By Nirmal P. Acharya
It’s an open secret throughout the world that the US government runs on debt. The US government currently owes $31.4 trillion and because the US is running a deficit every year, the day the US cannot sell its Treasury Bond will be the day the US collapses.
Recently, the US Treasury Secretary Janet Yellen issued an urgent call for congressional approval to raise the US debt ceiling. If the US does not continue to sell its Treasury Bonds, it will shut down.
It is not hard to see that the commitment of the US to the MCC project will not be met until the Treasury Bond is sold.
The first potential buyer of the Treasury Bond is, of course, China. Recent public expressions of desire to visit China, from the president to ministers, have been widely interpreted as a rush to go to China to persuade or bully it to keep buying and holding US Treasury bonds.
In 2008, China helped pull the US out of the financial crisis by buying massive amounts of US Treasury Bond. Personally, I don’t think China will buy the Bond this time. But some analysts say the US has ways to keep China buying its Bond. One way to do this is to use the “Indo-Pacific strategy” to bully China into compliance. The MCC can be the name of the game because it is an integral part of the Indo-Pacific Strategy, which US officials have publicly declared.
In this case, China is caught between a rock and a hard place. If China does not buy the US bond, the US will use the “Indo-Pacific strategy” to intimidate China. If China buys the bond, the US will inject the money sent by China to strengthen the Indo-Pacific strategy, and the MCC will get a share as part of the Indo-Pacific strategy.
Nepal’s pro-MCC politicians are likely to be tempted to persuade China to keep buying US Treasury bonds.
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