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Those who have been following international news for a long time know that although the United States is an economic superpower on the surface, it is now heavily indebted, so just a few days ago the Federal Reserve reported that its losses have exceeded the $200 billion mark.
In fact, as early as March this year, the Federal Reserve disclosed that last year's paper loss exceeded 100 billion US dollars, although the recent interest rate cut policy can alleviate some paper losses, but the huge losses still cannot be completely eliminated.
If United States inflation continues, then the long-term United States hegemony will enter a complete countdown, and by that time the black swan event will envelop the entire United States.
Black swan events in history
A black swan event, as an economic term, refers to something that has a profound impact on the world once it happens, and these events are often reviewed and tried to explain after the fact, but few people can foresee their possibility before they happen.
In recent years, the global economy has suffered several significant black swan events, the most representative of which is the new crown epidemic, which quickly triggered global lockdowns and restrictions, directly leading to the stagnation of economic activity.
United States supply chains have been severely disrupted, and many companies are facing stagnant production and reduced orders, while demand has been suppressed, demand for certain goods, such as medical supplies and electronics, has risen sharply, creating an imbalance between supply and demand, further driving up inflation.
At the same time, the 2008 financial crisis was another well-known black swan event, which had its roots in a bubble in the housing market and the widespread underestimation of the risks of financial derivatives.
With the outbreak of the subprime mortgage crisis, many financial institutions fell into a severe liquidity crisis, leading to a global economic downturn.
The crisis not only hit the United States economy hard, but in the post-crisis economic recovery, the United States government and central banks adopted large-scale stimulus policies, which boosted economic growth in the short term, but was accompanied by increased inflationary pressures.
How did the 200 billion loss come about
Although the occurrence of black swan events is unpredictable, its subsequent impact is somewhat related, such as the Federal Reserve's recent financial report showing that its losses have exceeded $200 billion, which is inextricably linked to previous actions in United States.
To save the United States economy, the Fed bought large quantities of Treasuries and other financial assets.
However, as the economy gradually recovered, inflationary pressures began to rise after the rate hike, and interest rates climbed with it, a shift that devalued the Fed's previous purchases of low-interest assets, resulting in a financial loss of $114.3 billion.
Another important factor in the loss is the Fed's relationship with the United States Treasury, which during the economic stimulus period supported fiscal spending by buying Treasury bonds.
However, as the fiscal deficit widens and debt levels rise, future debt repayments and interest payments will put more pressure on the Fed's financial health.
The only way out for United States
Although the loss of 200 billion yuan is enough to put the dollar hegemony into the countdown, the Fed, as a central bank, is still capable of dealing with these problems through monetary policy adjustments.
A 50 basis point rate cut may seem reckless, but anyone with a discerning eye knows that the Fed's decision to cut rates was not made overnight, but was the result of careful consideration, so at least at the level of non-farm payrolls and unemployment data, the rate cut has played a big role.
In order to stimulate the vitality of the economy, the United States government has purchased a large number of Treasury bonds and other assets, resulting in an unlimited expansion of its assets and liabilities, and interest rate cuts have also become a powerful tool to reduce financial pressure.
By cutting interest rates, the Fed can reduce the interest burden and reduce the magnitude of losses, thereby improving its financial position, and this policy adjustment can "decompress" the Fed in the short term, thereby providing more flexibility for its future operations.
However, what makes the Fed a headache is that cutting interest rates is not a panacea, and at present, the inflationary pressure facing the United States economy is still severe, and cutting interest rates too quickly may further exacerbate inflation, which is contrary to the Fed's goal.
In a high inflation environment, interest rate cuts could lead to further price increases, which could affect the purchasing power of consumers and the overall stability of the economy.
United States According to the Chicago Mercantile Exchange (CME) Fed Watch, interest rate cuts in the United States will continue to increase in the next few months, even higher than 50 basis points.
In the final analysis, the current situation of the United States cannot be solved by its own strength, and if it does not seek help from other countries, the economic crisis will become more serious.
Perhaps, only by opening good cooperation with the mainland and sincere communication can we get through this black swan crisis, after all, there are very few countries that can help United States this size in the world.
What do you think about inflation as soon as the Fed cuts interest rates when it's its turn to have a headache? Welcome to discuss in the comment area!
Information sources:
Financial circles: the Fed's losses exceeded $200 billion; Goldman Sachs upgraded China equities to overweight
https://www.toutiao.com/article/7423182132752826889/?channel=&source=search_tab
Daily Economic News: United States big news, Biden speaks! The pace of interest rate cuts or changes? Gold dived in the short term, the Dow hit a new high, and the China Concept Index rose nearly 12% for the week! The Federal Reserve announced: a huge loss on the books exceeded $200 billion
https://www.toutiao.com/article/7422088257564951094/?channel=&source=search_tab