According to some statistics, Fed Chairman Powell has made 67 public statements saying: "U.S. inflation is only temporary!" "Now there is a sudden sound of interest rate hikes, what does the Fed think?
Since the United States began to "release water", this torrent has rushed to the American people, and various prices have soared, but the Federal Reserve has come forward to reassure people's hearts, saying many times that inflation is temporary and will soon pass. However, the economic situation in the United States has deviated from the Fed's forecast, and inflation has not only persisted for some time in the past, but also has no end date in the future. This one is a bit of an overplay.
At this time, former Fed Chairman Alan Greenspan also stood up and publicly stated that the future inflation level of the United States was much higher than the Fed's scheduled 2%. If he can be forced to speak out, it seems that the economic situation in the United States is really not optimistic.
According to statistics, the United States has maintained a price increase rate of more than 5% for five consecutive months, but the income of the American people cannot keep up with this rhythm. Coupled with the fact that the average level of inflation in the United States is now more than 3%, this is already much higher than the 2% safety line that the United States has set for itself. Finally, it is concluded that INFLATION in the United States is not temporary, but long-term.
Many people understand the reasons for inflation in the United States. The most important thing is that the United States printed six trillion US dollars, which flooded the us dollar in the market, and the dollar depreciated, causing the purchasing power of the American people to decline and prices to rise naturally. To make matters worse, supply chains in the U.S. have had problems because of the pandemic.
The production capacity of U.S. factories has been again limited, and demand has exceeded supply. Imports were hampered and rising prices were concentrated, leading to long-term inflation in the United States. This inflationary situation will remain irreversible for a long time to come.
As we all know, the Fed's next move will actually be affected by a large part of Wall Street, which is related to the composition structure of the Fed, and will not be described in detail here. What is Wall Street's attitude? Judging from the current tone, Wall Street believes that the Fed will carry out monetary tightening policies in the future, which is likely to warm up for the next interest rate meeting, and the Fed will start the action to reduce US Debt.
According to BNP Paribas estimates, the U.S. will launch four rate hikes next year. The reason for this prediction is that the agency believes that the current inflation in the United States is too severe, and the Fed can only save the United States by raising interest rates intensively like this. Such an analysis is actually not unreasonable, as early as the United States released the signal of interest rate hikes, many countries have chosen to raise interest rates in advance to avoid their wealth being plundered by the United States.
So, what are the benchmark conditions for the Fed's rate hike action? Which indicators would make the Fed make the decision to raise interest rates?
This is to review the beginning of the establishment of the Fed, has set several goals, that is, the original intention of the establishment of the Fed. The first is to ensure employment, the second is price stability, and the third is the long-term stability of interest rates. But in general, long-term interest rate stability and price stability can be put together, so the Fed's goal is left with two, that is, the employment rate and the inflation rate, and the Fed has set itself an inflation target of 2%.
Now the U.S. economy is caught in a situation of low growth, low employment, and low interest rates. But in 2020, the Fed once again set its goal of guaranteeing an average inflation of 2%. That is to say, since last year, the Fed's level of inflation in the United States has amplified its own limits of interference.
That is, the uncertainty of the Fed's attitude towards US inflation has led to the market's inability to expect when the Fed will raise interest rates. Judging from the Fed's historical attitude toward inflation, the inflation target was established in 2012, which was just higher than the inflation situation in the United States at that time, so there was no need to raise interest rates.
In 2016, U.S. inflation exceeded its inflation target, so it meant the Fed was raising interest rates. Notably, the Fed also mentioned a five-year observation period. This five-year observation period is when the Fed conducts a self-examination of its own monetary policy and work over the past five years. However, there are no rules about whether interest rates will be raised after this five-year observation period.
So, how well are the U.S. policy goals achieved now? From the perspective of employment rate, in 2016, the employment rate and the employment gap rate were basically the same, the United States launched a rate hike, and now the employment gap rate is higher than the employment rate of 1.8%, indicating that the current employment situation is more severe than in 2016, and there is more reason to raise interest rates.
And the two important indicators of the price level now reach 5.4% cpi, compared to 1.9% in 2016; The PCE is now at 4.3 percent, compared to just 1.6 percent in 2016. This shows that the price level and personal consumption expenditure in the United States have now exceeded 2016 by a lot, and even more serious than in 2016. Looking at the various long-term interest rate indicators in the United States now below the 2016 indicator level, that is, the Fed has every reason to raise interest rates now.
However, under the premise that there will be no accidents in the debt reduction before the interest rate hike, it is bound to raise interest rates next year. Now the Fed also has no excuse that "inflation is only temporary", all aspects of the Pressure on the Fed, I believe the Fed will also choose to raise interest rates.
So, will the Fed's choice to raise interest rates this time bring the United States out of the mire? Former US President Trump criticized his predecessor for hesitating and not being crisp on the issue of interest rate hikes during the general election, and then he did come to power. Therefore, the fed's motivation to raise interest rates is sufficient, and it may make the market less reactive.
In the last century, European bankers discovered a way to make money by creating a financial crisis and then using assets such as stocks to profit from it, a bit like the way central banks control money now. Over time, bankers have been unable to unscrupulously amass wealth by controlling the amount of money, because of the restrictions of central banks. The central bank will not easily engage in such a natural anger at home, because it will arouse public indignation.
Still, central banks can operate internationally. Bring an economic crisis to the world, and then take advantage of the opportunity to accumulate wealth. Because of its unique monetary status, the US dollar has made this set to be familiar with the road, and it can even be said that it has natural advantages. Through such a set of operations, the United States can obtain a large amount of wealth in the world, and it can also bring down other countries and let the United States maintain its position as the world hegemon.
Do you think America will feel guilty? It will think that this is the money it has made with its ability, and it will sigh that your financial system is too fragile. This is the reason why the United States, which has the hegemony of the US dollar, has frequently taken the initiative to engage in financial crises in the international community.
Let's look at this action of the Fed to raise interest rates, what will happen to the Fed's interest rate hike? It will make the dollar less in the market, and the liquidity of the dollar in the world will be greatly reduced. That is to say, the dollar will appreciate during this period, and the currencies of the corresponding other countries will depreciate, prices will rise, inflation, and financial crises will break out.
American capital will be like a bunch of emotionless wolves, striking hard at countries with fragile financial systems. In this way, the United States can control a country and hold a political power. Among them, the capital of Wall Street in the United States can obtain wealth, the military plays a deterrent role in it, and the international status of the US government is further enhanced.
For the rest of the world, how can we ensure that their country's wealth is not harvested by the United States? In general, there are three methods. Interest rate hikes, depreciation of the national currency, and the addition of national capital controls.
The so-called domestic capital control is to keep domestic capital from fleeing from the country, while avoiding US capital from taking advantage of the void and buying a large number of domestic assets. There is a drawback to this method, that is, the national currency cannot take the international route. Then foreign trade will be affected. Foreign capital may also invest heavily in the country in the name of investment, and then withdraw in time at the right time. If there is an offshore financial market, then it will give foreign capital an opportunity.
Speaking of the role of local currency interest rate hikes, local currency interest rate hikes can attract foreign capital to stay in the country. Such an approach is also risky, potentially causing a rapid decline in domestic assets and triggering a financial crisis. The depreciation of the local currency will boost the country's export economy, but it is also a crisis for imports, causing some companies to be in trouble. In addition, the depreciation of the local currency means that the attractiveness of foreign capital is reduced, and then domestic assets will face a downward situation.
Therefore, if the United States chooses to raise interest rates, there will inevitably be some small countries because their financial system is incomplete, resulting in a violent shock to their own economy, and for the United States, as long as it is in order, debt reduction, interest rate hikes, it will be able to seize a huge amount of world wealth.
As the saying goes, "The drunkard does not mean the wine." "The United States is not only to alleviate its own inflation crisis, but also to plunder the world's wealth."
So how can China stand alone in this STORM OF US interest rate hikes?
The most fundamental solution is to reduce dependence on the United States. Now that China's exports are relatively large, if this part of the commodity can be converted into domestic demand, then it can form its own economic cycle at home. At the same time, we should step up to complete our own economic circle, and the internal cycle plus external circulation is the best way out for China.