Why has the US dollar been slow to cut interest rates? Some say they dare not cut rates anymore, as once they go up, they can't come down. What is the rationale behind this?
Has the current round of US dollar interest rate hikes been successful or a failure? Today, we will reveal to you the underlying logic and true secrets behind US dollar interest rate cuts.
Why has the US dollar been slow to cut interest rates? Was this round of US dollar interest rate hikes successful or a failure?
Relying on the strong global currency status of the US dollar, historically, the US dollar has raised interest rates multiple times and then lowered them, creating dollar tides to harvest globally, and Americans have been very successful. So, what is the standard for a successful US dollar interest rate hike?
Some have summarized six historical interest rate hikes of the US dollar and found common characteristics in two aspects.
Domestically, US dollar interest rate hikes always target two important indicators: one is inflation, and the other is unemployment.
High inflation indicates an increased risk of an overheated economy, while a rise in unemployment suggests that the economy is beginning to contract. An overheated economy requires interest rate hikes, while a contracting economy necessitates interest rate cuts.
Advertisement
The US dollar interest rate hike aims to suppress inflation, prevent the risk of an overheated economy, squeeze financial risks, and even burst bubbles, making the US economy and financial system healthier and initiating a new cycle of development.
From a global perspective, US dollar interest rate hikes lead to global monetary tightening, a decline in international trade activity, damage to manufacturing in producing countries, devaluation of other countries' currencies, and a drop in international commodity prices.
At the same time, global capital flows to the United States, and investment hot money and even industrial capital are massively withdrawn, causing a significant drop in industrial value and even leading to collapse crises. For those countries heavily in debt, the devaluation of their local currencies will increase debt pressure and may even trigger financial crises.Then the US dollar cuts interest rates again, and US capital massively harvests cheap global assets, seizing huge wealth.
Essentially, this is the process by which the United States creates tidal waves through interest rate hikes and cuts of the US dollar, transferring inflation and financial risks to the world, while harvesting the fruits of global economic development.
In previous interest rate hikes, Americans have been very successful, but this time, it is clear that neither domestically nor internationally have the goals been met.
Therefore, both domestically and internationally, this round of US dollar interest rate hikes has been a failure.
Firstly, domestically, the US dollar interest rate hikes have reached their limit, but inflation has not reached the target, and once the rate hikes slow down slightly, inflation rears its head again. At the same time, the US banking industry has repeatedly sounded the alarm, and Wall Street is suffering.
Internationally, this round of interest rate hikes has not triggered the collapse of several countries, and even countries like Argentina and Turkey are still holding on, and Southeast Asia, which was hit the hardest in the past, is also safe and sound.
Of course, the world is greatly affected by the US dollar interest rate hikes, including us and Southeast Asia, and the impact is significant, especially with a large amount of investment hot money and even industrial capital being withdrawn, global trade contraction, and a significant impact on export-oriented economies.
However, this time the world has miraculously held on, and the US inflation and financial risks have not been successfully transferred. Looking at the world, there are few targets to harvest, and opportunities are limited.
Therefore, if the US dollar cuts interest rates now, the consequence would be a massive flight of US capital, a sharp drop in the US stock market, and a high likelihood of triggering a financial crisis, followed by an economic recession or even a great depression.
This is the inevitable result of the US capital-driven economic model. US dollar interest rate hikes are a forced adjustment after the accumulation of bubbles and crises in US finance and economy. If the adjustment is not successful, the consequences will be very serious.Capital is filled with profit-seeking adventure and bloodthirstiness, accumulating a large amount of bubbles and crises every once in a while. At this time, if the bubbles cannot be punctured and the crisis cannot be alleviated, and capital cannot be utilized to its maximum effect, it will lead to catastrophic consequences.
The political struggle accompanying the 2024 election has added a large number of risks and uncertainties.
In the past, when the domestic goals of the US dollar interest rate hike were achieved, and a large number of targets for harvesting appeared abroad, the US dollar would quickly cut interest rates to help American capitalists quickly complete the harvest, and the US economy would return to the path of prosperity.
But this time, Americans are trembling and shivering, afraid that if they don't grasp the timing well, catastrophic consequences will occur, so they dare not raise interest rates again, and even less dare to easily cut interest rates.
Even if interest rates are cut, they will not be cut as quickly as in the past, but will be cut cautiously and slowly, gradually releasing bubbles, alleviating crises, and striving for a soft landing.
This is the fundamental reason why Goldman Sachs predicts that even if the Fed cuts interest rates, it will not be fast, and the range of interest rate cuts will not be too large.
Therefore, we can boldly predict that the earliest the US dollar can cut interest rates is in the second half of the year, and the interest rate cuts will also be cautious, slowly and cautiously, testing the market's response, and it is even possible to fluctuate repeatedly between interest rate cuts and hikes.
The US dollar interest rate hike is a double-edged sword, if it can't cut others, it will hurt itself. Now the whole world is raising sickles, waiting for the US dollar to cut interest rates, preparing to harvest US dollar capital in reverse.