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In the past two years, the Fed has used the dollar tide, essentially to promote the global dollar flow back to United States, causing a shortage of dollars to countries around the world, and eventually triggering a systemic economic crisis.
Then the United States will be able to buy high-quality assets of various countries at very low prices, and finally use the assets of various countries to fill the holes in the national debt that cannot be filled.
But now, the Fed's harvesting effect is not very good, and even the Japan dares to launch a counterattack to make the United States's harvest turn.
Chinese buyers, on the other hand, were prepared early and sold more than 220 billion United States real estate in advance.
So what's going on here? What is the overall situation in United States today?
First, the United States is somewhat unable to withstand it
Let's first talk about the United States Federal Reserve interest rate hike, which does have the possibility of bursting the economies of various countries, but the United States itself will also be under very great pressure.
Because the Fed's interest rate hike means that all banks in the United States need to give their depositors higher interest rates.
Before the Fed raised interest rates, the interest rate was a few percent of the percent, and some banks even had an interest rate of a few percent, so they paid a lot of interest.
But now the Fed has pulled the interest rate to 5.5%, and the minimum is 5.25%.
This means that some banks are spending two to three times more on interest on depositors than they did two or three years ago.
Some United States banks, which are relatively highly leveraged and have more debts, simply cannot withstand this rapid increase in expenses in the short term, so several banks have gone bankrupt in the past two years.
But the Federal Reserve and the United States government have come up with a way to avoid a full-blown bank crash in United States through government control.
They also provided special support to some United States banks whose capital chains were about to break, but this would greatly consume the funds of the Federal Reserve and the United States government.
Theoretically, the Fed could print unlimited dollars, but those dollars would create extremely high inflation.
The United States is now finally reaping the wealth of countries around the world through the dollar tide and stabilizing the inflation system.
If money is printed unscrupulously, it will still cause a reverse shock to the United States economy in the end, so it is difficult for the United States to continue to maintain high interest rates.
Although at the Fed meeting in July this year, Powell, the chairman of the Fed, still stated that he would keep the current interest rate unchanged.
However, it can be seen from his statement that I am afraid that interest rate cuts are in the near future.
Because Powell abandoned all hawkish rhetoric and frankly admitted that the Fed and the United States government are now under great debt pressure.
The official department of United States is also issuing a report pointing out that if long-term interest rates continue to be maintained, I am afraid that the US debt system may collapse completely.
Many economists are now predicting that the dollar harvest in the United States is about to turn around, and they will cut interest rates in September.
Once the United States cuts interest rates, it will cause a series of chain reactions, such as a large number of dollars leaving the United States market and returning to the international market.
It will play a positive role in the recovery of the global economy and the resumption of foreign trade.
At the same time, if this dollar tidal harvest fails, the impact on United States' financial hegemony will also be great.
Because in the past 30 years, as long as the United States turns on the dollar tidal machine, it has always been able to blow up the economies of some major economies.
So far, however, none of the major economies have collapsed in this round of dollar tides.
Although the currency exchange rates of China, Europe, Japan and Korea have all declined, they have basically remained at a relatively stable level, and even Japan have withstood the pressure of United States.
Then it will be difficult for the United States to use the dollar tide to threaten other countries in the future.
Second, Japan launched a counterattack
What we can see is that at this juncture when the dollar tide is about to end, even Japan dare to attack United States.
Japan suddenly announced a rate hike last week, and Japan's rate hike is actually a stab in the back against United States.
Originally, Japan was reluctant to raise interest rates on a large scale, and the rate hike was only willing to add zero points or one point, just because Japan did not dare to do so.
And they also feel that this will lead to the collapse of their own economy, because compared to the United States, Japan's debt is not low, and the fiscal deficit has increased year after year.
If interest rates are raised, the Bank of Japan and the Japan government will also have to spend huge sums of money to subsidize the banking sector, and Japan feels that it cannot afford to hedge against the United States in this regard.
Therefore, Japan can only sit back and watch the rapid decline of the yen against the dollar, and at the peak of the dollar, one dollar can be exchanged for nearly 170 yen, and the rapid decline in the exchange rate has led to a large depreciation of yen assets.
Some international capitalists, led by Warren Buffett, frantically shorted the Japan economy at that time and also acquired a large number of yen assets.
But on the whole, the Bank of Japan and Japan's business department did use various means to stabilize the economy.
So that there is no major chaos in Japan, at least no systemic economic crisis.
And when it saw that the Fed was about to be unable to hold on, Japan took the lead in raising interest rates, which was able to allow a large amount of money to flow back to the Japan market.
In the past, many international investors bought Japan's industries, and they did have bad intentions.
But now that Japan's economy is about to recover and Japan is about to raise interest rates, it will push a lot of funds currently stuck in United States and Europe to return to the Japan market.
Some experts believe that Japan's interest rate hike can at least allow 1 trillion US and European funds to flow back to Japan, which is definitely a boost for the Japan economy.
It is really very rare for Japan to do this, because Japan has always dared not use tough measures in the face of United States.
In the last century, when Japan's economy was highly developed, the United States forced Japan to sign a Plaza Accord, which had a huge impact on Japan.
At that time, Japan's economy was able to maintain rapid development, mainly because the products made in Japan were relatively low in price and good in quality, so they were sold all over the world.
However, an important clause in the Plaza Accord was the rapid appreciation of the yen against the dollar.
After the appreciation, Japan's products did not have a price advantage when they were exported, and Japan entered a lost decades.
Later, Japan's real estate economy was detonated, which caused an economic crisis for a time, and until now Japan cannot be said to have completely eased up.
And how could those politicians in the Japan not know the harm of signing the "Plaza Accord" to themselves, but they still signed the agreement, isn't it because they can't resist United States?
But now, when United States's national debt is facing an existential crisis, Japan dares to backstab United States, which can actually prove some problems.
That is, Japan feels that even if they raise interest rates now, the United States cannot do anything with them.
Third, Chinese enterprises have long been prepared
Compared with Japan, Chinese companies are obviously more comfortable in the face of United States possible economic crisis and debt crisis.
Even many entrepreneurs in China have already made advance layouts a few years ago.
In just a few years, Chinese companies and individuals have sold off a large number of United States assets, including $228 billion worth of United States real estate.
This sends a signal to the outside world that Chinese companies and Chinese investors have no confidence in the United States market.
And a significant part of this money actually went back to China, or stayed in Hong Kong, but essentially, it is now in the Chinese market.
This is also the fundamental reason why China's economy can basically remain stable in the face of this round of dollar harvest, and the exchange rate of the renminbi can remain within a certain range although it has declined, because China also has capital in its hands.
At the same time, a large number of Chinese companies' funds have left the United States property market, which will also bring an exemplary role to other international funds.
For more than 100 years, the U.S. dollar has been hailed as the most important safe haven in the financial community and an important cornerstone of the global financial order.
So investors from all over the world are buying a lot of various assets in the United States, including real estate.
Since the beginning of this century, Chinese entrepreneurs have been the main force in buying United States assets.
But now that even Chinese companies that have always taken the United States market so seriously are selling dollar properties, what will other investors think when they see this?
United States real estate data research firms have reluctantly claimed in their reports that Chinese buyers have been buying United States quality properties, including star-rated hotels and commercial buildings.
These Chinese properties are located all over Florida, as well as California.
But that's no longer the case, and China, along with investors from other countries, is selling off dollar properties.
If this continues, it is very likely that the entire $3.5 trillion in international funds will gradually be withdrawn from United States.
This money is higher than the current total economic output of United States, and it can fully cover the national debt of United States.
So the United States is panicking now, and the United States is afraid that those investors will invest all their hot money in the East Asian market or in China.
In this way, China's economy will develop faster and faster, so the United States is now somewhat deadlocked.
Naturally, they want to cut interest rates, which can give them a sigh of relief, but they are afraid that the rate cut will also give China a sigh of relief.
In fact, as early as March and April this year, there was news that the Federal Reserve was going to cut interest rates.
But United States dragged on until July, just waiting for that very slim possibility, but now it seems that United States will be difficult to wait.
epilogue
The Fed's long-term interest rate hikes have indeed made United States somewhat unbearable, but this is not a bad thing.
The gradual collapse of the dollar's dominant system means that countries around the world can build a fairer and safer international financial order.
Now that even Japan dare to fight back United States, doesn't it happen to prove that the deterrent power of United States is decreasing?
And we don't have to worry that this economic change will not be affected too much, and China's sovereign investors and entrepreneurs will still be able to grasp the direction of the wind.
References:
BWC Chinese 2024-08-03 United States Japan Harvest turns, Chinese buyers sell 228 billion United States properties in advance, 35 trillion or withdraw
Xiao Zhao talks about finance2024-08-04 United States Japan harvest turns, Chinese buyers sell 228 billion United States properties in advance, 35 trillion or withdraw
Xiao Guo talks about the world2024-08-04 United States Japan harvest turns to Chinese buyers, selling 228 billion United States real estate in advance and 35 trillion or withdrawing