In April 2024, the President of the US Federal Reserve announced in a public speech that he was considering cutting interest rates in the near future. As soon as the news came out, the market reacted violently, and the price of gold fell in response, while the dollar bucked the trend.
On the surface, this is an ordinary monetary policy adjustment, but at a deeper level, this move by the United States has far-reaching implications.
First of all, as the most widely circulated currency in the world, changes in the value of the US dollar directly affect the stability of the global economy.
According to the statistics of the global payment system in 2023, the US dollar accounts for nearly half of the world's payment currency usage. This wide circulation makes any small adjustment in the US dollar likely to cause large volatility in global markets.
U.S. monetary policy, especially the appreciation of the U.S. dollar, seems to be stabilizing the domestic economy, but in fact it indirectly "harvests" the wealth of other countries by influencing the exchange rate.
This practice has attracted widespread attention and discussion in the international community. For China in particular, there are more strategic plans hidden behind this wave of dollar strength.
Looking back at the trade war between China and the United States, China's renminbi has been depreciating ever since.
According to a report by Xinhua Finance Client, China's total economic output has fallen from 77% to 65% of the United States in the past three years, and the economic gap has widened rapidly. This allows the United States to manipulate the lifeblood of the global economy by adjusting the exchange rate.
And the United States is not satisfied with profiting only from Europe and the United States, and its eyes are beginning to turn to Asia, especially China.
As the world's second largest economy, China's market is huge, and for the United States, if it can complete round after round of "harvesting" here, it can not only obtain huge economic benefits, but also maintain its hegemony in the global economy.
In contrast, small countries such as Japan and South Korea are more susceptible to influence from external forces due to their political and economic structure.
Since the outbreak of the pandemic, Japan has experienced a sharp currency depreciation, and according to Xinhua News Agency, Japan's total wealth has almost evaporated by 40% in four years, and its total economic output has even been overtaken by Germany and India.
In this context, the U.S. strategy is obvious: to devalue the renminbi and adjust the exchange rate of global currencies to achieve the dual purpose of stabilizing the internal economy and seeking external benefits.
For China, a stronger dollar means higher import costs, increased external debt pressures, and exchange rate losses for exporters, which is undoubtedly a big blow to the country, which is struggling to recover its economy.
This strategy of the United States has also influenced global financial markets and investment trends. With the strength of the US dollar, global investors are turning to the US market in search of a safer and more rewarding investment environment.
This flow of money not only exacerbates the economic pressures of other countries, but also allows the United States to use these funds to further expand its economic influence.
At the same time, although the U.S. interest rate cut policy may have a positive effect on its economy in the short term, in the long run, whether this model of relying on monetary policy to regulate the economy is sustainable remains to be tested by the market.
For China and other developing countries, finding a strategy to cope with the strength of the US dollar and stabilize their own economies has become an important issue in the face of this change in the global economic landscape.
In this complex international economic environment, China and some other countries have begun to seek more cooperation to counter the economic strategies of the United States.
The countries of the Middle East, especially the six Gulf countries, have also shown a different stance from US policy under such global economic pressures.
They have provided another balancing force for the global economy by keeping oil prices stable and trying to reduce dependence on the dollar.
These moves, while unlikely to change the dollar's global status in the short term, may prompt the international community to reconsider the need for currency diversification in the long run.
Especially in today's increasingly globalized world, the strength of a single currency may no longer be optimal, and a diversified monetary system may bring more stability and fairness to the world economy.
In this context, it is necessary for any country or individual to observe and understand the far-reaching impact of these international economic policies. Inform your own economic decisions. While economic fluctuations can be unsettling in the short term, an in-depth understanding of these global economic developments will help everyone better adapt to the various economic environments that may arise in the future in the long run.