The Impact Of U.S. Government Sovereign Debt On Developing Countries

At the end of2009, the three major international rating companies downgradedGreece’s sovereign credit rating, make it into a financial crisis, sovereign debt crisisand finally broke out. Then, the momentum of the debt crisis gradually tendrilfermentation, spread to other euro-zone countries, Portugal, Ireland, Spain, Italy andexposed the financial problems, the three major rating agencies have downgraded theabove four credit rating. In the us local time, on the night of August5,2011, theinternational credit rating agency standard&poor’s cut America’s long-termsovereign credit rating, down to AA+. This is the first time in American history slideAAA sovereign credit rating. The myth of the Treasury zero risk and ashes. At thattime, the "sovereign credit rating","U.S. debt crisis","AAA","AA+" became aworldwide media such as the tide of hot words. In addition, the s&p downgrade itsoutlook for America’s is negative, the move then immediately cause strong vibration,the United States and the world market investor concern about the uncertainty of theeconomic outlook, panic spread, the global stock market crash. After that, the risk ofdefault and the government’s credit risk began to appear in the attention of people,became the various countries’ investor all the content of the alert.Hold huge dollar and dollar assets (especially US Treasuries) in developingcountries and emerging economies to the US government’s sovereign debt problemsin recent years, and the more negative changes suddenly faced with uncertainty isparticularly concerned about the risks. Although the capacity of developing countriesgradually emerge in the global market and to further expand the influence, but in allaspects of its economic strength, the market mechanism is still not strong enough to deal with the risks and risk mitigation are limited, more or less will be everyinternational the impact of the event. The US government huge debt, the deficit haslong been to quantify the implementation of easing, uncertainty of future default risk,will hold a large number of developing countries were affected and challenges,impact and breadth immeasurable. Therefore, we make the current situation of theUS government’s sovereign debt problems, the situation of developing countries, andthe US Treasury holdings of sovereign debt problems in the US government to studyand analyze the impact on developing countries. And thus given the limited policyrecommendations-all developing countries should make timely changes to improvetheir resilience to resist risks and achieve stable and healthy economic development.In this paper, the major official website to collect data from the United States,were to select, organize, and analyze. Through charts and other display methods,found that the US government’s sovereign debt showed the following fourcharacteristics:(1) Total debt is huge, and showing an overall increasing trend;(2)government debt-GDP ratio continues to increase;(3) US Treasury yields continue todecline; many (4) holders and foreign holders of a larger amount of share holdings.At the same time, we have to further explore this phenomenon by recognizing thisphenomenon behind the risks and difficulties, and this analysis. First of all, the21stcentury, the United States raised the debt ceiling frequency further faster, to October16,2013, the US national debt has reached$16.7trillion ceiling. Second, continueto increase the debt ceiling, combined with concerns about the US budget deficit andrising debt burden and the risk of default and have uncertain economic outlook,making S&P lowered the US sovereign credit rating to AA+, and the future thepossibility of the US sovereign credit rating was lowered still exists. Third, only inrespect of the current situation in terms of global financial markets, the short-termUS sovereign credit risk is small, the possibility of a sovereign debt crisis is alsosmaller, but the future is how to change the world situation is unknown, and therefore the future of the United States can sovereign debt crisis is still unknown.Fourth, the US federal government’s debt burden will undoubtedly huge lead peopleto think about the timely repayment of its debt. But in recent years the USgovernment budget deficit deepening but also makes investors and holders of theparties for their own interests, and expressed concern about its future prospects.Since the outbreak of the financial crisis in late2007, the US government budgetdeficit-GDP ratio increased significantly. Even if the future of the US economicrecovery and return to normal levels, the federal government will face hugestructural budget deficit, financial difficulties still exist.From the perspective of developing countries, first of all, the first analysis ofthe various holdings of US Treasury bonds in developing countries, since2004,developing countries holdings of US Treasuries scale growth rate significantlyhigher than in developed countries; secondly, from the external and Two reasonsinternal perspective of developing large holdings of US Treasury bonds. In terms ofexternal factors, or whether it is considered from the liquidity of funds from aninvestment point of security holders of US Treasury bonds are the optimal choice foreach sound investment in developing countries in the current situation. And becauseof aspects, including the developing countries due to historical reasons, theireconomic base is still weak, still not strong economic strength, the ability towithstand the risk of suffering from shock, and still is limited, so the governments ofdeveloping countries will be in the safety of the nation’s wealth fundamentalprinciples, pursue financial security foothold. And all along, one of the assets of USTreasuries are the highest safety factor. Especially in the event of major emergenciesand for some time afterwards, the US Treasury funds are the safest haven. Next, itwould be for the US government to study the impact of sovereign debt problems ofdeveloping countries. First, the Fed has been implemented in four rounds ofquantitative easing monetary policy to let the dollar value but also makes the hands of the federal government debt held by creditors shrink, but to the majority ofdeveloping countries are forced to imported inflation, and this Meanwhile, the USdollar increased the export competitiveness of local enterprises, limiting the abilityof US merchandise exports of developing countries. Second, the US Treasurylong-term sustainability of low income developing countries each hold enormousopportunity cost. Furthermore, the US government’s long-term fiscal imbalance isnot new, and the fiscal surplus or deficit is directly related to the government’s abilityto repay debt, and therefore, the financial sustainability of the US federalgovernment to become the US Congress, parties and other parties have been hot andextremely hot issues of concern. Financial arrangements do not have to have orderlyorganized not only erode America’s economic vitality, but also will increase the riskof global economic and financial instability, developing countries which will bringmore uncertainty, risk and unprecedented challenge. In addition, the future of USpolicy toward other uncertainties and unforeseen events, etc., and the impact willgive holders of US Treasuries developing countries, large or small impact.In conclusion, the article, based on the foregoing analysis and research allaspects of developing countries given the limited policy recommendations.