After the Federal Reserve opened a fierce rate hike in , some American analysts believed that the Federal Reserve's move caused deep pain to other countries in the world. From Europe to Africa, the accelerated appreciation of the US dollar not only pushed up the dollar exchange rate, but also exported severe inflation to the world, creating economic chaos in both wealthy and poor countries. The Fed has pushed up global prices, expanded debt repayment scale sharply and increased the risk of a deep recession.
For example, according to preliminary data released by the European Statistics Office on September 30, the euro zone inflation jumped from 9.1% in August to 10% in September, a new record for euro zone data since 1997. Among them, Germany's inflation rate soared to 10.9% from 8.8% in August. In the euro zone, 9 of the 19 countries have inflation rates of more than 10%, including three Baltic countries, with inflation rates of more than 22%.
It is worth noting that the euro zone's energy-free CPI soared to 6.4% from 5.8% last month. This indicator hit the 2% mark last October and has continued to soar since then:
German September CPI inflation surged to 10.9%.
With the events and losses related to the Nord Stream pipeline, also directly tore the energy supply chain that penetrated Western Europe , and inflation in the euro zone has further lost control. It is expected that the 19 countries in the euro zone will face further hyperinflation. As follows, Estonia's inflation rate in September has exceeded 24%.
The European Central Bank ended its quantitative easing in June, when its total balance sheet assets reached 8.84 trillion euros. On September 8, the European Central Bank raised interest rates by 75 basis points for the second time, with a deposit rate of +0.75%. After the interest rate hike in July, the era of zero interest rate policy (ZIRP) finally ended. Ended the crazy era of negative interest rate policy (NIRP).
At the same time, under the invasion of the strong dollar, it is pushing up the prices of food, fuel and medicines in many places around the world; in debt-ridden Argentina , Egypt and Kenya , the "strong dollar" is further pushing these countries toward debt defaults; in markets such as India and South Korea, the "strong dollar" is scaring away potential foreign investment.
Eswar Prasad, professor of economics at Cornell University in the United States, said: "For the rest of the world, this is a must-have situation." Today, the exchange rate of the US dollar against other major currencies such as the Japanese yen has reached its highest level in decades. In June this year, the euro reached a parity level of 1 to 1, the first time since 2002. At the same time, the US dollar is also crushing other currencies, including Brazilian Riyal and Korean won.
For example, the latest data released by the Central Bank of India showed that as of mid-September, India's foreign exchange reserves were US$545.7 billion, down 15% from the same period last year, setting a new low in nearly three years. According to statistics from economists, the total public debt of India, including states and the federal states, is approximately US$1.78 trillion, which is equivalent to the total debt of India exceeding about 300% of the country's foreign exchange reserves. This makes the Indian economy almost unable to withstand the invasion of the strong dollar.
Although Europe and India, as well as many other markets, have staged various economic difficulties in the context of a strong dollar, in the view of Rockefeller International President Ruchir Sharma, the current dollar is closer to its peak, and the weakness of the dollar is increasing. Whether or not after U.S. inflation adjustment, the dollar’s value against other major currencies is now 20% higher than its long-term trend and is already above its peak in 2001. This seems to be brewing that the US dollar has fallen sharply again.
At the same time, as of October 2, the total US federal debt had exceeded the all-time high of US$30.93 trillion, at 125% of the US GDP. The US financial website Zero hedged said that high debt has become a huge problem in the US economy and a hot potato in .
Although the Federal Reserve continues to raise interest rates sharply and the US dollar appreciates, the U.S. debt interest cost is also rising sharply.The non-profit U.S. Federal Budget Committee (CRFB) predicts that the 0.75% rate hike announced in September alone will increase the US $2.1 trillion deficit over the next decade. Based on this ratio, the Federal Reserve has raised the benchmark rate of to 3%-3.25% this year, and the total deficit increased by the United States in the next decade may reach at least $8.5 trillion.
This has a significant impact on the long-term US dollar and the US economy. Once global buyers continue to sell US bond , the US dollar will further lose its appeal. At the same time, the global de-dollarization process is also accelerating. As of now, China, Japan, Russia, Germany and France, 19 countries in the euro zone, the United Kingdom, Israel, India, Indonesia , Malaysia , Thailand, Iran , Angola , Venezuela , Iraq , Kuwait , Pakistan , Pakistan , Kazakhstan , Belarus , Armenia , Kyrgyzstan , Sri Lanka, Türkiye , l1Qatar , UAE, Vietnam, Hungary , Brazil , South Africa, Romania , Sweden , Singapore , Singapore , Canada, New Zealand , Swiss , Swiss , Customs , Customs , Customs , Customs , Customs , Chile , Chile , Chile At least 60 countries have started using different methods to start the process of de-dollarization.
According to International Monetary Fund (IMF), the current share of the US dollar in global foreign exchange reserves is 59%, the lowest level since 1995.
Surprisingly, Bank of Japan officially launched several months ago to form a joint cryptocurrency group in an attempt to bypass the dollar restrictions, including Bank of England , Bank of Canada, the European Central Bank, the Swiss Central Bank and other developed economies. This shows that traditional allies of the US economy such as Japan, the United Kingdom, Canada, Germany, France, and Switzerland, as neutral country, have also joined the ranks of de-dollarization.
As Nomura analysts said, some practices in the US economy are giving people reason to believe that the US dollar is becoming less and less like a major currency. Through the above figure, we can also clearly see that the global reserve currency has never been exclusive to one currency for a long time. In response, Sharma further stated that, so don’t be confused by the strong dollar, the post-dollar world is coming. (End)
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