On April 5, 2022, according to media reports: JPMorgan Chase CEO Jamie Dimon said in his annual letter to shareholders on Monday that the Fed's interest rate hikes "may far exceed market expectations" and that the market will experience a period of sharp volatility, but as long as it does not affect the economy, the Fed does not have to worry about market turmoil.
The Fed frantically released interest rate hike expectations, constantly sending signals to the stock market, the wolf is coming, it is time to prepare. However, institutions are still generally bullish on bulk non-ferrous metals, why is this? Will the Fed actually raise interest rates as expected?
First, let's take a look: Why does the Fed keep raising interest rates?
Historically, I don't talk nonsense. As we all know, the outbreak of the epidemic in March 2020, the Fed entered an unlimited amount of quantitative easing, on the one hand, to bail out the economy, on the other hand, to stabilize employment. I thought that the epidemic could end in 3 months, and the emergency unlimited quantitative easing was also a special case. But because of a large number of printing money, a large amount of water, a full 2 years, printing money for a while, inflation is rising.
- At the beginning, everyone knew that quantitative easing would inevitably lead to an increase in inflation, but when the Fed Powell proposed the concept of average inflation, and then proposed the "inflation temporary theory", and completely abandoned the inflation temporary theory on October 13, 2021, it turned out that the US CPI data has gotten out of control, and it has now reached 7.9%.
We can look at the above chart of the CPI changes in the past five years, that is, from October 2021, the Fed fully realizes that inflation cannot be ignored, and then gradually withdraws from loose monetary policy and begins to reduce debt purchases. In fact, the reduction of debt purchases is not to enter the tightening monetary policy, but to turn off the faucet, after all, the interest rate is still between 0-0.25%, which is quantitative easing.
- This is done because inflation and employment are two contradictory. For society, employment comes first and inflation comes second. Therefore, stabilize employment fundamentally, and then stabilize prices and control inflation. If employment is not put first, social problems will erupt to a greater extent than those brought about by rising prices and inflation.
Therefore, the first interest rate hike began in March this year, because the so-called employment data gradually returned to strength, the Federal Reserve began to control inflation, and the most effective way to stabilize inflation is to raise interest rates, and the United States has no other countermeasures.
Second, the Fed's interest rate hike expectations are so strong, institutional bullish bulk is actually betting that the Fed can not control inflation
The United States is now also a dilemma: on the one hand, the size of the debt is too large, especially the size of the national debt, and the pressure on interest payments is large; on the other hand, inflation is too high, and it is not known when inflation will peak.
- Learn from Paul Volcker's iron fist interest rate hike in the late seventies, whether it can control inflation, the US stock market and US debt will definitely collapse. And the U.S. real economy is likely to decline, and now the inversion of long- and short-term interest rates has reflected the market's expectations for a recession.
We all know that the US treasury bond of 30 trillion yuan is now 2.4% at a 10-year interest rate and 720 billion yuan a year, which is similar to the US military expenditure. The problem is that military payments are rigid, and this year's budget has risen to more than 800 billion, plus various other expenditures are also rigid.
- So, where does the money to keep raising interest rates and pay interest come from? Tax increases? Biden said to raise taxes, which I think is difficult. After all, in the following midterm elections, the Democratic Party will certainly not be able to control the House of Representatives.
So, you see, the Fed is expected to raise interest rates strongly, more just a cannon, the future economic situation in the United States will be very interesting.
Finally, and even more seriously, the dilemma of the US dollar as an international monetary and financial system
After the Russian-Ukrainian conflict, Europe and the United States began to impose unscrupulous financial sanctions on Russia, and Russia wants to break the international order, the key is to drag the United States out of the water, now it seems that the situation may have new changes, if Russia directly from the dollar as a breakthrough, the practical significance may be greater.
- At this time window, it is not just a war in Ukraine that affects only the security situation in Europe, but also another financial war, that is, the dollar tightening, which affects the whole world.
The tightening of the dollar, in fact, is to put it bluntly, it is worse than rotten in the world, and it is necessary to create the image of the dollar that is the least bad from all the credit currencies. Only when this is successful, and capital flows back to the United States to hedge, can it succeed. Russia launched the war to take advantage of the needs of the United States to harvest Europe, but after that, the situation may begin to change.
Just as Russia may not have anticipated a massive freeze on its foreign exchange reserves in Europe, the United States may not have expected that Russia would act at this level and link the ruble to gas. This is mainly because the U.S. own dollar system has big problems on two levels that cannot be hidden:
The first is the unlimited release of water after the epidemic, which not only pushed up inflation in the United States, but also inflation in the world, and it undermined the credit of the dollar.
The second is financial sanctions against Russia. This is more serious than releasing water, which is to slowly dilute your money, freeze foreign exchange reserves and confiscate private property, which is to rob money directly.
- The former is a wounded credit, and the latter is a ancestral grave with a shaved credit. Although the reasons said by the United States and Europe are grandiose, but everyone knows it, the reason is not open mouth, today can black Russian money, then next time it is not my turn is not a matter of minutes?
This is a fundamental question, and it is also a question of drawing a hole in the back of the dollar's interest rate hike, or the sword of Damocles on the dollar's head.
Last words: This Fed interest rate hike is just a dying struggle, capital pursuit of profit is the essence, and the credit structure is the bottom
Today, a large number of Fed officials are hawkishly speaking, are proposing interest rate hikes, and are releasing the expected purpose of speed, in fact, so that the US stock market can enter a technical bear market, slowly land, and stabilize US employment.
- But I can only say that this is the United States' bitter words, because the performance of financial sanctions against Russia can be said to be capitalist pursuit of profits can do whatever it takes, this problem can not be covered up as soon as it occurs, the biggest question it brings is, where is the credit of the credit currency? The effectiveness of the rate hike is closely related.