US Debt Crisis Exposes the Drawbacks of US Political and Fiscal Policy -- Interview with Cai Weicai, Senior Vice President of Thailand Kaitai Bank, US | Debt | Fiscal Policy
Cai Weicai, senior vice president of Kaitai Bank of Thailand, said in an exclusive interview with Xinhua News Agency reporters in Bangkok a few days ago that the US debt crisis has impacted the world economy and exposed the drawbacks of US domestic politics and fiscal policies. Governments and investors should be alert to the risks it brings.
US President Biden signed a bill on the federal government's debt ceiling and budget on the 3rd, putting an end to the recent uncertainty surrounding the possibility of the US falling into a government debt default. This bill temporarily suspends the effectiveness of the debt ceiling until early 2025, marking the 103rd time the United States has adjusted its debt ceiling since the end of World War II.
"The dispute over the US debt ceiling has been boiling for some time. No matter what kind of agreement the US Congress finally passes, the global economy has been greatly affected," Cai Weicai said.
Cai Weicai pointed out that when the United States faces a debt crisis, the Republican and Democratic parties always haggle and argue for their respective interests, causing concern and unease for the market, investors, and the global economy. "It is evident that the intense party debate over the debt ceiling has led to the continuous politicization of the debt issue."
He believes that even if the US Congress agrees to raise the debt ceiling and temporarily avoid the crisis, the measures taken by the US government in response to the crisis have to some extent shown the deterioration of the US fiscal situation and the difficulty of revitalizing the economy. Adjusting the debt ceiling is a temporary solution that addresses the symptoms rather than the root cause. The root cause of the debt crisis is the serious imbalance of income and expenditure and fiscal deficit in the United States for a long time, as well as the long-term implementation of ultra loose monetary policy relying on the hegemony of the US dollar in the face of economic crises.
Cai Weicai said that US treasury bond have long been regarded as safe haven assets by investors, but the repeated debt crisis continues to consume the US government credit and the value of US dollar assets such as US bonds, affecting investor confidence. In Thailand, some analysts have proposed that investors should consider selling US dollars, US bonds and US technology stocks to reduce investment risks in view of the uncertainty caused by the US debt ceiling problem.
Cai Weicai believed that the impact of the US debt crisis further exposed the harm of the US dollar hegemony. In recent years, with the fluctuation of the US dollar, the downturn of the US economy, and political risks, many companies in countries including Thailand have begun to adopt a "de dollar" settlement method in international trade.
Cai Weicai said that after the outbreak of the Ukraine crisis, the United States and the West have taken many financial sanctions against Russia, including excluding Russian banks from the Global Interbank Financial Communications Association system. The weaponization of the US dollar has forced countries to seek to reduce their dependence on the US dollar and establish an effective, low-risk, and non dollar controlled financial settlement system.
"The US debt crisis has made people wary of the US dollar and US bonds. Risk awareness has led many countries to evaluate and seek investment balance, and the new international situation requires governments to develop risk control systems that are suitable for their own actual situations and choose effective hedging tools." Cai Weicai said.
