Recently, when talking about the dollar, I can always hear a voice: "Wow, this dollar is too good to fight!" "That's right, since the beginning of this year, the dollar has been like a cockfight with pepper water, playing against the world's major currencies, and almost no defeat.
The yuan, the euro, and the yen took turns to fight, and they were pressed to the ground by the dollar in turn. Many people wonder, isn't it said that the US economy will recession and the Fed may cut interest rates? Why is the dollar so strong? In fact, there is a big article here, and today we will take a good look at the story behind it.
American under high interest rates
Speaking of which, the US economy's ability to "turn the tide against the wind" was not developed overnight. As early as 40 years ago, the United States began to consciously make a series of surgical adjustments to the economy.
To put it simply, it is to make your economy gradually immune to high interest rates. You see, whether it is interest rate hikes or high inflation, the U.S. market has not only not been greatly affected, but has a posture of "getting more and more courageous". Why? This starts with a three-step strategy for the U.S. economy.
The first is the "dumping" manufacturing industry. Back a few decades ago, manufacturing was a major part of the U.S. economy. But the manufacturing industry is too much of an interest rate, and once the interest rate rises, the entire industry will be out of breath.
In order to make the economy more flexible in dealing with high interest rates, the United States has gradually reduced the proportion of domestic manufacturing since the 80s, and has moved many factories overseas, especially those in capital-intensive industries. In this way, the impact of interest rate hikes on the US is much smaller.
The twin troikas of finance and technology
Then, the United States turned its attention to the two major "fat meats" of finance and technology. These two industries have one thing in common: they are relatively "immune" to high interest rates. The financial industry relies on market liquidity, and technology companies, especially those in Silicon Valley, rely on the stock market and venture capital for support.
They have been hit far less hard by high interest rates than they have been in the manufacturing sector. Therefore, the U.S. government and Wall Street are like blowing a "tech bubble", attracting global capital into U.S. stocks, especially those high-tech sectors, making the market value of U.S. stocks rise all the way.
Let's look at real estate. The U.S. real estate industry is also sensitive, but the government has created a huge demand for housing by bringing in immigrants.
This has not only stabilized the housing market, but also pushed up housing prices further due to the increase in rental demand. In this way, the U.S. housing market can remain dynamic even in the face of interest rate hikes.
The dollar, the nightmare of a "worker".
To put it another way, the strength of the dollar is actually a game orchestrated by the U.S. government and Wall Street. Through structural adjustment, the U.S. economy has been able to stand out from the headwinds of interest rate hikes.
This strategy, although it makes the United States look "invincible" in the short term, do not forget that there are losers in any game. And this time, it is the countries that are still under pressure to pay attention to traditional manufacturing.
Once interest rate hikes began, the economies of these countries came under tremendous pressure, and the dollar acted like a relentless harvester, harvesting wealth from all over the globe.
Long-term side effects
Although the United States now seems to be at ease, this dependence on high technology and finance is actually a double-edged sword.
On the one hand, there will always be a day when the tech bubble bursts, and once the bubble bursts, those young tech companies may face tremendous pressure to survive.
On the other hand, this structural shift in the economy has exacerbated the gap between the rich and the poor, with the rich making a lot of money through the stock market, while ordinary people may lose their jobs because of the recession in manufacturing.
This kind of social rift may eventually affect the stability and long-term development of society.
Finally, let's think again, is such a strategy sustainable? High interest rates and the strength of the dollar seem to have become the new normal for the US economy. But in today's globalized world, every small shock in the economy can have unpredictable ripple effects.
Perhaps one day, when other countries begin to grow tired of the domination of the dollar, or the rise of emerging economies such as China begins to rewrite the global economic landscape, the American game may no longer work. What kind of world will we see then? This question is worthy of deep consideration by everyone who observes the trend of the international economy.