U.S. debt offers the safest heaven for Chinese forex reserves, which effectively means that China offers loans to the U.S. so that the U.S. can keep buying the goods China produces. As long as China continues to have an export-driven economy with a huge trade surplus with the U.S., it will keep piling up U.S. dollars and U.S. debt. Chinese loans to the U.S., through the purchase of U.S. debt, enable the U.S. to buy Chinese products. It’s a win-win situation for both nations, with both benefiting mutually. China gets a huge market for its products, and the U.S. benefits from the economical prices of Chinese goods. Beyond their well-known political rivalry, both nations (willingly or unwillingly) are locked in a state of inter-dependency from which both benefit, and which is likely to continue.

Stephen I. Ternyik

I get that the information you provided about China's holdings of U.S. debt is accurate with respect to global economic dynamics. But what I want to study more is U.S. fiscal policy, interest rates, and the impact on the federal budget

When the economy is in recession, it does not allow recession. Instead, it uses proactive fiscal policies to push up debt and forcefully maintain prosperity. This actually further amplifies the damage to the U.S. debt. This prosperity comes at the expense of overdrafting national power and the future of the United States, and the economy is naturally There are cycles, and when the future cannot be delayed, the price will only be greater. This is my current view

Your point Yali 梁雅黎 Leung of forcefully (artificially) maintaining prosperity at the expense of the economic future makes sense, if we think in economic (natural) cycles. However, the whole (dominating) Western model of economics today is linear and the political temptation, e.g. via central banking, is to make the circle straight. You are right Yali 梁雅黎 Leung to state that the future generation has to pay for this economic and monetary mischief.

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https://mpra.ub.uni-muenchen.de/54835/1/MPRA_paper_54835.Pdf

https://www.sociostudies.org/authors/ternyik_stephen_i/

Yali 梁雅黎 Leung When a government is heavily indebted, it can be challenging to pay market rates. Let me break it down in simple terms for you:

Imagine you borrowed some money from a friend, and you promised to pay them back with some extra money as interest. Now, if you're already in a lot of debt and struggling to manage your finances, it can become difficult to find the extra money to pay back your friend with interest.

Similarly, when a government is heavily indebted, it means they owe a lot of money to different lenders. These lenders expect to be paid back with interest, just like your friend. But if the government is already struggling to manage its finances and has limited resources, it becomes challenging to find the money to pay back the lenders at the market rates.

In such situations, governments often face tough choices. They may need to make adjustments in their budget, cut spending in certain areas, or explore options to generate more revenue to meet their debt obligations. Governments can also negotiate with lenders to restructure their debt or seek assistance from international organizations.

It's important to note that managing debt is a complex issue, and governments often work with experts and economists to find the best solutions. The goal is to ensure financial stability and create conditions for sustainable economic growth.

I hope this explanation helps you understand the challenges governments face when they are heavily indebted.

Government can issue bonds to investors; this is an indirect way of borrowing money from investors. the bond has a fixed interest rate, which is the market rate at the time the bond is issued, and the government will continue to pay interest on the bond to the investor until the bond matures, at which point the investor is paid back the principal amount of the bond.

secondly, government can also borrow money from international organisations or other governments.

The question of how a heavily indebted government, like the United States, can afford to pay market rates on its debt is complex and there is no single, easy answer. Here are some key points to consider:

Challenges:

-High debt levels: The U.S. national debt currently stands at over $30 trillion, which is roughly 127% of GDP. This high debt level increases the cost of borrowing even at normal interest rates, as investors may demand higher returns due to the perceived risk of default.

-Market interest rates: When interest rates rise, the government has to pay more on its existing debt, further straining its budget. Rising rates can also make it more expensive to issue new debt to finance spending.

-Political gridlock: Finding agreement on fiscal policy, including raising taxes or cutting spending, can be difficult in a politically divided environment. This makes it harder to address the underlying causes of the debt problem.

Potential solutions:

-Economic growth: A strong and growing economy can generate more tax revenue, making it easier to service the debt. Policies that promote economic growth, such as infrastructure investment and education, can be helpful.

-Fiscal consolidation: This involves reducing the budget deficit by either raising taxes, cutting spending, or a combination of both. While politically unpopular, it can be necessary to bring down the debt burden over time.

-Debt restructuring: The government could negotiate with its creditors to extend the maturity of its debt or reduce the interest rate. This can provide temporary relief but does not address the underlying problem of excessive borrowing.

-Seigniorage: The government could print more money to pay its debts. However, this would likely lead to inflation and undermine the value of the currency.

The case of the United States:

The U.S. government has been able to borrow at relatively low interest rates for several reasons, including the size and stability of its economy, its strong credit rating, and the perceived safety of U.S. Treasury bonds as a global investment haven. However, these factors cannot be relied upon indefinitely, and the long-term sustainability of the current debt trajectory is a matter of ongoing debate.

Additional factors to consider:

-The composition of the debt: The U.S. debt is mostly held by domestic investors, which reduces the risk of foreign currency fluctuations.

-The Federal Reserve’s monetary policy: The Federal Reserve’s actions, such as its quantitative easing programs, have helped to keep interest rates low.

-Global economic conditions: A strong global economy can boost trade and tax revenue, making it easier for the U.S. to manage its debt.

Ultimately, the question of how the U.S. will manage its debt burden is a complex one with no easy answers. It will require a combination of economic growth, fiscal responsibility, and potentially adjustments to monetary policy.

I hope this information is helpful.