Original: an Aoki source official account: distant Aoki has been authorized to reprint
In order to cope with inflation, the United States has been raising interest rates in recent months, with a cumulative increase of 150 basis points three times, but the result of the interest rate increase in June was shocking.
In March this year, US inflation rose all the way to 8.5%, and the US was forced to start raising interest rates by 0.25% that month.
In April, US inflation fell to 8.3%.
At that time, we also liked to say that if inflation was reduced at this rate, the United States would have to raise interest rates to keep inflation down.
In May, the United States raised interest rates by 0.5%, ready to continue to suppress inflation.
But I didn’t expect that the US inflation data in May turned out to be 8.6%, the highest inflation record in 40 years, higher than that before the interest rate hike in March, and the effect of the interest rate hike turned negative.
There is no way to calculate how much the United States needs to raise interest rates to suppress inflation. What if the effect of raising interest rates is negative.
In June, the United States raised interest rates by 0.75% at one go, with a cumulative increase of 1.5% in just three months.
The medicine given in June is a powerful medicine. Even the 0.5% interest rate increase in May is a powerful medicine.
How about the effect?
On July 13, the US inflation data for June came out.
Inflation was as high as 9.1%, setting a new record of the highest inflation in 40 years just refreshed in May.
Yes, inflation is not 8.6%, nor is it 8.8%, directly jumping to 9.1%.
I can only say that this result is eye opening.
In the past few months, the United States has repeatedly raised interest rates and inflation has broken new highs. What should be analyzed and what should be said have been analyzed.
Now American inflation has broken to a new high again. I really don’t know what to say.
The only thing we can say is that inflation in the United States should not continue to hit new highs.
The U.S. has raised interest rates by 1.5%, which is not a decimal. Although the U.S. raised interest rates to 20% in the 1980s when it was hyperinflation, today is different from the past, when everyone had high interest rates, and now the world is in the era of zero interest rates.
In this era of zero interest rate, although the 1.5% interest rate increase is not earth shattering, it must not be underestimated, and it is definitely effective anyway.
Even if the U.S. inflation is reduced by 1%, it is far from being sorry for the 1.5% interest rate increase, because if the inflation is reduced to 2% according to this intensity, it needs to increase the interest rate to an outrageous figure.
During the stagflation in the 1980s, the United States suppressed inflation for many times, but it never solved the problem. Press the gourd to float, and finally raise interest rates to 20% at one go.
Now that the interest rate is increased by 1.5%, American inflation has not responded at all, even directly broke 9%. How much interest rate must be increased to solve the problem of American inflation?
Raising interest rates is not what you want to increase.
U.S. Treasury bonds have reached a record $30 trillion. For every 1% increase in interest rates, an additional $300billion in interest rates will be paid a year. This size of treasury bonds limits the upper limit of interest rate hikes in the United States.
In 2021, the U.S. fiscal revenue was $4trillion, and the benchmark interest rate was 0~0.25%. Therefore, the interest paid by short-term treasury bonds was almost zero. With long-term treasury bonds, the total interest paid was $352.3 billion.
The United States can’t afford to pay such a little interest. The budget is still in deficit and continues to borrow to survive.
The United States has set the benchmark interest
If the interest rate is increased to 2%, the annual interest paid on treasury bonds will be close to $1trillion in the future.
Increase the benchmark interest rate to 5% every year in the future
The interest paid on treasury bonds will be close to $2trillion.
The total income is only $4trillion, and there are a lot of domestic welfare expenses, none of which dare to be reduced. The United States takes the head to pay this interest.
You can borrow new bonds and repay old ones without paying back the principal. As long as the national credit is still there, the capital market will think that this bond is theoretically possible to pay off and can be held.
But at least you have to pay back the interest. Is it difficult for the United States to borrow new money to repay the old even when it pays interest?
If the income of the main body of the state cannot even pay the interest, can this national debt be held?
Inflation in the United States hit another 40 year high in June, and the United States is sure to raise interest rates again in July.
The market estimates that the United States is bound to raise interest rates by 75 basis points in July, and the possibility of raising interest rates by 100 basis points at one go cannot be ruled out.
The United States is bound to raise interest rates, but the potential for raising interest rates is running out.
When the United States used 20% interest rate to solve the problem of inflation in the 1980s, the scale of national debt was very small and could not constitute a heavy burden.
But today’s United States, with a huge debt of $30 trillion, is absolutely impossible to use the move of 20% interest rate to solve inflation. The means of interest rate are strictly limited, and even the affordability of 5% interest rate is not available.
If the nuclear bomb of national debt explodes, no one in the United States will suffer.
If the benchmark interest rate of 2% lasts for one year, the United States will pay $1trillion in interest. I see what the United States will pay for this money.
The United States knows the horror of high interest rates in the context of high debt, but it also knows the horror of high inflation. At present, it is in a dilemma.
Yellen said that Russia is to blame for high inflation. We should reduce inflation by limiting the price of Russian oil.
The ideal is very rich, that is, I don’t know whether the United States has the ability to limit Russia’s oil price.
Biden also came out and said that the inflation data in June was out of date, because the price of gasoline had been reduced by 40 cents since mid June, which was only half reflected in the June data.
Biden is telling the truth, but he is also lying.
The price of crude oil has indeed peaked, but even based on the gasoline price in the United States on June 30, the gasoline price has also increased by 46% compared with that on the same day last year, while inflation is only 9.1%.
If inflation is completely linked to crude oil prices, the inflation data of the United States should be 46%, not 9.1%.
The reason why inflation is only 9.1% is that the rise in raw material prices has not yet been transmitted to terminal industrial products, which takes time.
Since the epidemic, all raw materials have soared, all of which have doubled at any time. Only the price of industrial products has not risen much, which is unscientific and unreasonable.
Either the price of terminal products rises, or some manufacturers can’t stand the rise in the price of raw materials and eventually close down, and then the price of products rises.
This scissors gap is unsustainable. Factories need profits to survive, so anyway, the price of end products will rise in the future, but chain transmission takes time.
The 150 basis points increase in US interest rates cannot have any effect. The reason why we don’t see any effect on the surface, I think the real reason may be that without the 150 basis points increase in US interest rates, US inflation would have soared to 10% or even 11%.
The rising pressure of raw materials is still transmitting to the downstream. Many manufacturers around the world have been struggling for more than a year, and more and more cannot support it, and the price is also rising higher and higher.
The United States wants to suppress inflation, hang on.
The real cause of inflation in the United States is that too many people have too many dollars and chase too few goods.
Who is to blame? Where did you get so many dollars?
It’s not printed in China anyway.
Bloomberg predicts that the probability of a US recession in the next 24 months is 98.5%.
It’s OK. The United States still has a 1.5% probability of not entering recession. I hope Biden will work hard to govern and achieve a miracle turnaround.
Marx once said, “inflation is internal plunder, and war is external plunder”.
If we can plunder abroad, all economic problems can be solved.
If not, we can only plunder our own people through inflation.
There is no way to kill China, there is no way to kill Russia, either draw blood from Japan, South Korea and Europe, or plunder the American people internally.
Judging from the current action of the United States, it is intended to carry out blood drawing in Japan, South Korea and Europe and internal plunder at the same time, so as to prolong its survival time as much as possible.
Looking at the posture of the United States, it is intended to play with us. The leftovers are the king, and who can survive for a few more years.
It was so delicious to eat the Soviet Union that all the economic hidden dangers precipitated by history were solved at one go, and decades of glorious days passed,
The United States wants to do it again.
But this time, it’s hard to say who will die.
Of course, the United States has a strong foundation and is the country with the highest per capita consumption of resources in the world. It has always lived a very luxurious life.
Inflation, to put it bluntly, requires too many resources, which is not difficult to solve. Americans consume less resources on average, lower their living standards, and live a frugal life. Inflation immediately goes down.
As long as Americans are tolerant and considerate of each other in this process, they should not only live a good life for themselves, but also shift the responsibility to other Americans. They should tighten their belts to tide over the difficulties, speak of collective spirit, and share the resources of the earth with their rivals.
In theory, the United States is invincible. Even if the living standard is halved, it is better than the highest living standard of its rivals.
Don’t just talk about individualism and egoism. As soon as you reduce living standards and welfare, there will be civil strife. That will only cheapen your opponents.
This is for the good of you, America. What I say is all bad advice.