Debt,National Credit,and The Rise And Fall Of Hegemony

Since Trump took office,the United States' fear of China's growth has been superimposed on the hostility generated by the global epidemic in 2020,and it has evolved into the most severe containment and suppression of China since the normalization of Sino-US relations in 1972.If China wants to deal with the issue of American hegemony in a more targeted manner,theoretically,it should thoroughly explore the laws of the rise and fall of hegemony in the world's political and economic development since Great geographical discoveries,so as to have a clearer and comprehensive understanding of the core of today's US hegemony.Power resources-the essence of dollar hegemony,can also provide experience for China's nation-building and rise.The so-called law of the rise and fall of hegemony mainly includes three core issues: the definition of hegemony,the identification and cycle of hegemony countries,and the driving force of the rise and fall of hegemony.So far,academia has conducted relatively sufficient research on these three issues,and there are certain controversies.It is worth noting that many studies have emphasized that the efficiency of the national debt financing system to obtain funds is an important factor affecting the rise and fall of hegemony,but the problem that the academic community has not fully explained is the successful rise of hegemony in the Netherlands,the United Kingdom and the United States.Compared with Spain and France,which failed to challenge hegemony,what is the source of the higher efficiency of the national debt financing system?Debt has two basic dimensions: interest rate and maturity.The specific manifestation of the high efficiency of the debt financing systems in the Netherlands,the United Kingdom,and the United States is that they can raise funds with low interest rates and long maturities,while Spain and France need to pay higher levels of interest rate costs for debt within a shorter period.The interest expenditure of the same amount corresponds to the total amount of debt under different interest rates and maturities.Low interest rates and long maturity mean that countries with more efficient debt financing systems can use lower costs than high interest rates and short maturities.Expenditure is supported by a larger debt fund in the battle for hegemony.At a deeper level,the general factors that affect the interest rate and maturity of the debt are the collateral and the creditor's credit stipulated in the debt contract.The particularity of national debt lies in either the creditor's difficulty in executing the possession of the collateral,or the lack of collateral,which determines the interest rate.The level of maturity can only be the national credit of the debtor.Therefore,compared with Spain and France,the fundamental reason for the higher efficiency of the national debt financing system in the process of hegemony rise and fall in the the Netherlands,United Kingdom,and the United States lies in the quality of national credit.Difference.This dissertation defines the concept of national credit as: the three elements of national strength,institutional arrangements and financial markets have jointly constructed a credit guarantee and debt certificate circulation system for a national debt financing system.National debt is trusted by the market because of this system,and can be issued,circulated,repaid,and discounted continuously and steadily in this system.Therefore,the main concept and feature of national credit is national credit guarantee,which guarantees that the national debt financing system is trusted by the market and obtains huge and stable financing capabilities.This dissertation mainly starts from the logical perspective of national credit,trying to reinterpret the influence of the national debt financing system on the rise and fall of the hegemony of the Netherlands,the United Kingdom and the United States,and focuses on analyzing the current US hegemony relying on national credit and using the dollar hegemony to debt for its trade and fiscal deficits.The essence of the behavior of financing and apportioning the cost of its hegemony to the world explains whether American hegemony is really declining at this stage and the path that it may decline in the future.In the process of the rise of Dutch hegemony,the difference in performance of the Dutch and Spanish public debt financing systems has a major impact on the war between the two countries,the capitalist economy of the two countries,and the development of the financial market: the Dutch public debt system can effectively finance the war for hegemony and stimulate Economic and financial market development;Spain is stuck in a vicious circle of high capital cost of public debt-capital leakage-public debt bankruptcy-war failure.At the same time,Spain's economic and financial markets have been far behind other major European countries in the context of capital leakage and increasing tax burdens caused by public debt repayment and bankruptcy.The root of the difference in the performance of public debt lies in the quality of national credit.The excellence of the Dutch national credit is inseparable from the Dutch federal government and its fiscal system based on indirect taxes and the Bank of Amsterdam.These factors provide a good guarantee for the repayment and circulation of Dutch public debt.Spain's autocratic regime,inefficient taxation system,and suppressed financial markets correspond to poor national credit,making the issuance,repayment and circulation of public bonds extremely difficult.Since the late 17 th century,due to military pressure,hindered tax reforms,and stagnant fiscal revenue growth,the Netherlands has led to an excessively large proportion of debt service expenditures in fiscal expenditures,and the national credit has begun to decline.With the decline in the ability of the Dutch public debt system to raise funds,Dutch hegemony inevitably declines.The most important stage of the rise of British hegemony should be from the glorious revolution in 1688 to the historical period in which Britain defeated France in the Seven Years' War in 1763.The rapid growth of British industrial power caused by the Industrial Revolution that began in the second half of the 18 th century only consolidated its established hegemony.Compared with its main rival,France,during the critical period of competition for hegemony between Britain and France from the end of the 17 th century to the middle of the 18 th century,Britain had no absolute advantage in strength.The reason why Britain can defeat France and continue to rise depends on the excellent national credit constructed by factors such as the wealth created by privileged monopoly companies,an efficient nationalized fiscal system,an institutionalized national debt market,a central bank system,and maritime national strategy.It guarantees that the United Kingdom will continuously and steadily provide a steady flow of funds for the nearly 100-year war for hegemony between the United Kingdom and France through the issuance of national debt.At the same time,the large-scale smooth issuance of national debt and the high level of national credit have also played an important positive effect on the British economy and financial system,and promoted the development of the financial revolution and the industrial revolution.Unlike the United Kingdom,due to the strong power of the French despotism,the delayed fiscal reform,and the lack of a central bank,the country's credit is poor,and the country's debt financing costs are too high,making it impossible for France to raise funds in the ongoing war.Funds were needed,which not only led to the failure of the war for hegemony,but also resulted in a short-term heavy debt repayment burden and open market operations for debt reduction,which severely inhibited France's financial and economic development.As for the reasons for the decline of British hegemony,the root can also be found from the perspective of national credit.During the First World War,in order to fight and support Russia and other allies,the British accumulated a large amount of foreign debt(most creditors are the United States),and the country's credit overdraft was severe,which caused severe restrictions on the operation of economic and monetary policies.Reluctantly maintaining the gold standard,an important public product under the British hegemonic order,the UK has the worst macroeconomic policy combination of fiscal deficit + current account deficit + gold outflow +currency injection.Therefore,before World War II,Britain's national credit was completely weaker than that of the United States under the impact of shrinking trade and fiscal deficits.Capital outflows were severe and a large number of them were transferred to the United States.Compared with other countries,the United States is an artificially designed country,and one of its founding fathers,Hamilton,has long recognized the key role of national debt financing and national credit to the rise of the country.The history of U.S.Treasury bonds originated from the Continental Congress' s borrowings from the Netherlands,France and other countries to raise war funds during American Revolutionary War;the origin of national credit was mainly derived from the then Treasury Secretary Hamilton's national debt thinking and related national debt credits.Awareness of the source.Hamilton encouraged the development of the manufacturing industry,consolidated national debt,and established the First Bank of the United States,which initially established the national credit of the United States.The second half of the 19 th century to the first half of the 20 th century was a critical stage for the rise of American hegemony.Behind the rising economic power,military power,and financial power,the important role played by national debt and national credit is reflected: for the industrial revolution and economic growth.Provide sufficient and low-cost funds;lay the foundation and provide stimulus for the formation and expansion of the financial system;raise military expenditures for the United States to participate in previous wars.At this stage,the US dollar hegemony,which finances the double deficits of trade and finance through the issuance of US dollars to the world,is the core power resource of US hegemony.The essence of the dollar is national debt,and national credit is the fundamental support for the effective operation of the dollar's hegemony.The collapse of the Bretton Woods system in the early 1970 s was essentially a national credit crisis of the United States.In the late 1970 s,the United States promptly opened the national debt market to the world and strengthened its own financial market advantages.The improvement of security and liquidity has effectively compensated for the damage to the national credit of the United States from the current account deficit since the 1960 s through capital account black letters,and even played a role in strengthening national credit.The national credit of the United States is still stable so far,so the hegemony of the US dollar and the hegemony of the United States cannot be explained.However,the polarization of the rich and the poor,social divisions,and severe political polarization in the United States,as well as the implementation of the Fed's bottomless QE policy following the 2008 financial crisis,especially the impact of the epidemic,have significantly weakened the Fed's independence.,The hidden dangers of national credit decay are accumulating day by day.However,the fortunate thing about the United States is that there has not yet been a country in the outside world with strong national credit that can replace the United States' national credit.This is reflected in the breadth,depth and flexibility of the financial market,which is that there is no country or region in the world today.The financial market can be compared with the American financial market.The decline of American national credibility and hegemony is likely to be a relatively slow process in the absence of substitutes.Through theoretical analysis and historical review and comparison,this article draws three main conclusions:First,the quality of the national debt financing system and the credit of the country that provides guarantees is closely related to the rise and fall of hegemony in the process of world political and economic development.The specific mechanism of this relationship is that,compared with countries that have failed to compete for hegemony,the successful rise of hegemonic countries such as the Netherlands,the United Kingdom,and the United States have taken the lead in establishing excellent national credit and have the ability to directly raise funds and debt financing for the war for hegemony.Activate the credit guarantee capacity of the financial market for economic development.Correspondingly,one of the important reasons for the decline of the hegemony is the cost of hegemony-military expenditure or expenditures on public products to maintain the hegemonic system lead to excessive debt inflation of the hegemony and squeeze the normal fiscal expenditure space,resulting in a decline in military expenditure and economic development In the end,its national credit continued to be weaker than that of the rising countries,and it lost its debt financing ability to raise funds for hegemony costs and its central position in the international credit system.This process is embodied in the loss of status and privileges such as the international financial center originally owned by the hegemony,the national debt as the benchmark for national bond interest rates,and the domestic currency as the most important international reserve currency.Second,based on the relationship between the national debt financing system and the rise and fall of hegemony,it can be considered that after the emergence of the great historical cycle of capitalist globalization,three credit-hegemony cycles have appeared one after another: the Dutch cycle,the British cycle,and the unfinished American cycle.The credit cycle of the hegemonic country reaches its peak and decline before the hegemony cycle.The strengthening and rising phase of the credit cycle of the newly emerging country corresponds to the decline phase of the credit cycle of the traditional hegemonic country.The credit cycles of the two countries alternate before the hegemony cycle.Third,at this stage,the world is still in the credit-hegemony cycle dominated by the United States.Although the US hegemony has shown many signs of decline,its national credit has not yet experienced a systematic decline;more importantly,there has not been a country that has so far.National credit superior to the United States can replace the United States' position in the world economic system,especially in the financial market.To a large extent,this allows the United States to continue to use the dollar system to finance the cost of its hegemony.However,the cumulative risks of the financial market system and the rupture of global consensus may cause other countries and markets in the world to invest in dollar assets(The U.S.'s demand for world debts has severely declined,which has become the beginning of a serious crisis in the U.S.credit-hegemony system.The enlightenment of the research in this dissertation for China's future development and nation-building lies in: As the US credit-hegemony cycle begins to become unstable,China has increasingly become the main bearer of the cost of US diversification of hegemony.How should China deal with this risk? Based on historical experience under the national credit logic,in addition to continuing to strengthen the economic and military hard power,starting from the aspects of unifying the national debt market,deepening and opening up the financial market,maintaining and strengthening the independence of the central bank's monetary policy,etc.,we consciously strengthen the national credit,It is crucial for China to avoid greater risks that may arise in the future US credit-hegemony cycle;more importantly,this will help China's sustainable rise.