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"The Fed needs to keep current interest rates stable for an extended period of time, or even for the whole year!"
This is the hawkish signal released by the American "super trader" Neil Kashkari on May 7.
As the head of the implementation of the US Treasury's $700 billion financial rescue plan, Kashkari has been a hawkish member of the Federal Reserve voting committee.
Although he did not get the right to vote this year, Kashkari, as the chairman of the Minneapolis Fed, still has a lot of say in the Fed.
Source: Hexun.com 2024-05-08 About "Fed Burst! Nearly 5 trillion yuan traders are hawking, the dollar index is rising, and the yen is falling for three consecutive days: the Japanese stock market has fallen more than 1% again".
Recently, in the context of the "currency defense war" jointly launched by East Asian countries, the pressure on the Federal Reserve has suddenly increased, although the dollar has urgently rescued itself, but even so the US economy is still unable to escape the backlash.
You must know that the United States has won the harvest in Asia before, especially in South Korea and Japan, why is it not feasible now?
In the face of the failure of the financial layout, what will the Fed do? What kind of backlash will the United States, where inflation will become more and more serious in the future?
The Federal Reserve: Self-Salvation or Self-Destruction?
The Federal Reserve raised interest rates seemingly to alleviate domestic inflation and achieve the goal of harvesting the world and saving the U.S. economy.
But this is actually a self-defeating way, and the continuous interest rate hikes have touched the bottom line of countries around the world.
Because the US dollar interest rate hike will lead to a liquidity crunch in global funds, as the United States continues to increase in value, US dollar funds from all over the world will flow back to the United States in large quantities.
Especially for those developing countries that rely on large amounts of dollar borrowing to maintain international trade, the Fed's 11 consecutive interest rate hikes are a naked harvest.
The increase in interest rates due to interest rate hikes alone is unbearable for many small countries.
In this round of harvesting in the United States, the first countries that cannot bear it are those countries with low foreign exchange reserves, large foreign debts, and a single industrial structure, and even several countries have gone bankrupt because of this, such as Sri Lanka.
In this way, the Fed's interest rate hike has indeed reaped a lot of wealth for the United States, so why is it still said that the US government is killing itself?
In this regard, Liu Ying, an expert at the Chongyang Institute for Financial Studies of Chinese University, said that if the Fed chooses to continue to raise interest rates to alleviate domestic inflation, it will not only have a negative impact on the world economy, but also add fuel to the fire of the United States, which is about to fall into an economic crisis.
Liu Ying expert believes that the Federal Reserve's continued interest rate hikes will definitely suppress the economy, and as the credit of the US dollar continues to decline, the U.S. import and export trade will continue to decline, and the inflation that will gradually ease at that time will definitely rebound.
As a result, the United States seems to be caught in a dilemma, the Fed's continued interest rate hikes will exacerbate the bank liquidity crisis, and if interest rate hikes are suspended or cut, the inflation problem will become more serious.
Stanley Druckenmiller
Faced with this embarrassing situation, Stanley Druckenmiller, the head of the Duquesne family, who was famous for shorting the pound in the 90s of the last century, expressed his opinion on May 7:
Stanley believes that the Fed's reckless monetary policy is hurting countless ordinary Americans, and even President Biden's re-election chances may be affected.
Therefore, it is not unreasonable to think that the Fed has raised interest rates 11 times in a row, which is self-defeating, and the Federal Reserve, which has failed in its financial layout, has rarely released a signal that it will cut interest rates.
You must know that the Federal Reserve is notoriously "hard", otherwise it would not have raised interest rates 11 times in a row under pressure from countries around the world in the past few years.
So why did the Fed suddenly relent? Could it be that the plan to harvest Asia did not work?
The harvest failed, and the Fed made an emergency turn
On 8 May, the Fed released a blockbuster news that April's non-farm payrolls data arrived as scheduled.
However, it is clear from the data that the growth of non-farm payrolls in the United States has shown a serious downward trend.
Previously, the relevant US agencies predicted that the number of non-farm payrolls would increase by at least 240,000 in April, but in fact it only increased by 175,000, which was a full 27% worse than expected and the smallest increase since 2024.
For a highly developed capitalist country like the United States, a decrease in the growth rate of non-farm payrolls means that the unemployment rate in the United States will inevitably increase.
There is a large number of unemployed people in the United States
Indeed, the unemployment rate in the United States rose to 3.9% in April, up from 3.8% in the previous month.
We must not underestimate this 0.1%, any slight increase in the employment rate may hide huge social hidden dangers.
From these data, it is obvious that the Fed's 11 consecutive interest rate hikes have not well alleviated the pressure on the domestic economy, so the Fed has to make an urgent turn.
This can be seen in the fact that traders at the Chicago Board of Trade have advanced the Fed's rate cut from November to September, and have changed the previous expectation of a 25 basis point rate cut to two rate cuts for a total of 50 basis points.
You must know that before that, including U.S. Treasury Secretary Yellen, and many members of the Federal Reserve have said that they are likely not to cut interest rates this year, so the Fed's interest rate cut signal has given many investors hope again.
And the main reason for the sudden dramatic reversal after the Fed insisted on delaying interest rate cuts for several months is that the United States is wielding a sickle this time and preparing to harvest Asia.
Harvesting Asia will not work, and the US financial layout will fail
Since 2020, the global economic environment has entered a period of relative downturn, and countries have begun to seek strategies to stimulate economic development.
For example, China has chosen to lower loan interest rates and provide targeted assistance to small enterprises and agricultural enterprises, while the United States has chosen the most worry-free way, that is, the "money policy".
Under the US government's "flooding" monetary and fiscal strategy, there has been a brief period of brightness in the US economy.
However, what the US government did not expect was that the "money policy" that had been invincible before would not work this time.
Not long after the policy was implemented, as the inflow of dollars into the market continued to increase, there was a serious imbalance in demand in the United States, which far exceeded supply, which directly caused inflation and fiscal deficits to "burst" one after another.
Therefore, in order to solve the problem of high domestic inflation as quickly as possible, the Fed once again chose the simplest way to deal with it, that is, to raise interest rates 11 times in a row.
The United States is trying to adopt this policy of inflating the dollar and suppressing the currencies of other countries, relying on the hegemony of the dollar to alleviate inflation and fiscal deficits in the United States by harvesting the world economy.
The first to bear the brunt is the Asian economic market, which the United States has been "salivating" for a long time, among which South Korea and Japan, which have long been tied to the US dollar, were the first to be ruthlessly harvested by their "big brother".
Source: Red Star News 2024-05-07 Regarding "The strong dollar 'harvests' global wealth, the exchange rates of many Asian countries are in an emergency!" Experts warn that currency depreciation should not be excessive".
In particular, Japan, which has long pursued a policy of quantitative easing and zero interest rates, has fallen below the 160 mark against the dollar in a short period of time, hitting its lowest level since 1990.
A man looks at the yen exchange rate in the window of a money changer in Tokyo
However, just when the United States was complacent about taking a crucial step in its plan to harvest Asia, Japan's counterattack and the subsequent "currency defense war" launched by Asian countries shattered the "small abacus" in the heart of the United States.
In the face of the United States' step-by-step pressing, Japan, which is unwilling to sit idly by, has finally made up its mind to climb down from the "dining table" of the United States.
As a result, the Japanese authorities and the Bank of Japan decided to jointly intervene in the foreign exchange market, and under the rescue strategy of throwing a total of 8 trillion yen, the exchange rate of the yen against the dollar finally stabilized at about 154.
At the same time, South Korea, another "little brother" of the United States, is not idle.
According to an investigation report released by the Financial Supervisory Authority (FSS) of South Korea, nine global investment banks have been issued for illegal shorting, with a total transaction volume of 211.2 billion won.
Although the South Korean government has not released a specific list, anyone with a discerning eye knows that Wall Street Capital must be among them.
The United States, which was originally full of confidence and wanted to harvest Asia, never imagined that it would lose one after another in front of its "little brother" at the beginning.
You must know that this is not counting the European countries that have been watching the fire from across the strait, and China, which has already taken the initiative, so the Fed will be forced to make an emergency turn.
After all, on the one hand, there is stubbornly high inflation and fiscal deficits at home, and on the other hand, there is a complete failure of the strategy of harvesting Asia.
However, even if the Fed rarely signals a rate cut, it still cannot effectively get out of the dilemma.
The U.S. economy peaked at the end of 1984 due to inflation, causing nearly 8 million people to lose their jobs
After all, inflation is an extremely thorny problem for any country, including world powers such as the United States and China.
If the United States cannot deal with the current problem of high inflation in a timely manner, then the "stagflation crisis" of the 70s of the last century will once again sweep the United States.
In fact, all signs have shown that the US debt crisis has reached the brink of detonation, and with China and other countries vigorously promoting the development of "de-dollarization", the hegemony of the US dollar will eventually cease to exist.
At that time, the United States will no longer have the strength to make the world "pay" for it, so the famous American entrepreneur Musk has publicly warned: "If the US debt continues to grow, the dollar will eventually become worthless." ”
It can only be said that the United States is to blame for the fact that the United States has failed to harvest the Asian economy and has ended up with an inevitable backlash.
For many years, the United States has relied on its "dollar hegemony" status to reap the wealth of all countries in the world, but with the continuous development of "de-dollarization", it is believed that there is not much time left for the United States.
Key Sources:
1. The original article was published on Hexun.com on May 08, 2024 on "The Federal Reserve Burst! Nearly 5 trillion yuan traders are hawking, the dollar index is rising, and the yen is falling for three consecutive days: the Japanese stock market has fallen more than 1% again".
2. The original article was published in National Business Daily on May 08, 2024 on "The Federal Reserve Burst! Nearly 5 trillion yuan traders 'release eagles'".
3. The original article was published in Red Star News on May 7, 2024 About "The strong dollar 'harvests' global wealth, and the exchange rates of many Asian countries are in an emergency!" Experts warn that currency depreciation should not be excessive".