The Fed is in a very difficult situation right now, and whatever it does is bound to have bad consequences in some way.
If interest rates are not raised, inflation will continue to rise;If interest rates are raised, the economy will fall into recession;The global wave of de-dollarization has led to a constant increase in the US dollar, which in turn has forced interest rate hikes;However, further interest rate hikes have caused US Treasuries to fall and sell.
The United States has never faced such a predicament, and in the past, it was always able to harvest the wealth of other countries smoothly and help the United States through the economic crisis, but now the United States really can't cut it.
For a long time, the U.S. dollar has been recognized as a universal currency, and the U.S. dollar can rise and fall in value at will, simply through the Federal Reserve's interest rate hikes and cuts.
But now, while the Fed is still raising interest rates, the dollar's upward momentum has stopped this year, and at its peak, the dollar has gained 14%.
The United States urgently needs to maintain the status of the dollar, and in the current situation of global de-dollarization, if the dollar is allowed to depreciate, the consequences will be unimaginable.
But the problem is that the cornerstone on which the dollar rests has changed.
Prior to this, all countries in the world were based on ** as the main currency, although the economy of all countries is very stable, but the supply of ** is very small, especially after the war, all countries are required to implement loose monetary policy, which has led to the gold standard being gradually abandoned.
The world's best continues, every country is looking for a new currency, the United States is not one of those countries that has experienced two wars, whether it is military, economic, or technology, it is the most advanced in the world.
And the United States is also constantly helping other countries, and finally under the Bretton Woods system, the dollar and *** together to form a stable monetary system.
Later, with the issuance of a large number of currencies, the market was in short supply, and the United States decisively abandoned the gold standard and turned to an alliance with oil.
It can be said that the current status of the dollar, oil is the foundation, but at present, oil-producing countries have begun to de-dollarize in practical actions, but more and more oil ** is no longer settled in dollars, the status of the dollar naturally began to fall off the altar.
Why can't the U.S. maintain relations with oil producers such as Saudi Arabia?
The key is that in order to fight inflation, the United States has continuously suppressed oil prices, resulting in irreconcilable contradictions with oil-producing countries.
Therefore, there is a natural contradiction between solving the inflation problem and maintaining the petrodollar system to maintain the status of the dollar, which is an unsolvable dilemma.
In desperation, the dollar had to keep raising interest rates, hoping to push up the exchange rate of the dollar and suppress other currencies in order to continue to maintain the strong position of the dollar.
However, this has led to the emergence of another unsolvable dilemma, continuous interest rate hikes, which has led to the continuous increase in US bonds, and has also made central banks increase their efforts to sell US bonds.
As early as mid-January of this year, the United States** owed more than 314 trillion legal limit amount. The U.S. Treasury Department has no choice but to find a way to get Congress to pass a higher debt ceiling, but it has been slow to reach an agreement.
Previously, Moody's had warned that if the United States defaulted on its debts, it would cause about 6 million jobs in the United States and 15 trillion family assets to be wiped out.
In desperation, the United States ** Yellen hinted to China that China should maintain its ** US Treasury bonds and not reduce them, and since January, rumors about Yellen's visit to China have not stopped.
The intention of the United States to visit China this time is quite obvious, that is, to ask us to continue to buy US bonds after the United States raises the debt limit.
However, on the one hand, the United States continues to raise interest rates, resulting in the United States constantly being the United States, and on the other hand, the U.S. Treasury continues to issue new U.S. bonds, resulting in the continuous depreciation of the original United States. In this case, neither China nor other countries have any reason to continue to ** US debt.
In fact, the Fed is facing a myriad of difficulties, and there are only two dilemmas
However, all the problems boil down to one point: the United States is no longer the United States of the past, and it is difficult to maintain its former dominant position, and the status of both US bonds and the US dollar is constantly declining.