Author: Sheng Tang rushong source wechat official account: the chief shopkeeper’s knife has been authorized to reprint
Inadvertently, I suddenly felt that US Treasury Secretary Yellen appeared a little frequently recently. On May 31, she admitted to the media that she had made a mistake in predicting US inflation last year. Although she did not apologize, it was not easy for such people to admit their mistakes. After all, as a top student of Yale University, the first female chairman of the Federal Reserve, the US Treasury Secretary, and the Jewish elite, her staffing needs to be maintained.
The day before yesterday, Yellen once again told the media that global inflation has been in an unacceptable state and will continue to remain high, but this is not a unique problem of the United States. In this statement, Yellen has completely forgotten the mistake she admitted a week ago, and seems to have returned to a financial elite. Of course, her two consecutive statements come down in the same vein.
Following Yellen’s two statements, we can find a lot of things. And behind these many things, there are many interesting things.
Yellen said that inflation in the United States would not continue, but that it was a short-term difficulty. She said the same thing in June last year, and in November last year. In other words, because of the epidemic, the inflation caused by the indiscriminate issuance of US currency actually appeared as early as last April. At that time, the inflation rate was 4.2, and it had reached 5 points by May. At this time, it is necessary for someone to appease the resentment in the hearts of Americans. After all, the Biden administration was still thinking about making money at that time, which was an extremely passive way to fight the epidemic and ran counter to the direction of solving inflation. Therefore, Yellen used her professional reputation as a guarantee for Biden to ease the resentment of the domestic opposition and the public. But by October, domestic inflation in the United States had reached 6.1. After five months of hard work [in fact, the Biden administration has not made any efforts at all], inflation has increased instead of falling. At this time, domestic energy, milk powder and other commodities in the United States are not only a price problem, but also a difficult problem to buy. At this time, Yellen stood up again and assured the Americans that this inflation was coming to an end. But whether inflation will end or not, even I, a layman, can see that inflation in the United States can not end in the short term. Why dare Yellen say so? As a professional elite, why should she save some professional face for herself?
Therefore, from a professional point of view, inflation in the United States is unlikely to end in November. Moreover, from June when Yellen said the short-term theory of inflation to November when she again emphasized the short-term theory of inflation, the rise of inflation in the United States showed a steady upward curve. Will Yellen fail to see this long-term trend that even children of several years old can see? How could she possibly damage her professional reputation for this? Therefore, Yellen did not lie in November, but relied on what seemed impossible from a professional perspective, or from a political perspective. After all, economy has never been a pure economy, but closely related to politics.
So let’s look at what President Biden was doing at that time? He kept shouting the Russian threat theory and constantly revised the date of Russia’s attack on Ukraine. At that time, it was precisely the time when Putin asked the United States for a written guarantee that NATO would not expand eastward. China and the United States had talked about it in Tianjin last May, and it had no effect. Therefore, it is unrealistic for Yellen to place his hope for inflation relief on China, and it is more likely to place his hope on the Russian Ukrainian war.
Will the war between Russia and Ukraine solve the problem of inflation in the United States? It’s hard to say. It depends on the effect of the war. If Russia uses its own torrent of steel to occupy the whole territory of Ukraine at once from the beginning, it is bound to cause panic in the whole Europe, thus forcing a large number of European capital to collectively flee to the United States or other regions. However, Russia’s continuous and weak lethality made Europeans calm down after a period of panic. The war between Russia and Ukraine became a stalemate. It is estimated that Yellen did not think of this, or even if Yellen thought of it, he could not predict the consequences of this stalemate on US inflation.
However, the US arms dealers are certainly happy. However, the wealth of arms dealers can not solve US inflation. Solving inflation is a systematic social project. Yellen should have predicted that the start of the war between Russia and Ukraine would make the global supply system tense, thus pushing up the price of materials, so that the U.S. dollar that could not be absorbed at home could take advantage of the high price to overflow. This is probably one of the reasons why she predicted that inflation would end with the start of the war between Russia and Ukraine.
But another condition for curbing inflation is to balance the supply of products. The United States cannot do this by itself, because most of its basic industrial capacity has been transferred overseas. And the labor and other costs of the United States are not competitive. Therefore, to solve the inflation in the United States, China, a large producer, must provide sufficient product supply. Of course, on the contrary, China needs to undertake a large amount of US dollars in the past to ease domestic inflation in the United States. China is the most ideal destination for us dollar inflation spillover. Unfortunately, since February and March this year, the epidemic situation in China has been rising all the way. First, Guangzhou, Shenzhen and then Shanghai. The serious epidemic situation has basically brought China’s own production to a standstill, not to mention the export of goods. Looking at the dense cargo ships at the Yangtze River Estuary, we can see that the world’s trade circulation system has been blocked. This kind of blockage is not good for the United States and the rest of the world, which is in a state of severe inflation.
So the next thing we see is that Yellen was flustered by the continued high inflation in the United States. According to American practice, American inflation under the hegemony of the US dollar can overflow, and the side effects are all paid for by the world. Yellen naturally has this experience, and he also thinks he has this ability. That is why she has repeatedly said that US inflation is controllable in the short term. It is just unexpected that the trend of Russian economy and world economy caused by the Russian Ukrainian war is not as predicted, and China has not become a catch basin for inflation spillovers as predicted.
On May 31, Yellen knew that if she didn’t change her words, her professional reputation would be over, so she admitted her mistake. Then on June 7, Yellen knew that there would be no good news to help the United States alleviate the inflation crisis. So she said again that the inflation problem was unacceptable and would continue to be high, which was not a problem for the United States. What does this passage mean? Generally speaking, it means that the inflation in the United States will not end in a short time, but the United States is inflating, and other countries in the world are inflating, which is a typical comparison. Yellen is admitting that inflation in the United States has become uncontrollable, but it is not entirely the fault of the U.S. government, but a common problem in the world.
As we have said before, even if China can take up the main dam of the US dollar inflation spillover, the US dollar inflation spillover is still inevitable, because there are still many countries in the world that need us dollars and many countries willing to take over the US inflation spillover. After all, the U.S. market consumption capacity and dollar cashing capacity are still strong. There will always be countries that want to exchange products and resources for dollars, so as to enhance their purchasing power. Even China can only resist the invasion of abusing US dollars in a passive way, rather than building a US dollar firewall in a fair way. This is not a sign of weakness, but a way that has to be taken under the hegemony of the US dollar. Look at Russia. Now it has been excluded from the dollar settlement system, but it still does not refuse the dollar, because it is easier to buy what it needs with dollars. Although Russia is already trying to de dollarize.
However, the amount of spillover that Americans need this time is very large. It is difficult for small economies to meet their needs to reduce inflation only by relying on those small countries. As long as several large economies properly screw down the gate of dollar circulation, American inflation will eventually form the stagflation that Yellen worried about. And Yellen has obviously felt the arrival of stagflation. So, she began to panic, began to compare bad, began to shirk responsibility.
The main means to solve stagflation come from fiscal policy, such as raising interest rates, increasing fiscal expenditure and tax cuts. This is the direction that Yellen, as finance minister, can strive for. This is probably the implication of Yellen’s remarks, which wants to give the Ministry of finance more power. But now the two major political parties in the United States are fighting fiercely, although the two parties are surprisingly unanimous on the issue of China and Russia. But in terms of domestic policy, the Republican Party will certainly not let the Biden administration implement policies easily. Moreover, the mid-term elections in the United States will be held in a few months. Let Biden become a lonely or lame president after the mid-term election is the goal that the Republican Party must achieve. Therefore, before November, even if Yellen wants to implement an active fiscal policy, it is difficult to achieve his wish. This has led to a sustained rise in inflation in the United States in the next few months. Whether it can help the Biden administration to reduce inflation is a key factor, as is the trend of the war between China, Japan, Europe and Russia Ukraine.
I think it’s probably because Yellen is not optimistic about the direction of the next few months, so she has the mind to shirk responsibility and compare bad. The increasingly frequent gunshots in the United States, like the soul stirring drums, became more and more intense and urgent. Yellen rubbed her stomach and could only beg God to keep it or go with his mother.