Carnival on the crater? The Fed is cornered! At the same time as frequent overtures to China, the Fed began to shrink its balance sheet

Last night the Fed finally began to start a balance sheet reduction to reduce the release of liquidity to the market. Inflation in the U.S. in recent months has continued to run at nearly three-decade highs, double the Fed's target. But employment has been slow to return to the desired level. How to find a balance between employment protection and inflation control? This has pushed the Fed into a dead corner. The scale reduction is smaller than market expectations, so the three major US stock indexes have hit a record high.

　　However, Lao Wang feels that this delay in reducing the balance sheet only makes the financial system in the United States, which has accumulated a huge bubble, another step toward danger, like a carnival on the crater.

　　At present, the demand of Americans is picking up rapidly, but there is insufficient employment, no one is working, and the bottleneck in the supply chain is seriously more than expected, which has turned the US economy into a mess.

　　As Christmas approaches, demand is released further and rapidly, making U.S. ports appear to be "dead congested." At the end of August, 40 container ships were waiting to be unloaded at the ports of Los Angeles and Long Beach. By October, that number had soared to 79. At present, the main seven ports in the United States have a backlog of up to $24 billion in cargo.

　　Supply bottlenecks lead to a shortage of goods, which in turn superimposes the soaring prices of upstream raw materials, and prices throughout the United States soar. This puts a lot of pressure on the Fed and also causes dissatisfaction among the American people. A survey in the United States shows that Biden's approval rating has fluctuated sharply recently. The percentage of people who are satisfied with Biden's overall work is 42 percent, down 7 percentage points from August.

　　U.S. GDP growth in the third quarter was only 2 percent, down sharply from 6.7 percent in the second quarter and below the previous market expectation of 2.6 percent.

　　It is also in this situation of anxiety that the United States has recently begun to soften and frequently shows favors to China. First, U.S. Trade Representative Dai Qi said he hoped to ease trade tensions between the world's two largest economies. She said the trade relationship between the two countries was "like a pile of dry wood" and that a misunderstanding "could set off a raging fire with really serious consequences for all of us." And proposed "Sino-US economic re-linkage."

　　This week, U.S. Treasury Secretary Yellen also expressed hope to ease inflationary pressures in the United States by reducing tariffs on imports from China.

　　It can be said that Sino-US economic and trade relations have begun to show signs of recovery, and the follow-up hopes that the United States will not swing left and right. This time, the US softness once again proves that Sino-US cooperation is beneficial to both sides, fighting is hurting, and there is no winner in the trade war and tariff war. Better communication and promotion between the two countries on the core issues of mutual concern is the best solution for China and the United States and the world.