In recent years, the U.S. economy has continued to grow strongly, and despite challenges such as a stagnant technological revolution, limited domestic demand, and saturation of the global market, the U.S. has tried to maintain prosperity by controlling the trend of economic operation. Among them, the US dollar interest rate hike is seen as an important means to inject new vitality into the economy by attracting global wealth and promoting the reshaping of the US manufacturing and capital markets. At the same time, this move is accompanied by tensions created by the United States in the global manufacturing crisis and energy crisis, making global capital and manufacturing need to rely on the United States for survival. In addition, the U.S. is trying to exacerbate this trend by subsidizing the reshoring of manufacturing through a fiscal deficit. However, the Americans are well aware that this process is extremely dangerous and requires a lot of financial support. Therefore, the Fed must exercise caution in the process of raising interest rates.
Specifically, the United States has significantly increased its fiscal deficit since 2020 and stimulated the economy through various forms of fiscal release, with a total investment of more than $10 trillion. In addition, from the beginning of 2020 to March 2022, the Fed printed more than $8 trillion. Fiscal deficit growth of this magnitude is a rare phenomenon in U.S. history, which shows the extent of the madness of the United States in this regard. Through the US dollar interest rate hike, the US will bring the world's dollar wealth back home, but it will also produce monetary tightening and liquidity crises in the United States. In order to meet this challenge, the United States has increased the fiscal deficit and released water significantly to offset the negative impact of monetary tightening to ensure the continued growth of the American economy.
However, after 11 consecutive rate hikes, the Fed faces a serious problem at the end of 2023 that could even lead to a difficult situation for the US economy. Americans have found that despite the huge cost of raising interest rates, the dollar's rate hikes have not attracted global wealth as expected, and the reshaping of the manufacturing sector has been far from what was expected. As a result, the Fed had to remain cautious and repeatedly stated that it would maintain a high interest rate policy for a long time. At the same time, the U.S. federal ** is in a difficult position to further subsidize the domestic economy and manufacturing in the face of a rapidly growing fiscal deficit. As a result, in the case that the fiscal deficit is unsustainable, whether to continue to raise interest rates in the US dollar, or even whether to maintain a high interest rate policy, has become a major issue facing the United States. At present, due to the rapid growth of the fiscal deficit, the US federal ** may not be able to continue to provide subsidies, which will not only affect the domestic economy, but also cause problems for the manufacturing industry. As a result, the U.S. will face a key choice in 2024: continue to raise interest rates or keep them high, or seek a rapprochement with China to use China's manufacturing and financial power to bail out U.S. national finances and economies.
Faced with the current predicament, the United States is in trouble. Whether interest rates continue to rise or remain high, there is a risk of putting the economy in trouble. If we enter a cycle of interest rate cuts, the strong rally in the US economy will be interrupted, leaving a chaotic situation. If interest rates continue to be raised or if interest rates remain high, the economy will become unstable and even enter the Great Recession. At the same time, rapprochement with China and the use of its manufacturing and financial resources to bail out the U.S. economy may be a temporary solution, but in the long run, it will be difficult for the U.S. to reverse the recession without solving its manufacturing and infrastructure problems, which is undoubtedly a dead end.
There are several thoughts and perspectives that can be drawn from this. First, the Fed's attempts to reshape the economic model by raising interest rates have not been entirely successful, and their results have fallen far short of expectations. While the policy of raising interest rates has attracted global capital flows back to the United States to some extent, it has failed to achieve a complete reshaping of manufacturing and capital markets. This implies that economic development needs multi-dimensional promotion and support, and it is far from enough to rely on interest rate hikes.
Second, growing the fiscal deficit too fast could have serious consequences. At present, the U.S. federal ** is facing a dilemma that it cannot continue to heavily subsidize the domestic economy and manufacturing. Rapid growth in fiscal deficits, on the one hand, can provide stimulus to the economy, but on the other hand, it can also lead to debt problems and economic instability. Therefore, a healthy fiscal deficit policy needs to be properly controlled and balanced to prevent the economy from falling into crisis due to excessive debt.
Finally, the United States, as a huge economic empire, has an economic trend that cannot be fully controlled by manpower. Even in a country like the United States, it is difficult to change the trend of economic development, although they have been trying to control and guide it by various means. Therefore, in the face of the current predicament, the Americans are in a dilemma.
Overall, the U.S. faces significant dilemmas and challenges, with the risk of economic instability and recession, whether it is continuing to raise interest rates or maintaining a high interest rate policy. At the same time, relying on China's manufacturing and financial resources to bail out the economy can only be a temporary measure, and in the long run, the United States still needs to solve its own manufacturing and infrastructure problems to have a chance to reverse the decline.
Project Kunpeng may refer to a solution or plan, but it is not mentioned in the article. Therefore, the discussion of the Kunpeng program requires more details and explanations.