In recent years, the U.S. has raised interest rates 11 times in a row, and the U.S. economy has shown strong momentum, but is there a secret behind this?There is an opinion that by 2024, will the Fed stop raising interest rates?If interest rate hikes are stopped, what kind of trouble will the US economy fall into?Through simple logical reasoning and analysis, we can reveal the mystery. Although the process of economic operation is complex and changeable, its basic logic is relatively simple. This article will detail the key factors in the operation of the U.S. economy and their impact on economic development trends.
Economic growth is usually based on two aspects: internal scientific and technological progress to improve production efficiency and stimulate demand to expand the market, or to find a larger market space externally. The development of science and technology has liberated the productive forces and promoted rapid economic growth, which has been fully reflected in the two industrial revolutions. At the same time, the Keynesianism put forward by some economists argues that increasing investment through fiscal deficits can expand employment and boost consumption. In addition, the globalization movement has also brought economic miracles to the United States and China, as they have found larger markets on a global scale.
However, as we enter the 2020s, the United States faces challenges from internal and external factors. On the one hand, science and technology have failed to achieve revolutionary breakthroughs in the short term, the space for internal demand is limited, and the monetary policy has tended to be excessive. On the other hand, the global market is approaching saturation, and many market shares are being grabbed by competitors. As a result, the United States is approaching its economic peak and is beginning to decline. In order to buck the trend, the United States has adopted the means of forcibly pulling up, that is, through the policy of raising interest rates, amassing global wealth, reshaping manufacturing and capital markets, and reviving economic hope. At the same time, the United States is also creating crises and wars around the world, as well as creating an energy crisis, in order to force global capital and manufacturing to turn more to the United States. In addition, the United States is trying to fuel this trend by subsidizing the reshoring of manufacturing through fiscal deficits.
However, the U.S. knows it's a dangerous move that requires a lot of money or risk killing itself in the process of raising interest rates. Therefore, after 11 consecutive rate hikes, the Fed began to be more cautious, because it is very difficult to grasp the scale of rate hikes. In order to prevent a sudden collapse of the American economy, to succeed in this journey of rebirth, the Americans carefully designed one"Seesaw"On one end of the spectrum is a tightening policy of raising interest rates on the dollar, and on the other end is a policy of dewatering large fiscal deficits. According to incomplete statistics, since 2020, the U.S. fiscal deficit has increased significantly, and the total amount of various forms of fiscal stimulus has exceeded $10 trillion. The size of the U.S. national debt has grown rapidly from $23 trillion at the beginning of 2020 to 33 trillion today$7 trillion, an increase of almost $11 trillion. At the same time, before March 2022, the Fed printed more than $8 trillion in dollars. The scale of such a deficit increase is unprecedented in American history, which shows how crazy their actions were.
This strategy is essentially to withdraw global wealth through the US dollar interest rate hike, hoping to revive manufacturing and infrastructure investment to boost the US economy, but it has triggered a domestic monetary tightening and liquidity crisis. In order to alleviate the pressure from interest rate hikes, the United States** has offset the tightening effect by increasing the fiscal deficit and maintaining economic growth. However, after 11 consecutive rate hikes, this seesaw may be difficult to continue by the end of 2023, and it may even be empty with one foot in it.
The problems facing the U.S. economy have become more prominent as interest rate hikes have fallen short of expectations. The Fed has had to remain cautious and has repeatedly stated that it will keep interest rates high for a long time. However, there is a huge problem at the other end of the seesaw, and the fiscal deficit is growing too fast to be sustainable. At present, the size of the US national debt has reached 33$7 trillion, the federal ** can no longer subsidize the domestic economy, let alone subsidize the manufacturing industry. Therefore, in 2024, the United States will face a huge question: whether to continue raising interest rates?Do interest rates remain high?Now, the seesaw can't hold on anymore. If the dollar enters a cycle of interest rate cuts, then this strong rally in the US economy is bound to stop, leaving a miasma of smoke. If interest rates continue to be raised or kept high, the seesaw will be completely unbalanced and the US economy is likely to fall into the Great Depression. In addition, rapprochement with China and the use of China's manufacturing and financial resources to save America's finances and economy could be a solution that could sustain America's prosperity, at least temporarily. But in the long run, it will be difficult for the United States to reverse the decline if it fails to solve manufacturing and infrastructure problems. As a result, the United States is in a dilemma. The above is a simple logical analysis of the economic outlook for the United States in this article.
In summary, the U.S. economy is facing the challenge of raising interest rates and releasing the fiscal deficit after 11 consecutive interest rate hikes. If this problem cannot be solved, the US economy will face huge difficulties in 2024 and may enter a great recession. For the United States, rapprochement with China may be a viable temporary solution, but failure to manage manufacturing and infrastructure will make it difficult for the United States to sustain prosperity. This is the dilemma and choice that Americans face.