Original: Zhanhao source: official account: Zhanhao wechat ID: zhanhao668
In 2022, the Federal Reserve will raise interest rates crazily!
If we had not seen it with our own eyes, most people might not believe that the Federal Reserve would raise interest rates so quickly. Since the first interest rate increase in the new interest rate raising cycle was announced on March 16, and the target range of the federal funds rate was raised by 25 basis points to the level of 0.25% to 0.5%, by July 27 this year, the Federal Reserve has raised interest rates four times in just four months, bringing the federal benchmark interest rate to the range of 2.25% to 2.5%. The second to fourth interest rate increases were very high, as high as 50 basis points, 75 basis points and 75 basis points respectively.
Will the Fed continue to raise interest rates this year?
Just now, on August 26, local time, US Federal Reserve Chairman Powell delivered a speech at the annual meeting of global central banks in Jackson Hole, saying that the United States would continue to take measures to “forcefully” combat inflation, but at the same time warned that the forceful interest rate increase measures would bring “pain” to American families and enterprises. Powell’s speech shows that the Federal Reserve may still raise interest rates substantially in the coming months.
So, to what extent will the Fed raise interest rates? Powell did not mention the room for raising interest rates, but he talked about a target, that is, to reduce the US inflation rate to 2%. At present, the inflation rate in the United States is still around 9%, and it obviously needs a very strong interest rate increase to reduce it to 2%.
Powell stressed that measures taken against this goal will have an impact on the US economy. Powell said that rising interest rates, slowing economic growth and a weak job market will depress inflation. “This will bring some pain to families and enterprises, but these are the unfortunate costs of reducing inflation. If price stability cannot be restored, it will mean greater pain.”.
Powell’s remarks released two very important messages:
1? The Federal Reserve will not only raise interest rates, but also continue to raise them forcefully. This means that the previous analysis and inference of Zhanhao (wechat official account: Zhanhao) is reasonable, that is, the Federal Reserve will raise interest rates at least twice in the second half of the year, and the range is estimated to be as high as 100 basis points, which means that the benchmark interest rate of the Federal Reserve will reach 3.25% to 3.5% by the end of this year.
2? The Fed’s sharp interest rate hike will lead to a hard landing of the global economy. According to the current rhythm, the Federal Reserve will eventually raise the interest rate level to more than 5%, reaching the highest point of the previous interest rate increase cycle in 2006. The last time the interest rate of the Federal Reserve reached 5%, it triggered the subprime mortgage crisis in the United States and triggered the global financial crisis. Its negative impact continues to this day.
From this, we can infer that the Federal Reserve is very clear about the consequences of raising interest rates.
Since we know the consequences, why does the Federal Reserve still have to raise interest rates?
The answer is simple: if interest rates are not raised, there will be persistent hyperinflation in the United States. Hyperinflation means that the US dollar will enter the channel of substantial depreciation, and once this happens, its dominant currency position in global reserves and transactions will be lost. For the United States, it can only choose the lesser of the two evils. It knows that the economy will land hard after the crazy interest rate increase, so it has to be brave enough to increase. For the United States, inflation must be controlled as soon as possible.
The Fed’s frenzied interest rate hike means that the cost of using funds will rise sharply, and the asset price foam will be punctured. After the Federal Reserve raised the interest rate to more than 5% in 2006, the subprime mortgage crisis broke out in 2007, and then triggered the global financial crisis. Obviously, the Fed’s interest rate increase will also burst the asset price foam. Therefore, it is not surprising that the global economic pressure in the future is still behind us, and new crises and major conflicts will break out.
As a matter of fact, the United States has a very realistic and practical purpose in creating a crisis in the world, especially in provoking a war between Russia and Ukraine, in addition to its long-term purpose of maintaining its hegemony, that is, to carry out economic ransacking on the world.
The U.S. economy is now very weak. The deep-seated problem of the subprime mortgage crisis in 2007 has not been really solved. It is the joint rescue of the G20 to stimulate the economy. Then the U.S. released liquidity globally and pushed up the asset price in the U.S. market to temporarily control the problem. However, as the problems became more and more serious, the United States had to continuously release liquidity to maintain its high asset prices, which was the fundamental reason for the continuous rise of US stocks.
The real and bigger foam in the United States comes from more than one year after the outbreak of the COVID-19. Trump and Biden released more than $6 trillion in liquidity before and after the outbreak. In addition to pushing up the US stock price and temporarily stabilizing the US economy, the liquidity of more than $6 trillion has also pushed up prices. Coupled with the impact of the epidemic on productivity and the high tariffs imposed by the trump administration on Chinese goods exported to the United States, the hyperinflation in the United States has finally become very serious.
For the United States, to control inflation, it must increase interest rates, which will inevitably lead to the bursting of the asset price foam. In order to maintain the domestic asset price, the United States must frantically drive the US dollar back to the United States. How can I hurry? This is creating a crisis! What kind of crisis can make international funds flow into the United States at no cost? The answer is to make war!
How did the Russian Ukrainian war come about? That’s the big reason! The United States provoked the Russian Ukrainian war not only to stimulate the confrontation between Europe and Russia, enhance the control power of the United States over Europe and find opportunities to deal with China, but also to make more regional dollars flow into the United States to stabilize the asset foam of the United States and avoid the collapse after the foam burst.
You can pay attention to several important time nodes. In April 2021, inflation in the United States began to pick up and rose rapidly in the next few months. In the first half of 2021, the Biden administration, which had just taken office, began to stir up trouble in the Russian Ukrainian situation. In the second half of the year, the situation in Russia and Ukraine, which had been relatively stable in the past few years, rose sharply. The main reason was that the United States continued to provoke the Ukrainian army behind the scenes and stimulated the Ukrainian army to deploy to eastern Ukraine. At the same time, the Zelensky government of Ukraine continued to ask the Biden government to provide military assistance and he asked for the recovery of eastern Ukraine. During this period, the United States and Ukraine also secretly communicated Ukraine’s accession to NATO. Until November 2021, after repeatedly warning the United States and Ukraine, Russia began to carry out large-scale military exercises and took special military actions against Ukraine in the end.
The Russian Ukrainian war was secretly provoked by the United States. Its short-term practical effect is that the war scared Europe. They began to worry about their own security, and began to hold the United States’ thighs. Their political autonomy was weakening. At the same time, funds, including those from Europe, began to flee on a large scale and flow into the US market. The US dollar index rose sharply and other currencies fell sharply. In particular, the euro has fallen below 1:1 with the US dollar.
The sharp rise of the US dollar and the depreciation of the world’s currencies against the US dollar will have two consequences:
1? US inflation rate decreases, global inflation rate rises
As the dollar index keeps rising and the global purchasing power keeps rising, he can buy more commodities with less dollars. As the currency value of other countries in the world decreases and the commodities in the market decrease, the commodity price will rise. Therefore, the United States has realized the goal of exporting inflation by raising interest rates.
2? The asset price foam in many countries in the world will burst and even erupt into crisis
When the Federal Reserve raises interest rates, asset prices of other countries will fall and inflation rate will rise. At the same time, relevant countries have to raise interest rates in order to fight against capital outflow. As a result, asset price foam will further burst, and even there will be price inflation trend and deflation trend of the real economy. If it continues, many countries in the world will have a sharp fall in asset prices and a serious economic crisis.
Once such a situation occurs, it will be the time of American robbery! At that time, the Federal Reserve will significantly reduce interest rates, and then release a large amount of liquidity to American institutions and enterprises, allowing them to buy assets at low prices around the world. Once American enterprises and institutions can purchase a large number of cheap assets worldwide, the Federal Reserve will continue to release liquidity to stimulate the economy. When the global economy recovers and asset prices in various countries rise, American institutions and enterprises will make a lot of money and their own crisis will be solved.
This is the wishful thinking of the United States and the details of the future of the United States. However, objectively speaking, this is China’s opportunity.
Compared with many countries in the world, China has the world’s most powerful manufacturing industry, the world’s largest market and the world’s largest potential market. There is also room for China’s fiscal and monetary policies. All these have determined that China’s macro-economy can be stable under the background of the Fed’s interest rate increase.
How stable is China’s economy? We only need to look at our bank interest rate. Against the background of the large-scale interest rate increase by the Federal Reserve, we not only did not raise interest rates, but also cut interest rates locally. Now our benchmark interest rate is even lower than the benchmark interest rate of the Federal Reserve. This shows that our real economy as a whole is much more solid than that of other countries. Of course, due to the global economic difficulties, we are also under great pressure, including economic growth and consumption growth. However, our exports have maintained a high growth, our consumption is still growing as a whole, and our inflation rate is still low. All this means the overall stability of our national economy.
This stability makes China relatively calm in the face of the crazy interest rate increase in the United States. The devaluation of the RMB will further stabilize our export trade and further stabilize the economy. Next, what we need to do is to further stimulate consumption and economic circulation. As long as our macro-economy continues to stabilize, the United States will not be able to cut our leeks in the end. We can also use the United States to attack other countries to continue to expand the scope of RMB internationalization, and further stabilize the industrial chain and supply chain relationship between China and other countries.
Because of China’s huge economy, the United States can no longer easily plunder other countries. From this, we can also see why the United States is trying every means to provoke conflicts in the Taiwan Strait. Its purpose is almost the same as that of the Russian Ukrainian war, that is, to promote more funds to flow into the United States by creating regional conflicts. However, compared with the war between Russia and Ukraine, the Taiwan issue is China’s internal affair, and the gap between Taiwan’s military strength and the PLA is too large. Once a war breaks out, the United States itself is likely to be involved. Once that happens, I am afraid the United States will not be able to control it. Therefore, compared with the Russian Ukrainian war, the United States has no scruples, and it has much to consider in the Taiwan Strait.
We are clear about the conspiracy of the United States, so we will be more effective and confident in dealing with the United States next! We’ll see. It’s not so easy for the United States to cut the world’s leeks with China!