Source: wechat official account: authorized daily Yijian
Following the US inflation of 8.6% in May, a 40 year historical record.
The Fed is holding back.
On June 16, Beijing time, the Federal Reserve announced a 75 basis point increase in interest rates.
This range has set a record since 1994.
On March 17, the interest rate was raised by 25 basis points. On May 5, the interest rate was raised by 50 basis points. Now it is 75 basis points.
25?50?75?
It can play the interest rate hike into an arithmetic series.
The Federal Reserve is the only one in the world…
Raising and reducing interest rates are common monetary policies of the Federal Reserve and important means to regulate and control the economy.
Cutting interest rates will lead to the release of a large number of dollars from the Federal Reserve, with the United States as the source, pouring into the world. This behavior is also called “throwing money” among the people. In the United States, a large number of new currencies will solve many social contradictions and smooth out many economic problems.
The effect of raising interest rates is just the opposite. It will lead to the flow of US dollars from the private sector to the Federal Reserve. Because the interest rate has increased, people will tend to repay us bonds in advance or deposit money in banks. In this way, the total amount of US dollars in the world will be reduced. Of course, this will greatly reduce inflation, but it will also lead to an increase in social contradictions, which may lead to economic recession in serious cases.
Therefore, in times of economic difficulties, the United States will cut interest rates and spread money. When its economy is good, it will choose to increase interest rates to avoid inflation.
Cutting and raising interest rates have become very useful monetary means to balance the economic cycle.
However, due to the existence of US hegemony, all countries need to use US dollars for international trade. Therefore, every time the US interest rate hike leads to the return of US dollars, these countries will have an economic crisis.
Every time these countries fall, the beneficiary is, of course, the United States.
It was said before that the rate hike has set a record since 1994.
So what happened in 1994?
In the early 1990s, the economies of the four little dragons in Asia were booming, while the United States announced an interest rate increase in 1994, which directly killed the glory of the four little dragons and directly led to the economic crisis in Southeast Asia.
This cycle lasted for 13 months from January 1994 to February 1995. The United States expanded its strength by harvesting the four dragons.
Then the problem comes: since raising interest rates is of great benefit to the United States, it can not only reduce inflation, but also reap the wealth of the world.
So why should I say that the US interest rate hike this time will abolish unequal tariffs on China?
It’s complicated to say. Bring me a cup of coffee. I’ll say it slowly. Take your time.
First of all, the three interest rate hikes since the beginning of this year are really not a last resort for the United States to reap global wealth when its economy is at its peak. It is indeed a helpless move.
Inflation in the United States is now high.
A year ago, it was less than 2% below the safety red line.
However, by March this year, the inflation rate was 8.5%, which was already hyperinflation and would cause many social contradictions.
As a result, the Federal Reserve raised interest rates by 25 basis points for the first time in four years.
As a result, the data for April came out, and inflation fell, but only from 8.5% to 8.3%.
Unexpectedly, the interest rate was raised by 25 basis points at one go, which was only 0.2% lower.
25 basis points is 0.25%. Anyone who can count knows that if you want to wipe out so much inflation, you have to raise interest rates by 7%.
But how could this be possible? Even if it was added by 25 basis points, it would cause a shock in the global capital market. If it was really 7%, it was estimated that the members of the Federal Reserve would be shot at their doorstep the next day…
However, in any case, inflation has declined. Although it is only 0.2%, no matter how small the crab leg is, it is also meat.
So, the Federal Reserve said that I would take another 50 basis points. This time, I am sure that it can fall again, at least by 0.4%.
Unexpectedly, the data in may not only did not decrease, but also exceeded the data in March. Inflation rose to 8.6%, directly creating a historical record in the past 40 years.
Americans are crazy.
How can I play now?
I took strong medicine, but I still couldn’t control it. I got a raise.
It’s worse than before I didn’t raise interest rates. I raised interest rates twice, a total of 75 basis points. Didn’t I add a lonely point?
So this time, the Americans are really in a hurry. They don’t procrastinate. They just add 75 in one breath. If they want to take the strong medicine, they just pour it to the end, regardless.
Since inflation has reached a 40 year record, I will use another record – the largest interest rate hike in 24 years to put it out.
How cruel.
Moreover, the Federal Reserve also said that it was firmly committed to restoring the inflation rate to 2%.
But I checked the original text.
At the beginning, they said: “with the appropriate tightening of monetary policy stance, the Committee expects inflation to return to the 2% target and the labor market will remain strong.”
However, once it is sent out like this, it must be sprayed. You expect that if you expect it to work, the pig can fly into the sky.
Therefore, later, they quickly deleted this paragraph, but were afraid of causing misunderstanding. Later, they added a sentence at the end of this paragraph: “the committee is firmly committed to restoring the inflation rate to the target of 2%.”
Well, resolute and committed, doesn’t that sound much more pleasant?
It shows the confidence and determination of the Federal Reserve to fight inflation. The level of this revision is really full marks.
But you will believe it. Who will believe it?
They lie like breathing. They come at once.
It’s no use just shouting slogans. The key depends on what you take to ensure.
You keep raising interest rates?
The Federal Reserve also said that according to the expectation, the interest rate will be adjusted to 3.4% by the end of 2022.
In other words, another 175 basis points will be added.
good heavens.
People say that cutting interest rates is drugs, and raising interest rates is detoxification.
I didn’t expect that the Americans, in turn, took the interest rate hike as a drug and became addicted once they smoked it.
If it’s really so simple, the economy can be solved by raising interest rates several times. That’s so simple. I can do this job. Just let me be the chairman of the Federal Reserve?
In fact, economic activities are very, very complex. They are not policies that can be easily changed overnight.
To understand this mess in the United States, we must first analyze the causes of this historical inflation in the United States.
one
A few years ago, more money was printed, and trillions of dollars were spilled around the world.
two
, energy prices remain high. Crude oil has always been around $120. Therefore, the Americans still have to bite the bullet and continue to impose sanctions on Russian crude oil. Later, the United States wanted to ask Saudi Arabia for help to increase production and reduce prices, but Saudi Arabia did not agree. Now it’s good to sell it for $120. I don’t make any money. Why should I sell it for $100? My mind is burning.
three
, grain prices rose. It’s also the situation between Russia and Ukraine. Ukraine is the granary of Europe. How can we continue to farm after a war? Russia is also a big food exporter. Because of sanctions, food cannot be exported.
You should know that the exports of these two countries together account for 30% of the world’s wheat, 20% of the world’s corn and 75% of the world’s sunflower oil. All of this may lead to a global food crisis.
four
That is, the tariffs imposed on China, the slow recovery of the supply chain affected by the epidemic, the rising house prices in the United States, the high rental costs, and the rising prices of the service industry.
It is mainly the above four reasons that have led to the most serious inflation in the United States in 40 years.
In fact, in 2008, because of the subprime mortgage crisis, the United States began to release water to save the market, and trillions of dollars poured into the world.
At that time, the United States also faced the problem of inflation. Only that time, China saved the United States, and a large number of Chinese goods poured into the United States to help them survive.
Inflation is easy to understand. It means inflation. More money is printed, but the commodities on the market remain the same. Naturally, prices will rise.
But that time, after the United States solved inflation, it was still complacent. They thought that their strong national strength and heritage had solved the crisis. Then they began to boast and export the slogan that the United States is the best in the world and the American system is the best in the world.
However, China has no choice. In 2008, we were also affected by the subprime mortgage crisis, and the domestic economy had problems. At that time, Premier Wen Jiabao proposed to expand domestic demand and a 4trillion yuan economic stimulus plan.
At this time, a large number of orders from the United States have come, which is also a good thing for our country.
As a result, China’s economy developed rapidly and took off for more than ten years.
Originally, China US cooperation is a good thing for mutual benefit and win-win results. Although China suffers a little, you abuse money and pass on the crisis to the world, but I can only sell labor and cheap goods to you.
But at that time, our economic aggregate was not as good as that of Japan. Development was the last word, so we had to choose this way.
To my surprise, Americans gasped for breath. Trump launched a trade war to impose punitive tariffs on China and impose an additional 25% punitive tariff on imports from China.
Moreover, trump has been clamouring to sign the Sino US trade agreement as his greatest political achievement and the campaign capital for the next presidential election.
Later, in January, 2020, the COVID-19 broke out in China, and the Americans were even happier.
Is China’s economy finally over this time? During his term of office, trump has solved a strong enemy. Trump is complacent and feels that he has another campaign chip in his hand.
Unexpectedly, after March, 2020, the situation will suddenly change.
The virus made a big joke on trump.
The epidemic situation in China has been brought under control and China has begun to gradually return to work and production. However, large-scale outbreaks have begun in European and American countries. Tens of thousands of cases are increasing every day. At the peak, millions of new cases are added every day.
After the outbreak of the COVID-19 in the United States, the U.S. stock market experienced four circuit breakers at one go, all of which were concentrated in March.
Is that enough?
The situation in China and the United States is different. Americans attach great importance to the stock market. Americans do not save money. Most of their financial assets are in the stock market.
The value of the stock market to Americans is just like that of China’s property market.
The stock market is about to collapse. What should we do?
We can only “scatter money”.
Within a month, the Federal Reserve cut interest rates twice, and the money printing machine started rolling.
Trump spent $4trillion to go out at one go.
Later, although the stock market was temporarily saved, trump was ousted because of the unfavorable epidemic prevention and control and the election failure.
After the new President Biden came up, he continued the previous big water release policy and threw another 4.7 trillion yuan out at one go. After all, who is not happy about printing money?
The result is: on the surface, the economy has begun to flourish, the unemployment rate has decreased, and a scene of prosperity and rapid development.
You know, a total of $8.7 trillion has been released, while the total population of the United States is only a little more than 300million.
So everyone gives you more than 20000 dollars, but the money is stored in the stock market. I ask you, are you happy?
Of course, I am happy. The stock market is booming, the value of the rich has soared, and the people have money in their hands. It looks like Hello, everyone. The economy is booming and prosperous.
But it has been said before that printing money is a drug. When you have a good time, it will bring endless pain, such as inflation.
As a result, Americans soon found that although they made tens of thousands of dollars, the steak in the supermarket rose to $100, and the gasoline rose to $200. Prices are rising. They may have to take sacks to put money on the street tomorrow.
Of course, this is just an analogy.
It is enough to explain the horror of the hyperinflation caused by this massive release of water.
So, of course, Americans are not satisfied. There are protests everywhere. At most, 400 cities are protesting at the same time.
There were also news reports that a female teacher was forced to sell her blood to support her family.
This time, Biden’s pressure came.
It’s great to print money, but now that the fun is over and inflation is coming up, let’s ask you what to do?
There are only two ways.
The first way is to continue to buy Chinese goods as in 2008.
Let the supermarket shelves be filled with Chinese goods. In this way, prices will naturally stabilize.
However, this time, China will not accept the blame of the Americans.
Well, in 2008, I helped you through the crisis. If you don’t thank me, you can say that this is your own credit in China. That’s OK.
In the twinkling of an eye, when you got up from the mud pit, you thought about biting back, turning your face against us, fighting a trade war with us, and adding tariffs to me. This is not crossing the river and tearing down the bridge. What is this?
The real story of Mr. Dongguo and the wolf.
China and the United States work together to make money and develop together, which is the king’s way.
But now, since the United States wants to take the initiative to destroy it, and the tariff is still being added, I’m sorry, we don’t accept the order.
As a result, in this round of US dollar expansion, China’s foreign exchange reserves did not move at all, and all the gains were spent.
Moreover, in the name of environmental protection and industrial upgrading, we control the total production capacity of the country. High end industrial products can continue to be produced, and chip photovoltaic can be developed.
But those low-end industrial products, such as plastic basin slippers and so on, are all stopped to meet domestic demand. Disorderly expansion is not allowed.
Therefore, there are many people asking “Why are Chinese factories unwilling to accept orders from the United States?”
In fact, it is very simple. One is that our country controls the production capacity of low-end industrial products and is not willing to transfer the risk of American deforestation.
Second, those entrepreneurs are not fools. They also want to eat. What entrepreneurs like most is economic efficiency.
Now the shipping price is so outrageous, especially the price of containers, which has soared ten times since the beginning of 2020.
Moreover, what is more disgusting is that when Chinese goods are shipped to the United States, the price is CIF rather than FOB.
FOB is very easy to understand. When Chinese products leave the water bank of China, the price is calculated at this time.
The arrival price means that after the Chinese goods are transported to the port of the United States, people will calculate the price with you.
In international trade, the strong side usually chooses the arrival price.
Therefore, if Chinese enterprises want to sell their goods to the United States, they have to bear the costs of shipping and containers.
Now the container price has risen tenfold, the international oil price has changed, and the shipping price is also rising. Now, I can’t make much money. Who would like to?
Can’t I sell to Europe, Southeast Asia, Japan and South Korea, and sell to China?
You can’t make much money when you sell it to the United States. If you accidentally touch your so-called federal laws and say that this is Russian, Xinjiang cotton or something, you can find various excuses to review and detain it.
Instead of taking the risk, we won’t go into your muddy waters.
Besides, many Americans are also protesting, saying that the emergence of a large number of Chinese goods has robbed the market of American local goods and their jobs.
Why do we have to do something that is thankless and can’t earn a lot of money? Why should we do it? Why should we be in a hurry to be cheap?
Therefore, many Chinese enterprises began not to take orders.
Americans can’t help it. It’s not easy to give you dollars. Therefore, they can only find various allies to work together, but it’s useless. Because of the war between Russia and Ukraine, energy prices in Europe have risen, and inflation has also been pulled up. They simply can’t digest it.
It is no longer feasible to buy goods from China.
As a result, the United States has only one last way left – to raise interest rates.
If we cut interest rates on drugs, then raising interest rates is detoxification.
Drug addicts are the most afflicted. When drug addiction breaks out, they have to tie their hands and feet with ropes.
After the interest rate hike, of course, the most painful thing is the stock market.
As we all know, the stock market is risky.
If the risk cost of the stock market is x% and the risk of buying US Treasury bonds is 0, it is almost zero.
Before March 2022, the Federal Reserve has always had zero interest rates.
So, at this time, as long as your return on investment exceeds x% of my risk cost, I will buy your stock.
But now, the interest rate is not zero. The Federal Reserve has raised interest rates. For example, the interest rate is now 2%.
If investors continue to buy your company’s shares, your return on investment must reach more than (2+x)%.
The rate of return is directly linked to your company’s profits. If your company’s profits have not increased, but when the interest rate was zero before, more people bought your shares, and your company’s valuation was fried up, doubling your company directly.
But now that the interest rate has been raised, what will happen?
If your company fails to double its profits, the share price will naturally fall, or even halve.
This is the simplest economic law.
For another example, many people often believe in private lending. Why, private lending has 10 points of interest, which is far from what banks can achieve.
But now, suppose the central bank raises interest rates and says I want to raise interest rates. How much? Add it to 5% and deposit it with me for one year. I will give you 5% interest!
Although 5% is far from being compared with 10% of private lending, there is no risk in quietly saving money in the bank.
Of course, ordinary people will choose to deposit their money in the bank. Unless you also raise the interest rate of private lending to 20%, then I will continue to choose you.
However, the increase to 20% does not mean that the people will believe you, but when it comes to what you will pay back, how can you get back?
So, all the money of the people went to the bank from private loans.
In this case, no one cares about private lending. If the money they borrow happens to be working on a project, the capital chain will certainly break, and they will naturally go bankrupt. This is the same truth.
As a result, the first serious consequence of the interest rate hike is that the stock market will collapse.
When someone saw this, he said, no, I saw the European and American stock markets today, but they didn’t fall. Why did they rise?
That’s because the news of the Fed’s interest rate hike was predicted after the 8.6% inflation data in the United States came out. Therefore, the market has panicked for a while.
From the beginning of 2022 to the present, many stock indexes have fallen to the level before the outbreak in 2020.
Technically speaking, it has entered a bear market.
Really, one night back before the release…
The second impact of the interest rate hike is a sharp rise in unemployment.
For business, there is one in every heart.
For example, if I deposit my money in the bank and buy American bonds, what is my expected yield?
Then I’ll go to assess the income expectation of my store.
If my expectation of income from opening a store exceeds that of US bonds and banks, I will certainly open a store. Therefore, when interest rates are reduced, people often take money out for investment.
But now that the interest rate has been raised, the expectation can not be exceeded. Then those bosses will think, ah, I have to take risks in opening a store. Now that the inflation is so high and the costs of materials, manpower and all aspects are so many, I might as well be more prudent.
So they naturally closed their stores, deposited their money in the bank and took it to buy US debt.
When shops close, natural jobs will be reduced, and a large number of people begin to lose their jobs.
In addition, at this time, the stock market also fell, and personal assets were also shrinking.
No money, no job, no stock market, no consumption, so the economic crisis appeared.
It is inevitable that raising interest rates will lead to an economic crisis.
Therefore, the government of any country dare not raise interest rates casually, unless the economy is very prosperous, or it is just two cups of poisonous wine and choose one to drink.
We can all think of such a simple truth.
Doesn’t the Federal Reserve know this truth? Doesn’t Biden know this truth?
A few days ago, Biden met with the chairman of the federal reserve after half a year. Wouldn’t they talk about it?
Of course, there will be discussions and disputes.
They certainly know that raising interest rates will have serious consequences.
But there is no way. Inflation cannot be kept down. There is no way to explain to the American people. The Republican Party and the media are going to drown them. Who cares?
Therefore, the 75 basis point interest rate hike came as scheduled.
Raising interest rates is a powerful medicine, but if the economic data in June comes out and inflation still does not improve.
Then Biden has only one way to go.
If he doesn’t want to lose the mid-term election, if he doesn’t want to be impeached and step down now.
There is only one way, that is, to completely abolish unequal tariffs on China.
Although some American experts predicted that the complete elimination of tariffs on China could reduce the inflation rate by 1.3%.
Although it is a drop in the bucket compared with 8.6%, what can we do?
It has to have some effect. It has to tell Americans that I am really taking action.
Otherwise, Biden will have to step down now and will not survive until 2024.
In fact, since May, Biden has been building momentum, saying that he would “consider Abolishing Some tariffs on China”.
The results have been considered for so long. Why hasn’t it been implemented?
On the one hand, Biden did this. He shouted it to the domestic people to test the domestic reaction of the United States.
After all, I’m the world’s leader. The leader bows to the second. Isn’t it all over with national pride and great country pride?
Second, he also wants to talk to China about the terms.
Trump is most proud of his China US trade agreement and the tariffs imposed on China. He believes that this is his own unequal treaty against China. Now that Biden dares to cancel it, you are traitorous. You are a sinner of the United States. You, you, step down!
What should Biden do?
Biden, on the one hand, wants to abolish the unequal tariffs imposed. On the other hand, he needs China to give him a step down. At least he can get something back. It’s better for him to explain it when he comes back to the United States.
But China refused. According to the original words of our Foreign Ministry spokesman:
“Must cancel unconditionally!”
It was originally unequal. Why should we impose tariffs on us? Now I want to talk about the conditions again?
Sorry, absolutely impossible. You are not qualified to talk down to China.
Moreover, you Americans will finally pay for the increased tariff. If there is no product left, you still have to buy it.
Therefore, those unequal tariffs have no impact on China. Instead, it is the United States to see if you can sustain 8.6% inflation.
It’s like some people spitting shit and swearing in the comment area, which is equivalent to pulling a lump of shit and thinking it can disgust me. I don’t care. I’ll put it on top of you. Anyway, it’s your own disgusting.
In the end, if you can’t make it. If you delete the comments yourself, you’ll be eating your own shit.
Americans are doing this now. Biden is going to eat trumpra’s shit.
But in the end, I predict that Biden will have to eat.
After all, who is the most hurt by the whip? Those who shout patriotism and America’s greatest people, you let them bear inflation. It is 8.6% now and 9.6% next month
10.6%, would you like to ask him?
Moreover, in the United States, a president with a bad economy can only serve one term.
Therefore, Biden could only cancel it in the end. He is still hesitating to see if he can get some benefits from China. Even if he finds a little sesame, China can give him a big watermelon when he returns home.
We don’t have to worry at all. We always have to cancel it and let them eat the shit by themselves.
After a lot of analysis, I think Biden is really too difficult.
The reason is that trump failed to control the epidemic, which broke out in the United States, and then the stock market crashed, and trump ran out to pour water.
Later, after Biden took the stage, he realized that it was you who buried the thunder for me.
But he could only harden his head and continue to put water down.
No wonder the American Dance King often said that no one knows the stock market better than me.
Don’t deceive me.
No wonder they are businessmen. You are just a politician. No one can stop the businessman from playing tricks.
By the way, a few days ago, Biden also announced that he would participate in the 2024 US presidential election.
However, the latest polls show that Trump’s approval rating can now lead Biden by 5 percentage points.
Moreover, the economy is so bad that inflation cannot be kept down. May I ask Mr. Biden, what will you run for?
Finally, I want to say: Chuan Bao, come back quickly. I can’t say whether you can save the United States. But if you don’t come back, I won’t have any jokes about Yibao. You won’t have much fun.