Text: Mirror
All of the statements in this article are based on reliable sources and are reproduced at the end of this article
Preface
It turns out that Tesla CEO Elon Musk has foreseen this situation for a long time?
Recently, the news of the Fed has been flying all over the sky, and the news of the Fed's failure is everywhere.
At this time, China directly cut 44.8 billion yuan of foreign exchange!
When I saw the current situation of the Federal Reserve, I found that what Musk once said had already been verified!
The Fed was defeated
The United States has always had the reputation of being a superpower, and it also has a lot of U.S. debt in the world.
However, for a long time in the past, the inflation data in the United States was unacceptable and very disappointing.
According to the information, although the United States has been controlling the changes in the data, and even the employment data has declined, the inflation rate in the United States still remains above 2%, and there is no obvious result, and the risk of upward inflation in the United States cannot be prevented.
Based on this situation, instead of starting the interest rate cut policy, the Fed has postponed the interest rate cut policy again and again, and there has been no clear result.
Source: Guangming.com, May 7, 2024 "Stubborn Inflation, Strong Employment, Fed Interest Rate Cuts Push Again and Again"
Just on May 1, the Fed concluded its two-day monetary policy meeting and announced that it would keep the federal funds rate in the range of 5.25% to 5.5%, which it would begin in June to slow the pace of balance sheet reduction.
However, this is the sixth consecutive meeting of the Federal Reserve since September last year to keep interest rates unchanged, and many countries are dissatisfied with this.
The Fed mentioned in a statement at the time that although inflation has eased in the past year, it is still at a very high level, and in recent months, the Fed has achieved its 2% inflation target, but there is still a lack of further progress.
They argue that it would be inappropriate for the Fed to lower the target range for the federal funds rate until there is greater confidence that inflation will continue to move toward its long-term target of 2%.
Source: Jiemian News, May 7, 2024 "New York Fed President Williams: The Fed Will Eventually Cut Interest Rates"
In the Fed's view, the U.S. labor market now has strong demand, and inflation is still growing faster than expected, so they will continue to postpone interest rate cuts, and think this is appropriate.
I thought that the Fed would continue to maintain the practice of not cutting interest rates until the end, but on May 6, the head of the Federal Reserve Bank of New York, John Williams, said that the Fed's next move is likely to be to lower interest rates.
Although he did not specify the time, it is not difficult to see that the Fed cannot hold on, and they will not be able to withstand such pressure in such a situation.
According to the data, the Federal Reserve has delayed cutting interest rates because the economic data in the United States is not optimistic, the economic growth rate is much lower than expected, but the inflation indicator remains high.
According to the latest data, the U.S. economy has entered the risk of "stagflation", just taking the data from the first quarter of 2024, the GDP growth rate of the United States has fallen sharply, but the inflation level is rising more than expected.
This puts the United States in a dilemma: if interest rates are cut now, it will easily cause inflation to rise, but if interest rates are not cut, such high interest rates are eroding the domestic economy.
This has led to the United States not only putting itself in a dilemma, but also dragging many countries into the quagmire of high inflation
Today, the US faces six times the size of its national debt before the 2008 financial crisis, and it is expanding rapidly.
However, the national debt is not the biggest threat facing the United States right now, what really worries the United States is about the prospect of fiscal deficits, and the former chairman of the Federal Reserve has curbed inflation under the threat of death, and I don't know what decision will be made this time.
I don't know how the impact of the continued rise of the US dollar index and the decline in global financial asset prices will affect other countries in the current situation.
Source: The Paper, May 5, 2024 "Warren Buffett on U.S. Debt: Not Worried About the Scale of U.S. Debt, but Worried About the Prospect of Fiscal Deficits"
China cuts foreign exchange
In the current situation in the United States, the mainland's foreign exchange reserves have been seriously affected.
According to the data, as of the end of April 2024, the scale of the mainland's foreign exchange reserves is 3,200.8 billion US dollars, compared with the scale at the end of March, our foreign exchange has decreased by 44.8 billion US dollars, a decrease of 1.38%.
Source: Jiemian News, May 7, 2024, "State Administration of Foreign Exchange: The scale of China's foreign exchange reserves at the end of April was US$3,200.8 billion"
According to the news pointed out by the foreign exchange bureau, under the influence of macroeconomic data and monetary policy expectations of major economies, the US dollar index has risen, and the global financial asset prices are in a downward situation.
The size of the mainland's foreign exchange reserves fell in April, mainly due to the translation of exchange rates and changes in asset prices.
However, the mainland's economic foundation is stable, with many advantages, strong resilience, and great potential, which is conducive to maintaining a basically stable scale of foreign exchange reserves.
Although the scale of the mainland's foreign reserves has declined, it still remains above 3.2 trillion US dollars, according to economic expert Li Xunlei, since the Federal Reserve raised interest rates, the yield of US bonds has risen sharply, but the price of US bonds is falling, so holding US bonds will lose money.
Source: Securities Times, May 7, 2024 "External Reserve Data Released! Maintaining more than $3.2 trillion
But gold is different, gold has become a very real hedging tool, therefore, reducing US bonds and increasing gold has become the choice of many central banks.
According to the data, the mainland is constantly purchasing gold, in April, the mainland's official gold reserves were 72.8 million ounces, an increase of 60,000 ounces compared with March, which is also the 18th consecutive month that the mainland has increased its gold reserves.
Increasing gold reserves is a smart move to stabilize the exchange rate, and the head of the World Gold Council in China also said that China's gold investment demand is likely to continue to strengthen, and China's approach to buying gold is very correct
However, so far, the Fed has not made any changes, but has learned from the mouth of the US Federal Reserve that it is not appropriate for the Fed to cut interest rates this year due to persistent inflationary pressures, and the federal funds rate will remain at its current level for a longer period of time, which means that the Fed will not cut interest rates this year.
Source: Beijing News, May 11, 2024 "Inflationary pressures continue, Fed governor says he will not consider cutting interest rates this year for the time being"
This is reminiscent of what Tesla President Elon Musk once said: "If the US debt continues to grow, then the dollar will be worthless!" ”
In the current international situation, the United States needs to make some changes, otherwise the dollar may really be "worthless" in the end!
Source: Sina Finance, May 4, 2024 "Musk warns: If U.S. debt continues to grow, the dollar will eventually be worthless"
brief summary
The Fed's postponement of interest rate cuts may help the United States in the short run, but in the long run, it will be detrimental to the development of the United States, and even to the development of the whole world.
It is hoped that the United States will recognize the reality as soon as possible and let the world work together to solve this remaining problem.
bibliography
Sina Finance, May 4, 2024 "Musk warns: If U.S. debt continues to grow, the dollar will eventually be worthless"
Jiemian News, May 7, 2024, "State Administration of Foreign Exchange: The Mainland's Foreign Exchange Reserves at the End of April Will Be 3,200.8 Billion U.S. Dollars"
Beijing News, May 11, 2024 "Inflationary Pressures Continue, Federal Reserve Governor Says No Interest Rate Cut Will Be Considered for the Time Being"
The Paper, May 5, 2024 "Warren Buffett on U.S. Debt: Not Worried About the Scale of U.S. Debt, but Worried About the Prospect of Fiscal Deficits"
Guangming.com, May 7, 2024 "Stubborn Inflation, Strong Employment, Fed Interest Rate Cuts Push Again and Again"
Jiemian News, May 7, 2024 "New York Fed President Williams: The Fed Will Eventually Cut Interest Rates"
Securities Times, May 7, 2024 "External Reserve Data Released! Maintaining more than $3.2 trillion
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