Chapter 231 The Federal Reserve may postpone interest rate cuts again. Are you worried?
Thursday, April 11, 2024.
Last night, many people were sleepless again.
Because the CPI released by the Federal Reserve in March exceeded expectations by a staggering 3.5%! The core CPI grew by 3.8% year-on-year, exceeding expectations for three consecutive months.
U.S. inflation continues to rebound, and expectations of a Fed rate cut have dropped significantly again.
Some investment banks pointed out that the Federal Reserve is likely to postpone the interest rate cut to July or even September, and will only cut interest rates once or twice within a year;
Some radicals even claim that if the inflation situation in the United States continues to worsen, it is very likely that the Federal Reserve will not only not cut interest rates, but will raise them instead!
When this data came out, the financial community was in an uproar.
Indeed, the inflation situation in the United States has been unexpected time and time again.
The previously predicted interest rate cut was postponed from March to June, and now it has been postponed to July or even September.
Could it be that the Federal Reserve will not cut interest rates?
If the Federal Reserve doesn't cut interest rates, will the global economy be in trouble? Will commodity prices stop rising?
When Xiao Bo thought of this, he became a little worried.
This morning, Xiao Bo got up early, hurriedly arranged today's business, bought an egg-filled pancake, ate it while taking the subway to the VIP room.
There are hundreds of thousands of dollars being thrown into the stock market, and I can't help but worry.
Otherwise, one mistake could result in a difference of tens of thousands or even hundreds of thousands of dollars.
When he arrived at the VIP room, Li Feng was already sitting in his seat, drinking tea, and seemed to be in a good mood.
This made him feel relieved, and he thought to himself: "Looking at Li Feng like this, it doesn't seem like anything serious is wrong, right?"
After hesitating for a few seconds, Xiao Bo took a bite of his egg-filled pancake, then moved closer to Li Feng and asked, "Hey, Li Feng, did you know that the Fed's CPI exceeded expectations again last night? These interest rate cuts will have to be postponed. Sigh..."
"Sigh... Do you think it will have any negative impact on commodities?"
"Alas...if commodities plummet, will the stock market also plummet? After all, it's almost 3,000 points...
Xiao Bo sighed, which instantly attracted the attention of Lao Liu next to him, and he pricked up his ears.
After observing for these days, Lao Liu has discovered that the real boss is not Xiao Bo next to him, but Li Feng who is sitting on the other side and drinking tea.
According to his observation, under the guidance of this big boss, Xiao Bo firmly grasped the trend of non-ferrous metals and has made a profit of at least 20% in the past six months.
This was achieved when the market was sluggish and fluctuated around 3,000 points. It was not easy.
Therefore, he had heard every word of the conversation between the two of them over the past few days.
Li Feng glanced at Lao Liu who was quietly approaching, and then looked at the screen in front of him, which summarized various real-time financial information.
Each one is quite eye-catching.
The most conspicuous thing is that the Federal Reserve has taken a dovish stance again, the so-called "major negative news".
Indeed, last night’s Federal Reserve data directly led to adjustments in U.S. stocks, U.S. bonds, and gold.
However, when Li Feng clicked on a web page and took a look at the crude oil price, he couldn't help but laugh.
Last night, crude oil prices did not adjust at all after the release of the US CPI data. Instead, they continued to rise. The May WTI crude oil price and the June Brent crude oil price both rose by more than 1% at one point, directly lifting the veil of the Federal Reserve.
It seems that the failure of the Fed’s interest rate cut expectations has no substantial impact on the king of commodities.
In fact, it is very simple for the Federal Reserve to reduce domestic inflation.
The first method: lower the price of oil.
Oil is the mother of inflation.
As long as its price goes down, all inflation will come down.
However, the other two major powers will not allow it.
Oil production is an important economic pillar of Russia. There is no reason and no conditions for it to suppress it, and it even wants to raise oil prices further.
my country is the world's factory. Considering both political and economic factors, the best option is that oil prices can rise, but they must rise steadily, or be maintained within a certain price range.
In this way, the costs from upstream can be slowly passed on to downstream, while also stimulating the development of the new energy industry.
What's more, my country's CPI data is currently at a low level, and even the PPI in March showed a negative growth of 2.8%. There is even less reason to actively suppress oil prices.
The second method: re-link with China.
Look, even though interest rates in the United States have been raised to over 5%, domestic inflation still cannot be suppressed and is bound to rebound.
In contrast, China has been continuously flooding the market with money and loosening its monetary policy, but the CPI data for March, which was just released today, was only 0.1%.
Therefore, the simplest and quickest way is to lower tariffs, directly import Chinese goods, and suppress domestic inflation in the United States directly through low-cost goods.
If yin and yang are harmonized like this, wouldn’t everything be fine?
However, if this is done, there will be no hope of manufacturing returning to China.
Because cheap goods and meager profits will devour all manufacturing industries in the United States.
The American was very scared, so he didn't dare.
Therefore, there was the ridiculous scene during Yellen’s visit to China, in which she accused my country of “manufacturing overproduction” in a cowardly manner.
The third method: blast the country.
Since the oil price cannot be suppressed and the United States dares not lower tariffs, the United States still has another way to reduce the domestic inflation level, which is self-destruction.
In 2021, my country took the initiative to explode, or reform, the three major mountains of education, real estate, and Internet finance in the country, thereby indirectly suppressing the domestic inflation level.
The Americans can cross the river by touching the Chinese.
Directly targeting the three major mountains of US stocks, US healthcare, and US education will definitely suppress the domestic inflation level.
However, he was a little hesitant.
Because the American political system is a capitalist country, and the capitalists are the real masters behind the scenes. How dare he take such cruel action against his masters?
To take a step back, if such drastic reforms lead to an economic recession, who will take the blame?
This year is an election year.
Moreover, what if the economy goes into recession and the rabbits pick the peaches?
The fourth method: forgery.
Europe and the United States are extremely skilled in this craft.
You can simply falsify the data, suppress it, and cut interest rates anyway.
As for the fact that interest rate cuts will lead to rising commodity prices, is this a problem?
Didn’t Nixon’s Treasury Secretary Connally once say: “The dollar is our currency, but it is your problem.”
Therefore, as long as interest rates are lowered and monetary policy is loosened, plundering global goods and resources again would be a good option.
What?
If you don't follow the above four options, you are going to insist on holding an interest rate of more than 5%, or even raise interest rates, and bankrupt some countries?
However, times have changed and this approach no longer works.
Because whenever a country is about to go bankrupt, it will often find that it can borrow enough US dollars from my country to repay its debts through a currency swap agreement.
Not only is it cheap, but the price is also quite cost-effective.
Over time, the US dollar debts of some countries were gradually replaced with RMB debts.
These countries, which were on the verge of collapse and became the food supply for the Americans, were snatched away by our country in the blink of an eye. Isn’t that infuriating?
Moreover, raising interest rates will essentially lead to an increase in borrowing costs, suppressing consumption and encouraging savings.
In the past, the world was in an industrial chain led by the United States.
Resource-rich countries are responsible for producing resources, such as Australia, Brazil, Russia, Chile, the Middle East, Africa and other countries.
Manufacturing countries are responsible for producing goods, such as China, Japan, South Korea, Southeast Asia, and India.
Consumer countries are responsible for consumption, as well as design and branding.
In this cycle, European and American countries are at the top of the industrial chain, and their consumption accounts for the majority of global consumption because they are rich.
Their money, or profits, come from exploiting resource-rich and manufacturing countries.
This can be seen from the production of Apple mobile phones. An Apple mobile phone accounts for 85% of the global profit.
Go back further.
Decades ago, European and American industries experienced their most glorious moment.
Our country produces 800 million shirts in exchange for one airplane.
It costs tens of thousands of yuan to install a telephone in our home, tens of thousands of yuan for a mobile phone, and more than 200,000 yuan for a Santana car. You also have to use all your connections to get it.
There's nothing you can do, they have it and you don't.
If you want to consume, you have to pay for it, no matter how expensive it is.
Therefore, Europeans and Americans can naturally enjoy a superior life, where a couple, three children, and a dog can live in a big villa.
Because industrial products produced by others in a few days can be exchanged for huge amounts of materials produced by developing countries.
You can even use some and throw away some without feeling any regret.
Is this kind of economic suppression and industrial exploitation a form of colonization?
Therefore, in the past, whenever they raised interest rates, countless manufacturing countries and resource-rich countries had to follow suit, because they all belonged to the industrial chain led by the United States, and they were all in an alternative relationship of financial colonization.
But now, everything is different from before.
Since the trade war, two trade closed loops have actually formed in the world.
One is a cycle centered on Europe and the United States, with Japan, South Korea, India, Australia, Mexico, Canada and other countries as the main players.
The other is a cycle centered on China and Russia, and mainly on developing countries.
The key point is that China's rapid progress in manufacturing, especially breakthroughs in automobile manufacturing, mobile phone production, chip manufacturing, and new energy industries, has directly shattered the source of high profits in developed countries and benefited the vast majority of developing countries.
This directly cuts off the lifeline of European and American countries.
Fundamentally, the US monopoly and suppression of the chip industry is a kind of fear and dread?
They are afraid that the pinnacle of technology will be seized by others, and they will lose their monopoly profits.
They fear that the narrowing of the technological gap will lead to thinning profits of monopoly commodities and the loss of the basis for supporting their superior lives.
Therefore, they directly launched a trade war with the intention of destroying my country's high-end manufacturing industry and destroying my country's chip industry chain in one fell swoop.
At its core, they just want to be superior forever and enslave the world.
The butt determines the head.
There is nothing new in history.
This scene has happened in history.
Once upon a time, my country monopolized the world with the production of porcelain, silk, and tea, and also used the production of salt and iron to balance the grassland tribes.
Now, besides Tesla, Apple, Boeing and Airbus, what other products can be sold in Europe and the United States?
Without technological advantages and technological monopoly, we will lose the source of high profits, and we will not be able to enslave the people of other countries and support a high-handed lifestyle.
The hard times for Europe and the United States have actually just begun.
Once my country's new energy vehicles, mobile phones and aircraft have conquered the markets of many developing countries, what will Europe and the United States have left?
Perhaps, there are only guns and cannons.
Perhaps, it is only the flood of US dollars.
Perhaps, we can only take the average wage and compete honestly with the vast majority of developing countries on the same starting line.
As for finance, it's all illusion.
Money, money, without goods, money has no value.
Thinking of this, Li Feng regained his composure and said slowly, "Now the Fed's interest rate cut is becoming more and more like a false proposition, or even a joke."
"Because, when it cuts interest rates, it will lead to a rise in commodity prices."
“It doesn’t cut interest rates because of inflation and also because of rising commodity prices.”
"In fact, we shouldn't be paying too much attention to the US's movements now. We should pay more attention to the movements of China and Russia, and more importantly, pay attention to the policy trends of our country..."
"Furthermore, just because Europe and the US are raising interest rates and tightening their belts, and reducing consumption, doesn't mean other developing countries should follow suit. They can simply stop consuming high-priced goods from developed countries and instead consume high-quality, low-cost goods from my country."
"People in developing countries are also human beings and want to live a good life."
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