Analysis of the U.S. Debt Economic Model and Its Risks

At the beginning of the new year, the scale of U.S. national debt has exceeded 36.4 trillion dollars, prompting reflection on how to resolve the U.S. debt crisis and whether the international hegemony of the dollar can continue. This article will discuss the current debt risks faced by the internationalization of the dollar, starting from the U.S. debt economic model, and analyze the feasibility of U.S. debt repayment plans.

The Formation of the Economic Model of U.S. Debt

After the collapse of the Bretton Woods system, the hegemony of the US dollar rapidly developed under the debt economic model. After the dollar was detached from gold in 1971, it transformed from a commodity currency to a fiat currency, with its value no longer backed by precious metals but by the national credit of the United States.

On this basis, the United States established a debt-based economic model: global trade is settled in US dollars, while the US maintains a huge trade deficit, allowing other countries to accumulate large amounts of dollars; countries purchase US Treasury bonds and financial products to ensure the value appreciation and repatriation of dollars. This model effectively perpetuates the hegemony of the dollar.

Risks Faced by the Internationalization of the US Dollar

1. The contradiction between the internationalization of the US dollar and the return of manufacturing.

The internationalization of the dollar requires maintaining a long-term trade deficit, but the U.S. policy of promoting the return of manufacturing will alleviate the trade deficit, leading to a shortage of dollars. This contradiction may trigger a series of chain reactions such as the weakening of dollar credit, intensified inflation, and rising U.S. Treasury rates.

2. Commercial Real Estate Debt Crisis

After the pandemic, the U.S. commercial real estate market is facing severe challenges. It is expected that by 2026, the vacancy rate for office buildings in the U.S. will rise to 24%. Small and medium-sized banks have a high proportion of commercial real estate loans, reaching 44%. If defaults occur, it could trigger a new round of financial crisis.

Analysis of US Debt Repayment Plan

Sell gold to repay U.S. debt?

Although the Federal Reserve holds a large amount of gold assets, selling gold to repay U.S. debt is not feasible. Gold, as a universally accepted currency of international consensus, plays a key role in stabilizing currencies and addressing economic crises. Selling gold would be seen as a signal that the Federal Reserve has lost confidence in U.S. debt, which could trigger a liquidity crisis in U.S. debt.

Bitcoin check to repay US debt?

Repaying U.S. debt with Bitcoin also faces numerous challenges. First, the volatility of Bitcoin's value is significant, and creditors may not necessarily accept it. Secondly, the current amount of Bitcoin held by the United States is far from sufficient to repay the huge U.S. debt. Even if Bitcoin reserves are established in the future, it would only delay rather than solve the debt problem.

Is the dollar anchored to Bitcoin?

The proposal to peg the US dollar to Bitcoin also presents issues. This could lead to anyone having the right to issue currency, undermining the international status of the dollar. Furthermore, the high volatility of Bitcoin could affect the international community's confidence in the dollar and limit the monetary policy space for the United States.

The Impact of Debt Crisis on International Settlement Units

If a U.S. debt crisis erupts, Bitcoin may decline in the short term along with the financial markets, but in the long term, it may become a new safe-haven asset. The scarcity and decentralized characteristics of Bitcoin could allow it to play an important role in the future international settlement system.

Can Bitcoin Become the Future International Settlement Currency?

Bitcoin has certain advantages as a potential international settlement currency. It enables round-the-clock, cross-border transactions and effectively captures global liquidity. As its application scenarios expand, its value measurement and storage functions are also continually strengthening. However, whether it can ultimately become the dominant international settlement unit still requires time and market validation.