If there was no epidemic, would the world get better? From a financial perspective, the answer is not necessarily. Many of the problems we see today, whether they are between countries or between people, if we look at them from the perspective of interests, in essence, they are likely to be the result of the slowdown in economic development and the distribution of interests. question.
When the economy grows rapidly, everyone will directly or indirectly benefit from it, because it is relatively easier to earn money, and competition between countries will be more tolerant. When the economic growth slows down, the distribution of benefits can no longer be as high as If the growth period is so relaxed, internal conflicts will become acute and conflicts between countries will intensify.
In fact, if there was no epidemic, the world economic development cycle would also rotate to the current stage, because after the global integration of economy and , the overall growth, led by the United States, faced the pressure of peaking in stages. The pressure naturally peaked in 2008.
The US dollar’s super easing cycle that began in 2008 was exactly after the financial crisis. In order to postpone contradictions and conflicts, easing was forcefully passed, and the crisis that should have erupted more than ten years ago was forcibly extended. It can be said that these ten years, from the perspective of the United States, have essentially been a feast of watershed. Now that the feast is over, the biggest question facing us is, who will pay the bill?
Tightening has entered the critical point
According to the Federal Reserve interest rate hike plan, interest rates will continue to be raised on June 15. If nothing else, this time it will increase by 50 basis points. Many people have no idea about the U.S. interest rate hike, but whether you care about it or not, it will 100% concern you, because the impact of the U.S. interest rate hike is global.
It will not only affect the financial markets around the world, but also affect the exchange rates of various countries, and even financial and economic policies, which will directly or indirectly affect the real life of each of us. Speaking of which, this is something that cannot be avoided at least at this stage. After all, the international currency status of the US dollar has not yet been subverted.
We have to eat one bite at a time, and the road to de-dollarization has to be done step by step. Before this status is completely changed, we still have to pay attention to the Federal Reserve's financial policy and its impact on the world.
The Federal Reserve’s plan is to raise interest rates on June 15. In fact, the market has already digested the impact of this interest rate hike in advance. US stocks are falling, the U.S. dollar index is rising, and the return of global capital to the United States has indeed exceeded expectations. Strong. But even so, the U.S. financial market will now reach a critical point.
I have discussed this issue before. The amount of U.S. dollars flowing back around the world is now huge. But what the Federal Reserve did not expect is that after the money returned to the United States, it did not go to the U.S. stock and U.S. bond markets to take over. Instead, it kept cash on the sidelines.
The current size of the Federal Reserve's overnight reverse repurchase has remained at this high level since it exceeded 2 trillion in May. This is equivalent to more than 2 trillion US dollars in cash. There is neither speculation nor speculation in the financial market. Invest in the real economy. Such a large sum of cash, without adding leverage , if you add 5-10 times capital leverage , it will be tens of trillions of dollars in the financial market. This scale of funds can make all the difference in the market. That's no exaggeration at all.
On the one hand, a large amount of money is waiting in the form of cash in the financial system, but on the other hand, the US stock market is constantly falling, and the US stock market is the lifeblood of the United States, which makes the Federal Reserve anxious. The ultimate problem with the decline in U.S. stocks is the pressure on funds, which may put greater pressure on the valuation of U.S. stocks than the risk of economic recession caused by interest rate hikes.
The financial pressure on U.S. stocks is first reflected in the price trend of U.S. bonds , because the U.S. bond market may be the most important source of funds in the global financial market. The price of U.S. bonds falls and the yield rises. Every time the yield rises a little higher, it means that the cost of funds will double by the leverage ratio.
Therefore, in the past, in the capital market, the U.S. bond yield reaching 3% has been regarded as a critical point for capital costs. Once this critical point is passed, all funds will face the risk of deleveraging. To put it bluntly, to deleverage funds, we need to sell stocks on U.S. stocks to cash out.
When the U.S. bond yield exceeds 3%, the U.S. bond yield and the trend of U.S. stocks will form a seesaw effect. The higher the U.S. bond yields, the greater the pressure for a U.S. stock market crash. The source of all this is related to the Federal Reserve's interest rate hikes . The more the Fed raises interest rates, the greater the pressure on economic growth and the higher the risk of recession. Correspondingly, more investors will be bearish on the future of the United States, thus selling the United States. The more people buy and sell Treasury bonds, the lower the price of U.S. bonds will be, and the higher the yield on U.S. bonds will be, and the greater the financial pressure on U.S. stocks will be.
This has become an endless loop, and the starting point of the loop is the Federal Reserve's tightening. Speaking of which, the reason why the Fed wants to tighten is because the current inflation level in the United States is too high and cannot be suppressed without raising interest rates. Sooner or later, big problems will arise if this continues, so after delaying the interest rate hike for so many years, it can no longer be delayed, so it is a last resort.
The current situation is that when interest rates are raised to this level, the yield on U.S. bonds has basically stabilized at the critical point. The next step is for the yield to invert, which is still a little short of that.
Starting from the big talk of tightening in the second half of last year, and now really starting to raise interest rates, the pressure at this stage is actually on other countries, mainly the outflow of US dollars from around the world, which has brought great pressure on capital outflows to many countries.
The United States cannot feel this pressure, because the United States only has inflationary pressure. Other countries in the world not only have inflationary pressures that need to be alleviated by raising interest rates, but also have exchange rate depreciation pressures caused by capital outflows, which also need to be alleviated by raising interest rates. But wouldn’t raising interest rates like this mean that our economy will collapse first?
This is the plight of Turkey now, and it is also the plight of other developing countries, and this may be exactly what the United States wants to see most. Through competitive interest rate hikes, you can bring down others before your own financial market collapses. After all, for many countries, the return of capital triggered by the U.S. dollar interest rate hike, coupled with the interest rate hike to suppress inflation, is equivalent to a double tightening. , many countries simply cannot survive.
So Türkiye would rather go against common sense and let inflation soar but not raise interest rates. Esultan knew very well that he could only choose one, either the meat would rot in the pot, or the pot would be taken away by the United States. There is no second possibility for
.
Finance and Economy
As interest rates continue to rise, the U.S. financial market, from U.S. bonds to U.S. stocks, will also begin to come under pressure. The current pressures in the United States are all due to interest rate increases, and interest rate increases are due to high inflation, but where does inflation come from? If you trace it back to its roots, there are only two reasons why inflation is so high.
One reason is that under the dominance of the US dollar after 2008, too much water was released. In theory, the United States believes that there is a way to solve this problem, which is to transfer this inflationary pressure to the asset side, that is, the downstream of the industrial chain and supply chain. If these countries share the burden of inflation, the pressure on the United States will naturally be much less. .
So there is a second reason. The United States forcibly transferred the conflict and fell out with us. In the entire midstream and downstream industrial chain and supply chain, the countries supporting us are naturally unwilling to bear the consequences of this daily release. Therefore, this bitter fruit can only be swallowed by the United States itself.
In fact, not only the United States, but also other Western developed countries, are all rentiers in this food chain, but the United States eats the big head, and they eat the small head. But having a small head to eat is better than turning around and being eaten by the United States, right?
The United States not only covered up problems and contradictions by releasing water after the outbreak of the financial crisis in 2008, but also failed in harvesting in 2015, launched a trade war in 2018, and after having actually fallen out, the epidemic broke out in 2020 After that, unlimited water release is done again. Whether it is Europe, Japan, or other Five Eyes Alliance countries, they are all followers of this policy.
This is difficult to understand. Knowing that it is no longer possible to transfer inflation, but still letting loose so much, is it because you think you have a long life, or are you overconfident in your own strength? The current situation of
is like this. This team that has no choice but to continue to bet that the United States will win. If the United States wins, they will win and the United States will lose. The most likely result is not that the United States will bear the main cost. They pay for past feasts. Faced with such a situation, who can not be anxious?
This is true for countries, and it is also true for individuals. As it is with us, so is the world.
In fact, I have always been a long-term optimist, but it is undeniable that our overall direction in the past forty years has been to strive for development opportunities by integrating into the world economy. The problem now is that when the United States once again faces this window of time when internal conflicts are transferred to the outside world, not only does it have no choice, we have no choice.
There is no way out for further compromise. Just like in Turkey, there is only one way and one choice for life or death. Many people think that after compromise, they will be content even if they can still live the same life as Japan and South Korea. However, this is a matter of course, because Japan and South Korea are just high-level workers. When the crisis in the West cannot be transferred to developing countries, It's their turn.
If the best outcome of compromise is nothing more than this, what is the meaning of the independence that our ancestors gained through bloodshed and sacrifice?
explained that the above background is not meaningless. Now that the US dollar continues to shrink, the whole world will face economic slowdown pressure. We are now the mainstay of globalization, and changes in the world will naturally affect us. The development of the economy is closely related to the changes in the financial cycle .
When the US dollar, as the de facto global currency, undergoes an unprecedented contraction, demand around the world will be severely impacted in the foreseeable future. The tightening of the dollar has put the U.S. financial market under tremendous pressure, and at the same time, the world's economy is also struggling to support itself.
Everyone is suffering. The anxiety at this time will penetrate into all aspects of society step by step. Don’t use this to create divisions and confrontations. That is the best way to divert class conflicts in the United States. This kind of financial Austerity will lead to a slowdown in economic development, and then to the anxiety of every individual. In the end, no one can escape.
In the final analysis, we still need to have confidence and have four self-confidences. We believe that not only the United States can lead the development of the world economy, but we can too. As long as you have this confidence, you will inevitably understand that the economic slowdown and various difficulties caused by the current austerity are phased.
The austerity in the United States will eventually end, and the future economic cycle , driven by us, will also start. Once we start a new round of economic development, is it possible that we will still use the Western methods? The Western approach has come to an end, and it is time for us to use our own approach to drive further economic development.
If we do not strengthen the four self-confidences from the root, from the bottom, it is impossible to believe that we can restart a new round of economic development cycle in the future.
The financial tide behind the era
Today's changes in the world are facing a severe threat of structural disintegration. The US dollar interest rate hike can only be regarded as an opportunity, because there are many problems and contradictions, and the accumulation does not take a day or two. It should be said that there is a big cycle of economic and social development behind it. The U.S. dollar interest rate hike coincides with the timing of the short-term financial tightening cycle and the larger cycle of social development, and may even form a major resonance.
The core of Western economics is marketization. The core of marketization is free competition, and the outcome of free competition has followed the same law for thousands of years. In the West, it is called the 28th law and the Matthew effect , also It is free competition in business. What will eventually be reflected in the social structure is the inevitable differentiation of rich and poor, and then the strong will always be strong.
This rule is summed up in the East as: The way of man is to make up for what is lacking.In fact, it means the same thing, that is, after the differentiation between rich and poor, the strong will continue to strengthen their position by occupying more resources, while the weak will only become weaker.
Let’s look at the history of capital accumulation in the United States. It is exactly such a process. Before the Great Depression in 1929, the internal wealth differentiation in the United States reached its peak. After that, Roosevelt’s New Deal suppressed the powerful. This was the first 50 years.
Then in the 1980s, Reagan restarted neoliberalism. Ten years later, the historical cycles converged here. The polarization between rich and poor in the United States began to show an inflection point from here, and then globalization began to accelerate after the collapse of the Soviet Union, and the United States transferred the wealth earned through globalization to the country to continuously alleviate internal conflicts. Finally, in the 2020s, This is the next 50 years.
In fact, the gap between the rich and the poor within the United States, and the international gap between developed and developing countries measured in US dollars, may have reached their peak at the same time. Of course, we are an exception here. We certainly do not belong to the circle of developed countries. If we are removed from developing countries, the wealth comparison between developed countries and developing countries will be more direct and obvious.
Obviously, the two circles inside and outside the United States, both under the market economy and free competition, have reached the end of the model, and may have further achieved synchronization in time. The start of the dollar tightening cycle has further synchronized with these two cycles.
So in the end, what we saw was not only a problem of dollar deflation, but also a problem for the United States and the whole world. It may have reached a critical point. In our words, this is a major change that has not happened in a century.
Finally
According to historical experience, there are two ways to solve the current contradictions and problems. One is to have another new industrial revolution , which will greatly increase productivity and quickly create wealth to alleviate conflicts around the world. Another is to use the way of heaven to make up for the shortcomings. By changing the Western-dominated order, we can release production potential and balance global interests.
With the current advancement of science and technology, the first solution is to quench thirst far away. The second method requires comprehensive theoretical innovation to replace the current Western theory to guide the new stage of economic development. More importantly, it also requires the Western world to pay for the feast it has enjoyed for decades.
But here’s the difficulty. The feast is over and no one wants to pay the bill.
