As the Governor of the Bank of India analyzed, it is also what we have emphasized many times before that the fundamental reason for the continuous "embezzlement" of emerging market assets in recent months is not the unilateral continuous interest rate hikes by the Federal Reserve

We noticed that this Sunday (June 3), Governor of the Bank of India Urjit Patel issued an open letter in the Financial Times, calling for "The Federal Reserve should slow down its balance sheet. Emerging market economies are already under serious pressure and cannot cope!"

As the Governor of the Bank of India analyzed, it is also what we have emphasized many times before that the fundamental reason for the continuous "embezzlement" of emerging market assets in recent months is not the unilateral continuous interest rate hikes by the Federal Reserve, but the Federal Reserve while raising interest rates, it has reduced its balance sheet, making US dollar financing tight. On the other hand, the large-scale tax cuts in the United States have led to a decrease in fiscal revenue, which in turn stimulated the US Treasury Department to invest a large amount of US Treasury bonds into the market, which further absorbed US dollar liquidity - we call the US dollar "star-absorbing law."

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As expected, according to data from the International Finance Institute (IIF) today (June 6), foreign investors withdrew $12.3 billion from emerging markets in May, the largest outflow since November 2016. Among them, about $6 billion was flowing out of bond and stock markets; $8 billion was flowing out of Asian countries. Of course, the IIF further explained in the report that the phenomenon of asset outflow in emerging markets is not driven by the single factor of liquidity tension caused by the strong rise in the US dollar, but a series of factors are working together.

As shown in the figure below, the US dollar index has been strengthening in the past five months. The yield of US bond broke through the 3% high, causing global funds to turn, causing foreign capital to continue to flow out in emerging markets.

And the logic behind this is that the United States is to attract funds back to the US dollar and to allow other economies, including emerging markets, to flow out of funds, thereby cutting out the "wool" of investors in these countries. However, to change this trend, hiding the best way through interest rate hikes, balance sheet reduction, tax cuts and erecting trade barriers . In fact, this is the highest level of currency "war", and it is also the "star-absorbing method" used by the United States after it cuts its global economy into anti-globalization, that is, it has changed the flow of global capital, labor and technology exchanges.

Our team believes that the United States uses credit guarantee banknotes to exchange for cost-effective goods and resources from countries around the world, and at the same time, it reflows the liquidity of funds in the form of US Treasury bonds to export its domestic inflation to the world. If an economy falls into the US dollar debt trap, the financial market will eventually be "robbed" by the US dollar. This US dollar debt trap itself is an "economic black hole" carefully designed by Wall Street to "loot" the market. Today, the financial turmoil that occurred in some emerging markets and Venezuela's economic brink due to super inflation is the best example, but India is also facing the same problem.

We have noticed that since the beginning of this year, foreign investors have also withdrawn from the Indian financial market. In this round of sharp drop in emerging markets, the Indian rupee has become like Turkish lira - one of the most depreciated currencies in the Asian monetary system, which has fallen by nearly 5% this year. It is precisely in the above context that According to Indian media around 5 pm today, the Central Bank of India suddenly announced an emergency rate hike ( Earlier than expected), all members of the central bank's monetary policy committee unanimously voted to raise the policy interest rate (upload the repurchase rate from 6.00% to 6.25%, and the reverse repurchase rate from 5.75% to 6%, while maintaining a neutral monetary policy stance.), joining the global tightening of monetary policy, including emerging market central banks, to cope with the appreciation of the US dollar, defending the local currency exchange rate , and after the news was announced, the Indian rupee rose against the US dollar in the short term, and the Indian BSE index cut its gains slightly. (End) Original works by

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