Over the past two weeks, the Chinese yuan has maintained a volatile upward trend against the US dollar. However, it was unexpected that after entering this week, the yuan experienced a decline for five consecutive trading days, even breaking through the 7.36 level at one point.

The depreciation of the yuan corresponds to the appreciation of the US dollar. However, the US did not gain an advantage during this wave of yuan depreciation, as US treasuries are also declining, and it is not ruled out that they may reach a historical low.

The trend of the US 10-year Treasury futures fully illustrates this point. Since this futures contract began trading at the end of 2017, the lowest historical price occurred last October, when it fell to a minimum of 108.828.

But just a while ago, the price of the 10-year US Treasury bond fell to its lowest at 108.875, just a hair's breadth away from setting a new historical low.

Considering the continuous slowdown in global economic growth, various troubles in trade, and the increasingly severe debt crises in some countries, it is inevitable to feel that a storm is brewing.

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Is a global financial crisis really about to break out?

01

Although the exchange rate of the yuan falling a bit more would also set a record for depreciation, it has little to do with a global financial crisis.

After all, the depreciation of the yuan has its drawbacks, but also its advantages.

An appropriate devaluation of the yuan will definitely help our exports, which have shown a clear and continuous increase in the past three months.The latest data indicates that exports in August increased by 1.2% compared to July, and the depreciation of the exchange rate might have contributed to this growth.

Moreover, the Chinese yuan is continuously enhancing its global presence, and the devaluation of the exchange rate also benefits more countries and institutions to hold more yuan.

Therefore, the real potential trigger for a global financial crisis is still the United States, or rather, the culprit is most likely to be U.S. debt.

02

As is well known, the U.S. economic situation has been pessimistic for a long time, with severe inflation constantly suppressing the U.S. economy.

At the same time, over the past few months, the number of jobs in the United States has been falling all the way, with data continuing to be in a slump for several months, the data on job growth is worrying, and the unemployment rate has also become a major concern for the United States.

Looking at the deteriorating employment data, the Federal Reserve can hardly remain indifferent. It can be said that this is also a major bottleneck that the United States has encountered in recent years.

In response to this phenomenon, authoritative industry experts in the United States have said: Although the data is not optimistic, this is not necessarily an ominous sign. Nowadays, everyone knows that the employment situation in the United States is not good, and this is also an opportunity for a bottoming out and rebounding.

The United States itself is at the center of the inflation vortex, and the unsatisfactory employment environment can actually pull the U.S. economy out of the mud a bit.

This explanation sounds a bit strange, obviously willing to fall into another problem in order to solve one problem.In essence, the fundamental concern that everyone harbors is the deteriorating state of the U.S. economy and the increasing fiscal imbalance in the country. At such a critical juncture, the U.S. Treasury is still continuously issuing U.S. Treasury bonds.

Naturally, people are reluctant to hold U.S. Treasury bonds, which in turn forces the U.S. Treasury to continually increase the yield on these bonds. This leads to a significant devaluation of the previously held bonds, prompting holders to sell in order to cut their losses.

This creates a vicious cycle.

03

Analyzing from the above two perspectives, we can clearly see that there should be no issues with the exchange rate of the Chinese yuan; any fluctuations are, at most, short-term.

The real root of the crisis lies in U.S. Treasury bonds.

After all, the total value of nearly $33 trillion in U.S. Treasury bonds looms over the United States like a hanging lake, potentially collapsing at any moment.

However, since various countries have already sold off a considerable amount of U.S. Treasury bonds in advance, as long as they respond cautiously, it should not lead to a global financial crisis.

Nevertheless, a financial crisis within the United States itself seems inevitable.