Transferring crises, breaking rules, and cutting the world apart - the United States is the biggest source of economic turmoil in the world. The US government | the United States | the economy

US President Biden recently claimed during a political fundraising event that China, with weak economic growth, was a "time bomb". Just recently, due to concerns about the deteriorating financial situation and fiscal management capabilities of the US government, the international rating agency Fitch downgraded the US credit rating.

Whenever they fall into a predicament, American politicians are accustomed to using other countries as a shield to divert domestic public opinion and a scapegoat to shift conflicts. In fact, for the still fragile recovery of the world economy, the United States is the biggest source of turmoil. As the world's largest economy, the United States only considers its own interests, disregards its major country responsibilities and obligations, violates economic laws, undermines market rules and international economic and trade order, erodes the foundation of international cooperation, threatens the stability of global industrial and supply chains, and brings huge risks to the world economy.

The Source of Global Financial Risks: Abuse of US Dollar Hegemony to Transfer Crisis and Harvest the World

In early this month, international rating agency Moody's announced a downgrade of the credit ratings of 10 small and medium-sized US banks, and included the credit ratings of 6 large US banks in the downgrade observation list. The Wall Street Journal commented, "The problem with Bank of America is far from over, it's just beginning."

The high interest rate shock that many banks in the United States find difficult to bear is not only a backlash to the Federal Reserve's aggressive interest rate hike policy, but also a microcosm of the global financial policy chaos caused by the US dollar hegemony.

The radical and ever-changing monetary policy and fiscal policy have led to the United States using the dominant position of the US dollar to harvest global wealth and shift crises, constantly causing turbulence in the international market.

In order to boost its own economy, the United States has arbitrarily opened the "gate" of the money supply. After the international financial crisis in 2008, the Federal Reserve introduced multiple rounds of quantitative easing policies. After the outbreak of the COVID-19 in 2020, it implemented "unlimited" quantitative easing, pushing global inflation to a 40 year high. Most excess US dollars are exported through importing goods, investing in other countries, and helping the United States harvest global wealth.

To alleviate domestic inflationary pressures, the Federal Reserve has launched an aggressive interest rate hike model since March 2022, raising interest rates 11 times so far, with a cumulative increase of 525 basis points. This has led to rapid tightening of global liquidity, significant depreciation of multiple currencies, and a sharp increase in debt repayment pressure for countries borrowing in US dollars.

According to Desmond Rahman, an economist at the American Institute of Enterprise Research, the Federal Reserve's policies have led to a significant appreciation of the US dollar, capital flowing back from emerging markets, and higher interest rates exacerbating debt risks in emerging economies, adding insult to injury to the world economy.

Due to the existence of US dollar hegemony, US dollar assets such as US treasury bond bonds are sought after, which enables the US to absorb US dollar backflow at a very low cost. Despite frequent debt ceiling crises, the US government remains addicted to borrowing.

According to data from the US Treasury Department, the current US public debt has exceeded $32.6 trillion, equivalent to nearly $100000 in debt per American.

Analysts believe that the US economic expansion model based on massive debt not only leads to the crisis of the federal government's debt ceiling, but also is related to many secondary crises such as extreme Federal Reserve policies, deficit fiscal policies, hollowing out industries, and high leverage of household finances.

When Fitch Ratings downgraded the US credit rating this month, it stated that the US government's debt burden remains high and continues to increase, weakening people's confidence in the US fiscal management capabilities.

Adel Mahmoud, an economics professor at Cairo University in Egypt, said that the United States using the US dollar hegemony to shift domestic crises, hindering the normal operation of global financial markets, will drag down the pace of global economic recovery.

The Source of Global Economic and Trade Disruption: Violating Economic Laws and Forcing "Decoupling and Chain Breaking"

The US government recently issued an executive order to restrict investment in China's high-tech sector, once again politicizing economic, trade, and technological issues. The United States is using the guise of "risk reduction" to decouple from China, which has caused widespread concern in the international community.

In recent years, the United States has engaged in a major trade and technology war, artificially building walls and barriers, and forcefully promoting decoupling and chain breaking. From promoting so-called "friendly shore outsourcing" and "nearshore outsourcing", to introducing exclusive and discriminatory industrial policies such as the Inflation Reduction Act and the Chip and Science Act, and then issuing administrative orders for foreign investment review, the United States seriously deviates from the principles of market economy and fair competition, destroys market rules and international economic and trade order, and damages technological innovation and investment activities that support the sustained development and prosperity of the world economy.

The German think tank Iver Institute of Economics estimates that if EU companies decouple from China under pressure from the United States, the trade volume between Germany and China will sharply decline. In the worst-case scenario, Germany's gross domestic product will decrease by 0.81%, which may lead to economic downturn and large-scale unemployment. The Nihon Keizai Shimbun estimated that "decoupling" from China would result in an annual loss of 53 trillion yen, equivalent to 10% of Japan's annual GDP "evaporation". The International Monetary Fund warns that if the global economy falls into severe fragmentation, overall economic output may shrink by up to 7%.

Schwab, founder and executive chairman of the World Economic Forum, believes that open global trade benefits countries, and the decoupling of global trade and investment will further widen the "heating curve" of the world economy, manifested as high inflation, high debt, and low growth.

Has promoting decoupling from China worked for the United States? The fact is not so. The Economist recently reported that the decoupling of the United States from China, which is driving supply chain reshaping, is just a facade. On the surface, US demand is shifting from China to other countries, but China's global supply chain position has not weakened, and these countries rely more on China for production than ever before. In the end, the United States' attempt to decouple and break the chain may actually push allies and China to establish stronger connections.

The Source of Global Governance Disorder: Splitting the World under the guise of "Multilateralism"

In order to maintain its own hegemony and seek self-interest, the United States, under the pretext of strengthening cooperation, formed alliances and engaged in factional confrontation, leading to the artificial division of the world economy and a serious regression of economic globalization, which has brought serious impacts to multilateral cooperation and global governance.

Last year, the United States launched the so-called "Indo Pacific Economic Framework", claiming to be "open and inclusive", but excluding China, one of the largest and most dynamic economies in the Asia Pacific region.

In addition to the Asia Pacific region, the United States is also vigorously promoting "pseudo multilateralism" in other parts of the world: in the Atlantic region, the United States strengthens its trade and technology committee mechanism with Europe; In the Americas, the United States initiated the "Partnership for Economic Prosperity in the Americas"; Driven by the United States, the G7 has launched the so-called "Rebuilding a Better World" global infrastructure initiative, claiming that it is a "value driven, high standard, and transparent infrastructure partnership led by major democratic countries"... The United States is using ideology as a boundary to extensively divide the world, posing a threat to the global governance order and seriously damaging the overall interests of the world economy.

As the founder and main beneficiary of the multilateral trading system, the United States should have played a leading role in maintaining the authority and effectiveness of the multilateral trading system, but ignored trade rules and order, engaged in unilateralism, protectionism, and bullying, and seriously impacted the multilateral trading system.

The WTO Dispute Adjudication Research Report shows that two-thirds of WTO member violations are caused by the United States, which is by far the most unruly. As the member with the most dispute resolution initiated by WTO members, the United States not only selectively enforces WTO rulings, but also insists on obstructing the selection of members of the Appellate Body, leading to its paralysis. It is globally recognized as a "destroyer of the multilateral trading system.".

The Australian East Asia Forum website pointed out that the various actions of the United States in recent years have been a significant blow to the international economic order, and the United States has become a major disruptor of the international trade system.