not change the general trend of shrinking trade.

Unless new economic growth points emerge, we will all get rid of the shadow of the economic crisis.

The last one is the issue of the relative appreciation of currencies of various countries.

Well, we all know that market prices are determined by supply and demand. The US dollar also has a market price, which is also affected by supply and demand.

In the absence of significant changes in demand, changes in supply will cause fluctuations in the US dollar exchange rate.

Now that there are more US dollars in the market, its price will naturally fall to a certain extent.

The price of the US dollar is reflected in the exchange rate with other countries' legal currencies.

For example, if the exchange rate of USD to RMB is 7.065 today, then RMB will appreciate relatively and may return to around 6.9 later.

This has no big impact on ordinary people.

But people engaged in foreign trade and stocks need to pay attention.

The appreciation of the RMB is beneficial for the United States to sell goods to us, but not for us to sell goods to the United States.

The future trends of the U.S. stock market and cryptocurrency market may be better, but it is hard to say about the A-share market.