The promise of the security of US Treasury bonds is real

The United States can only sustain its own interests by truly taking measures to secure the assets of foreign investors. In terms of game theory, the U.S. commitment to security and China's commitment to security is "incentive compatible" national Development Bank senior economist Wu Zhifeng although "Schon", but Obama most understand the "sublation" of the dialectic Spirit, his legacy of the "SED" (Strategic Economic Dialogue) to expand the use of, into a　　"S&ed" (Strategic and Economic Dialogue), the strategy from a modified adjective into a noun, the middle of the "&" is the Secretary of State Hillary Clinton. Does this change in logo form make sense? Yes, there is! Form and content are unified here. Obviously, the previous "SED" talks, Paulson said he would talk about the renminbi exchange rate, the attack and defend the party is not a "strategy", and now talks "in addition to the last month," the many events, including China-US international cooperation, global climate change, the international financial system and so on, "strategy" has risen to the main level,　　China has also been "defensive" to "attack" and asked the United States to pledge China's security of U.S. assets. Had to "empty" for the purchase of assets such as Treasury bonds, Obama repeatedly reiterated is "safe", there is "absolute confidence", U.S. Treasury Secretary Timothy Geithner in this dialogue "four times" pledged the security of U.S. dollar assets.　　But we do not see any concrete measures by the United States, which makes people feel that verbal commitment is a bit "false". To increase the credibility of the commitment, Geithner continued, "We are committed to taking steps to increase the rate of personal savings and to try to reduce the federal deficit to a more sustainable level 2013 years ago." "The idea behind this is to reduce the level of U.S. debt to ease concerns about debt repayment and the depreciation of the dollar, but that is also" false "because the US debt reduction is difficult, not to be lowered.　　And this sentence can not be used as a promise, when the debt is not yet "not yet", the dollar has been relegated to the "derogatory". But we have to understand Obama and understand Mr Geithner. They can only say that, especially in the media. The author has suggested a commitment to the US to demand a gold option that would allow China to buy American gold at a certain price after agreeing to a real depreciation of the dollar to a certain extent, or after the value of the bonds falls to a degree. But it would be difficult to get a specific commitment, unless, on the brink of the cliff, the US could not easily agree. And even if won, it is impossible to openly say, not only can not say, but also as top secret. Given China's specific commitment, Japan, Saudi Arabia and other creditor countries are not the day?　　Therefore, the promise of U.S. debt security may only be verbal, which is the "virtual" side. "Virtual" in the "real" seems to be aware of their commitment to the "virtual", the United States has deliberately made compensation, so that "virtual" in the "real". First, America no longer preaches. In a few previous dialogues, the United States Representative, on his debut, waved the theoretical banner of the "Washington Consensus" on ChinaEither preaching or blaming.　　This time the American Representative's attitude is calm and the two sides can have an equal dialogue. The United States does not seem to care about the topic of human rights. And I do not know whether to compensate for China's concern about the safety of dollar assets, this time the US does not mention the renminbi exchange rate issue.　　International pressure to revalue the renminbi has eased considerably. In addition, both sides emphasized improving economic fundamentals. While there is no direct Bond security pledge, Geithner has pledged to cut fiscal deficits, tighten financial regulation and carry out responsible fiscal and monetary policy. This lays the groundwork for the security of dollar assets. In response, the United States also asked China to adjust its economic structure and reduce its reliance on exports.　　This is more realistic. At the same time, the two sides increased emphasis on global economic cooperation. The two sides ' policy measures against financial crisis, sustained economic growth, financial system reform, trade and investment cooperation, global climate and new energy technology cooperation and other major economic issues to coordinate their positions, to help China in the reform of the international monetary system and other key issues of imagination, but also conducive to the global economy out of crisis.　　And only when the global economy emerges from the crisis can we truly guarantee the security of China's assets in the US. "Virtual" can be "faith" only the commitment to achieve commitment, verbal commitment to be credible. America's motivation is that it can only sustain its own interests by genuinely taking measures to secure the assets of foreign investors.　　In terms of game theory, America's commitment to security is "incentive compatible" with China's demand that the US commit to security. U.S. bailout measures need to continue to raise debt financing, the United States this year's debt issuance program as high as 2 trillion U.S. dollars. However, with concerns about U.S. debt and the dollar, yields on US debt have risen since March, meaning the cost of issuing debt will increase.　　If the security of foreign assets is not guaranteed, if the decline in treasury bonds and the depreciation of the dollar, creditors will lose confidence in US Treasuries, the U.S. government will not be able to send debt to save the economy. So can the U.S. government stabilize the confidence of foreign investors?　　A review of history may be instructive. During the American Civil War, the federal government had to terminate the gold standard and raise funds by issuing "green coins" to finance the war. However, during the Civil War, the addition of "green coins" did not cause severe inflation and devaluation of the currency. The data found in Friedman's history of the US currency was that prices at the end of the 1865 war were only twice times the level of 1861. Gold's green-currency price index is 1861 years to 100, to 1879 to restore the gold standard, the whole period gold price index is convergent, averaging 124.57.　　In other words, the "green coin" period, inflation is not serious, the sharp devaluation of the dollar did not occur. How does this work? Friedman observed that inflows of foreign capital played a big role. "If people expect the green-currency price of gold to rise, they will convert their green coins into gold or foreign currency." On the other hand, if people expect gold's green-currency prices to rise and return to their previous levels, they will convert gold and foreign exchange into green coins. It seems that people's expectations are more likely to be the latter. So the short-term rise in gold prices in the long termThe expected inflow of speculative capital led to an increase in demand for US debt and a fall in the rate of return on its prices. Friedman's decision is backed by empirical evidence, such as "The yield on U.S. railway bonds fell from the end of 1861 to the beginning of 1863, and 1863 and 1864 were lower than before and after the war." "The data on capital inflows is more direct evidence," as early as February 1863, when ABN Amro began buying American securities on a small scale, and "capital inflows increased markedly from June 1863 to June 1864".　　The winning of the federal government in the War of 1864 "seems to herald a swift end to the war, which in part spurred the vast majority of investors to hold green-currency assets, although the rise in gold rose rapidly in the year." In other words, the start of the American Civil War printing presses did not bring too much inflation and a sharp depreciation of the dollar, mainly because foreign investors have confidence in the purchase of U.S. debt. This conclusion is obviously of great significance to the United States today! If foreign investors such as China lose confidence in buying foreign capital, the Fed has to print money to take on bonds sold by foreign investors, which could plunge into a vicious circle: the less confident foreign investors sell their bonds, the more the Fed will devalue and flood the currency, leading to internal inflation and devaluation of the foreign dollar,　　The long-term depreciation of the dollar further depresses investor confidence, further selling bonds and pushing the vicious circle deeper ...　　Therefore, whether from historical experience or realistic choice, the United States has to safeguard the confidence of foreign investors in the dollar assets of the intrinsic motivation, which is the United States on China's dollar asset security commitment "real" side. (The article stands for personal opinion)