In March last year, the United States launched a new cycle of interest rate hikes, which has been going on for a year and a half. This is a financial war against us, with the aim of harvesting global wealth through financial austerity. Although we are in the middle of it, it is not very obvious because some of the difficulties we are facing don't seem to have much to do with it.
But in fact, behind these difficulties are closely related to the financial war of the United States. The easing cycle in the United States brings global prosperity, while the tightening cycle brings global depression because the dollar is the world currency and its influence is global. This time, the United States has also added all kinds of containment and containment to us, which has made our pressure even greater.
The biggest concern now is whether we can resist the US financial offensive as the global economy seems to be in troubleIf the United States fails to complete the financial harvest smoothly, what kind of impact will it have on the future world?What changes will there be in the global pattern and the future economic situation?
To clarify these issues, I tried to compare the current situation with that of 2015, when at the end of that year, the United States had launched a financial austerity, but that time the United States did not succeed. Let's compare the present and see if this time, will the United States lose again, or will it risk winning
I will compare the differences between the past and the present in terms of the most important changes in the United States and China. Look at this contest, what direction will it take?
Let's start with the United States.
Three major changes in the United States
At the end of December 2015, the United States began to tighten its financial services for the first time since 2008. This is a financial war against us. At that time, the United States felt that the situation was gradually getting out of control, at least on the surface, for two main reasons.
The first reason is that we created the MLF tool in September 2014. It is a tool that issues money according to its own needs. In the past, when we issued currency, we mainly relied on foreign exchange to take money. That is to say, for every dollar that comes in, we will issue about 7 yuan or so. The more dollars flow in, the more money will be issued in the country. Conversely, once there is a large outflow of dollars, there will be uncontrolled monetary tightening in the country.
The second reason is that on August 11, 2015, we carried out a historic exchange rate reform, known as the 811 exchange rate reform, which changed our currency exchange rate from being pegged to the US dollar to being pegged to a basket of currencies.
The essence of these two things is that we really want to take back our own currency issuance and pricing power. Because if the right to issue and set prices of currency is closely related to the dollar, then in fact, at the monetary and financial level, it is the United States that indirectly holds the initiative and control.
After the monetary decoupling began, the United States felt that a financial harvest was imminent. At the end of the year, a round of financial tightening began. But when we look back at the last financial war of the United States, there is no doubt that the financial harvest of the United States was a failure. Our first financial firewall is our foreign exchange reserves, and the United States has not even broken through this.
The total size of our foreign exchange reserves, which peaked at nearly $4 trillion before the financial war, flowed out of large amounts of dollars after the United States began to enter contraction, and at its lowest, it was less than $3 trillion. But it has never fallen below that level since then. This has built the first firewall for us in terms of the country's financial security.
And the United States has not even broken through the first firewall, so naturally it cannot talk about other so-called financial harvesting operations in the future. So now that we look back at the last round of financial warfare, we can see that the United States has undergone some internal changes over the years.
The main ones are the following three changes.
The first change, compared to 2015, is that the monetary basis of the contraction of the dollar is different.
At the end of 2015, when the United States began to tighten its financial system, although the United States experienced a significant expansion of its balance sheet after the 2008 financial crisis and subsequent rounds of QE, the Fed's balance sheet at that time only expanded from less than $1 trillion in 2008 to $4 trillion.
Relatively speaking, the U.S. currency has not yet reached the point of being out of control. Generally speaking, the financial risks in the United States at that time were relatively more controllable, and they had not yet reached the point where they had to make a desperate bet.
And before this round of financial war, the United States experienced the first collapse during the epidemic. In order to save the market, the Fed had to carry out unlimited water releases. This, in turn, led to a rapid expansion of the Fed's balance sheet in the short term, doubling from less than $4 trillion to more than $8 trillion.
By this time. If we look at the level of the U.S. national debt, in 2015, it was less than $20 trillion, and by the time of the interest rate hike last year, it was close to $32 trillion.
The biggest difference between this round of financial tightening and the last round of US interest rate hike cycle is that there is an unlimited release led by the Fed in between. It can be said that by this time at the beginning of last year, the United States had no way out but to make a desperate bet. This is a change determined by the monetary and financial foundation of the United States.