The Fed has paused interest rate hikes twice in a row, is victory in sight? This victory is a victory that the whole world is looking forward to - the United States will cut interest rates at an early date, and the world economy will return to easing. The U.S. interest rate hike has led to a global money shortage and economic strain, which has been a real experience for more than a year. In fact, the impact of the US dollar rate hike on the world is much greater than the impact on the US mainland. Therefore, the world is hoping that the United States can cut interest rates as soon as possible so that everyone can take a breather.
The US dollar raises interest rates
Our victory will still be focused on China and the United States. Japan is also very uncomfortable, but who cares about Japan? As long as we can survive until the United States cuts interest rates, a series of domestic conditions can also be alleviated. In the Sino-US financial war, as long as China can survive until the United States enters a cycle of interest rate cuts and easing, it will be considered a victory.
In contrast, real estate companies are much more unlucky. Many real estate companies have borrowed a lot of US dollar bonds in the past few years. In just these two years, it's time to pay off the debt. As soon as the U.S. raised interest rates, the dollars in the market were siphoned off. Real estate companies want to repay dollar debts, and they can't borrow new to repay the old. Of course, the problems of the fallen real estate companies are still the main reason, which we do not deny. However, the dollar shortage caused by the US interest rate hike was definitely the last straw that broke the camel's back. Several large real estate companies first broke out that the dollar bonds could not be paid, and then they began to thunder.
real estate
In fact, the US dollar interest rate hike against China is also a breakthrough by blowing up China's real estate. Other industries are slow to achieve results, but the real estate industry has the fastest results. In the past year or two, we've really seen that effect. Therefore, the whole world is now holding on, waiting for the United States to stop raising interest rates, and then enter the channel of interest rate cuts and reopen easing. Before that, if you can stabilize yourself and not have major problems, it will be considered a victory.
Exploding real estate in China
This is the second time since the US stopped raising interest rates in September. Let's wait and see if the US will raise interest rates again in December next month. If another rate hike is stranded in December, it will see the light of day. As the saying goes, once you are strong, then you will decline, and then you will be exhausted. If there can be three strandings, even if the United States raises interest rates head-on, it will be the end of the crossbow. It doesn't work, and people's confidence will be reversed.
The Fed stopped raising interest rates twice in a row, not out of kindness, but because two data fell short of expectations: one was the data on small non-farm payrolls, and the second was the PMI for the manufacturing sector. Regarding the employment data in the United States, everyone agrees that this is a bit outrageous. In fact, there are a lot of duplicate statistics in this. Let me use a report from Yahoo Finance as an example: on March 27 this year, there was an article in Yahoo Finance that inflation was as fierce as a tiger, and 8 million people in the United States worked two jobs to make a living. If Yahoo Finance's report is not too exaggerated, then the distortion of the U.S. employment data is indeed quite serious.
Yahoo Finance
The total population of the United States is 340 million, so the total employed population is 250 million at most. The 8 million second jobs added out of thin air are enough to increase the employment rate by 3 percentage points. Because the employment statistics in the United States are calculated by jobs, not by people. In particular, the small non-farm payrolls, also known as the ADP employment rate, which is a direct survey of the employers' payroll statistics. As long as your employer pays a salary, then this is considered an employed population. He doesn't care how many salaries you get alone. And now, it is this ADP employment data that is less than expected, the expectation is 150,000, but it is actually more than 110,000, but the increase is only 89,000.
The second is the manufacturing PMI. The manufacturing PMI for October was 46.7 versus 49 expected. This compares to China's PMI of 49.5 in October. However, the comparison between China and the United States compared to the PMI is really not interesting. China is a producer, and the manufacturing PMI is below 50, as if something big is going to happen. The U.S. is a consumption-driven GDP, and as long as consumption is strong, the manufacturing PMI is a little lower, and the impact on the economy is not as great as that of China.
I have to say that on the surface, it seems that the Fed's expectations management still has a set. The main line of the U.S. economy, the data on the bright side, that's pretty good. At the moment, only these two indicators are expected to weaken a little, which pauses the rate hike. On the surface, it does show the wisdom of the world's central banks.
Fed
As we said at the beginning, the Fed's interest rate hikes will have a much greater impact on foreign countries than on the United States. Because the U.S. dollar is the world's currency, global economic transactions have a very high positive correlation with the number of U.S. dollars. When the Fed raises interest rates and tightens monetary policy, a large amount of overseas dollars will flow back to the United States. Therefore, the shortage of dollars in the United States is much smaller than overseas. In the past, the US dollar has raised interest rates before the US economy falls into recession, and many other countries have collapsed first. This time it is actually the same, and it will also cause foreign companies to fall before American companies, and foreign economies will collapse first.
In fact, I think that the Fed has been emphasizing that the employment rate, unemployment rate, recession, and other factors are not the real reasons that affect them. What can really suppress the Fed to stop raising interest rates is the yield on US Treasuries. This indicator is directly related to the lifeline of the United States. The Fed can not care about economic growth, it can not care about employment performance, but it cannot ignore the fate of the United States.
U.S. Treasuries
In the past, when the United States raised interest rates, the national debt was not the first factor to consider, because at that time the national debt of the United States was not much. But now it is different, the balance of the US national debt has grown from 10 trillion in 08 to 34 trillion now. Such a large amount of national debt cannot withstand the pressure of long-term and high interest rates. In the past, countries around the world would definitely not be able to withstand the harvest of this interest rate hike by the United States, including China. Perhaps, like in 08, I will have to cooperate with the United States and get through this first. So, it seems a little early for us to say victory or not, but, after all, we have already seen the light of day. Moreover, the dawn of this victory is not subject to human will.
The Fed stops raising interest rates and pauses interest rate hikes, which is the result of weighing the pros and cons under various factors. If the environment changes, such as a sudden rise in oil prices, then the Fed's policy may also change. However, the lifeline of U.S. bonds is getting bigger and bigger, and the Fed can only try its best to repair it, and he can't get back. At this stage, this year and next year, what China's economy needs to do is to cultivate its internal strength, and it is to endure this period of hard work. It wouldn't seem to be too long.