Vietnam's 20-Year Recession Fears Amid US Debt Risk Shift to 17 Nations, $960 Trillion Exit

As the cycle of interest rate hikes comes to an end, the dollar's global harvesting has also reached its peak, with at least 17 countries currently experiencing a dollar shortage, Vietnam being one of them. To date, approximately 960 trillion Vietnamese dong have withdrawn from Vietnam. Could the Vietnamese economy be on track for a continuous recession lasting 20 years?

Vietnam is hanging by a thread due to the global economic downturn and the Federal Reserve's interest rate hikes. Although the Vietnamese central bank has lowered the GDP growth rate four times this year, it still hasn't been able to keep up with the pace of economic decline.

Due to the ongoing weakening of the global economy, at the beginning of the fourth quarter, Vietnam's exports experienced a sharp decline, with a massive amount of overseas capital withdrawing from the country. This indicates that even though the United States has temporarily halted interest rate hikes, the dollar's harvesting cycle is far from over.

Vietnam has been a beneficiary of the transfer of low-end manufacturing from the United States. Over the years, following the U.S., Vietnam's economy has developed rapidly. In 2022, Vietnam's economic growth rate reached 8%, the highest in nearly 25 years.

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However, after reaching its peak, Vietnam's stock market, real estate market, and foreign capital utilization have all experienced a cliff-like decline since last year.

In October, Vietnam's exports continued to decrease, marking the seventh consecutive month of decline. In the first eight months, Vietnam's export orders plummeted by 80%.

Due to Vietnam's heavy reliance on exports, which are primarily clothing, shoes, and low-end electronic products, the demand for these items will plummet during an economic downturn, leading to a global contraction in consumption.

The consequences are that Vietnam's real estate, manufacturing, and technology companies have all experienced large-scale layoffs.

Additionally, international capital is also a significant cause of Vietnam's economic recession. This year, an increasing amount of dollar capital has exited Vietnam, with foreign investment in the country decreasing by 40% year-on-year, and at least 960 trillion Vietnamese dong fleeing the country.These are all triggered by the dollar panic. The United States, by raising interest rates, recovers the liquidity of the dollar, bursts the economies of other countries while achieving the appreciation of the dollar and the decline of domestic inflation.

Why do export-oriented economies, including Vietnam, encounter an economic crisis every 10 years? The reason is the impact of the dollar tide.

With the continuous devaluation of other currencies, there will be a large number of cheap assets in the future, waiting for the appreciated dollar to bottom out, which also means the beginning of a new round of large-scale water release, and the dollar completes a round of harvesting.

Nearly 70 years of world economic history has shown that every dollar interest rate hike cycle has invariably caused global financial turmoil. This interest rate hike cycle has led to the bankruptcy of countries such as Sri Lanka. The reason for bankruptcy is the exhaustion of dollar foreign exchange reserves, which also means that the country cannot use imported necessities.

The increase in the financing cost of the dollar has also led to overdue dollar debts, leading to national bankruptcy.

There are still many such countries, including South Africa, Brazil, Myanmar, Vietnam, Venezuela, Indonesia, Zimbabwe, Lebanon, Poland, Pakistan, Egypt, Argentina, and so on, at least about 17 countries.

For example, Argentina has experienced 9 national bankruptcies, and currently, Argentina's inflation has reached 142.7%, reaching a 32-year high.

The United States' credit-driven economic growth model is an important reason for the dollar to harvest the world, and it goes on and on endlessly.

At present, the market has begun to speculate on the expectation of interest rate cuts, but J.P. Morgan analysts believe that a U.S. financial debt crisis is likely to occur in the next year.According to data from the U.S. Department of the Treasury, in this fiscal year, the United States' fiscal deficit has reached $1.85 trillion, a year-on-year increase of 179%, while income has fallen by 24%.

What's more alarming is that with the Federal Reserve maintaining high interest rates, the cost of repaying these fiscal deficits has also risen by 27%. Additionally, the United States' debt has reached $33.7 trillion, which is $2.3 trillion more than the $31.4 trillion at the beginning of the year.

Therefore, for the United States to minimize its losses, the countries mentioned earlier will suffer. Since the U.S. dollar dominates the foreign exchange and foreign trade of countries worldwide, the U.S. can transfer its growing debt default risk to countries with a single economic structure, high dollar debt, and nearly depleted foreign exchange.

The United States has taken a series of trade protectionist measures, including trade sanctions and tariff barriers against countries like Vietnam. These measures may lead to a decline in Vietnam's exports, thereby affecting economic growth.

For countries like Vietnam, they may increasingly recognize the benefits of a diversified global currency. Almost all of the more than ten countries we mentioned earlier have increased the proportion of the Chinese yuan as their foreign exchange reserves.

In recent years, the United States has taken a series of trade protectionist measures, including trade sanctions and tariff barriers against countries like Vietnam. These measures may lead to a decline in Vietnam's exports, thereby affecting economic growth. In addition, the United States' import restrictions on some Vietnamese products have also deprived Vietnam of sales opportunities in the U.S. market.

Vietnam's economic recession is related to the U.S. investment environment. The United States is one of the world's largest economies and has always been one of the main destinations for foreign investment.

However, in recent years, the U.S. investment environment has undergone some changes, including political instability, financial market fluctuations, and intellectual property protection issues. These factors may make foreign investors worry about the risks of investing in the United States, thereby reducing foreign investment.

In addition, Vietnam's economic recession may also be affected by other factors. For example, a global economic downturn, natural disasters, and domestic political instability can all have a negative impact on Vietnam's economy, and U.S. economic policies are just one aspect of it.Whether it's Vietnam or any other country, if they continue to blindly trust the US dollar, they cannot escape the fate of being harvested. What do you think?