"World economic history is a serial drama based on illusions and lies, and the way to gain wealth is to recognize the illusion, invest in it, and then exit the game before the illusion is recognized by the public. ”
Soros. Recently, I have written several articles about Japan, and I have received some private messages one after another, and some readers who do not understand how the United States is harvesting other countries by raising interest rates, and have come to me to ask me in private messages.
Then I will use this article to analyze in detail the underlying logic of the United States' completion of financial harvesting.
(1) The establishment of dollar hegemony
Let's first review the process of establishing the hegemony of the dollar.
At the end of World War II, the United States became the most powerful country in the world.
In 1944, in order to seek greater hegemony, the United States united with 44 other countries to establish a dollar and ** based on the United StatesBretton Woods system
Pegging the exchange rate of the U.S. dollar to **, i.e. $35 to one ounce**.
The currencies of other countries are then tied to the US dollar exchange rate.
In this way, the central position of the dollar in the world economy has been basically established.
At the beginning, this system was still working well, promoting international development and improving the economic level of various countries.
However, with the flood of the US dollar in the later period, the US economic crisis caused by the Vietnam War and other factors led to seven dollar crises in a row.
Finally, in December 1971, the United States could no longer afford to come up with an equivalent ** to maintain the value of the dollar.
Marked by the Smithsonian Accords, the United States announced the depreciation of the dollar against **, and the Federal Reserve refused to pay ** foreign ** banks***
At this point, the Bretton Woods system officially collapsed.
The collapse of this system was mainly caused by the indiscriminate issuance of currency by the United States.
Moreover, the United States itself will stop when it says it will stop, which is somewhat of a scoundrel nature.
However, due to the hegemonic status of the United States at that time, other countries dared to be angry but did not dare to speak, and in the end they were helpless.
After the collapse of the Bretton Woods system, it has continued to this dayPetrodollar system
The U.S. dollar is no longer pegged to **, but is guaranteed by the credibility of the United States**, and the U.S. dollar is used as legal tender for oil transactions.
In this way, the dollar has re-established its hegemony in the international economy.
Moreover, since it is no longer anchored to *** and so on, the United States can print money more brazenly.
It can also affect the entire world economy by cutting interest rates and raising interest rates to "pump water".
And then to achieve the purpose of harvesting the whole world.
(2) Interest rate hikes and economic crisis
Since 1976, the Fed has experienced eight relatively large interest rate hike cycles, and is currently in the eighth round of interest rate hike cycles.
I've compiled a breakdown of the Fed's rate hikes since 1976:
I made another diagram to mark the time points of the major economic crises, which looks more intuitive.
It can be seen that the Fed's previous aggressive interest rate hikes will trigger various economic crises.
In 1980, the United States raised interest rates to 20%, and in 1982, the Latin American economic crisis broke out, and some debtor countries had to give up part of their sovereignty and accept the intervention of the International Monetary Organization.
In 1989 the rate hike was raised to 975%, in 1990 the Japanese bubble burst, Japan experienced a "lost thirty years".
In 1995, interest rates were raised to 6%, and in 1997, the Asian financial crisis erupted, leading to the near-bankruptcy of Thailand, South Korea and Indonesia**.
In 1999 the rate hike was raised to 65%, in 2000, the dot-com bubble burst, and the NASDAQ's market value evaporated by $5 trillion.
In 2006 the rate hike was raised to 525%, in 2007, the subprime mortgage crisis broke out in the United States, and the world economy suffered a heavy blow.
In 2018, the rate hike was raised to 25%, as a result, a money shortage crisis broke out in the United States in 2019, causing the Federal Reserve to urgently stop raising interest rates and print money to save the market.
Rate hike to 5 in 20235%, this round of interest rate hike cycle has not ended so far, but there have been various problems such as Germany's "technical recession", Argentina's "shock**", and the liquidity crisis of US regional banks.
It can be seen from this that the Fed's previous "water release" and interest rate hikes will bring about serious turbulence in the world economy.
Some say that these economic crises are not all about raising interest rates, but that there are other reasons.
It is true that the causes of every economic crisis are diverse.
But in previous economic crises, the Fed's interest rate hike must be one of the most important reasons.
We should not ignore this greatest "cause" just because there are other reasons.
(3) The logic of harvesting
After talking about the relationship between the economic crisis and interest rate hikes, let's analyze the logic of the United States to complete the harvest.
In fact, since the collapse of the Bretton Woods system, the Federal Reserve has been playing the role of the "world central bank" and can issue money at will.
It also controls the flow of the dollar by controlling the trend of interest rates.
In a cycle of rate cutsThe U.S. dollar is pouring from the United States into the world like a surging tide.
At this time, major countries, especially emerging economies, are generally willing to borrow money to develop their economies because they need a lot of money to develop their economies, coupled with low interest rates.
Latin American countries, for example, quadrupled their debt from $75 billion to $315 billion in just a few years from 1975 to 1983.
At the same time, for companies, the extremely low interest rates will also attract a large number of foreign companies to raise or borrow through US dollars.
It should be noted that the US dollar financing or borrowing of domestic enterprises will also bring about an increase in the national currency, because after the US dollar is borrowed, it needs to be put in the bank to exchange for the domestic currency before it can be used.
This is equivalent to creating a dollar reserve and a national currency out of thin air.
Therefore, the influx of foreign capital and the financing and borrowing of domestic enterprises will increase the issuance of domestic currency, push up assets**, and thus cause imported inflation in the country.
The first is the ** and the property market, and then spread to other assets.
Eventually, the debt level of the entire population will be raised, triggering an economic bubble.
From an overall perspective, it leads to the expansion of global assets, rising liabilities, and bigger bubbles.
At the same time, by buying low and selling high, the first dollar to enter the market generally reaped strong returns.
This is the first round of harvest in the United States.
Generally, at this time, the Fed will start a cycle of interest rate hikes to achieve the second round of harvest.
In the interest rate hike cycle,The dollars that were released before will flow back to the United States from all over the world like a surging tide.
In response to the pressure of capital outflows, other countries have been forced to raise interest rates.
However, once the interest rate hike is started, coupled with the contraction of the scale of the local currency, the various assets** that were pushed up in the early stage will encounter a crash**.
This led to a financial crisis.
If the debt is too high, it can lead to various serious crises, such as debt crises and exchange rate crises.
At worst, the country's credit will be damaged, and at worst, its sovereignty will be lost.
At this point, the Fed will enter the next cycle of interest rate cuts again, releasing a large amount of dollars.
These dollars will go crazy all over the world** high-quality assets.
That's what America isThe second round of harvesting.
South Korea's Samsung, for example, was acquired by Wall Street capital after the 1998 financial crisis.
This is not enough, after the financial crisis, the IMF will also provide loans to the affected countries in the name of aid.
But these loans come with a variety of harsh conditions attached.
These countries are forced to accept these conditions under pressure from home and abroad.
Ceding their national market to Wall Street capital.
So the United States took advantage of this to complete the third round of harvesting.
For example, Argentina and Mexico in the 1982 Latin American crisis, and South Korea and Indonesia in the 1997 Asian financial crisis, all had to turn to the International Monetary Fund for help, and they were forced to accept the harsh terms of the aid package.
In this way, with each ebb and flow of the dollar, the United States has completed the harvest of the world again and again.
and then through the harvested assets, consolidate their position as world hegemony.
A complete closed loop is formed.
How to avoid it
The logic of the harvest of the United States has been mentioned above, so should other countries let it reap, and is there a way to avoid being harvested themselves?
The answer is yes.
As mentioned above, when the Fed enters a cycle of interest rate hikes, it will cause the dollar to flow back.
In order to avoid a large outflow of foreign capital, countries just:Had to follow the rate hike, otherwise it will cause a significant depreciation of the country's exchange rate.
However, a rash interest rate hike will seriously affect the domestic economy.
Mild recessions, such as a "technical recession" in Germany's GDP.
At worst, it triggers an economic crisis that leads to more serious problems, such as in Argentina today.
So, if you don't want to be harvested, you need toMaintain the independence of monetary policy and cannot blindly follow interest rate hikes.
Just like the counter-cyclical adjustment we are doing now, it is the embodiment of maintaining the independence of monetary policy.
There is a monetary exchange rate policyImpossible trigonometric lawIt is impossible for a country to achieve the three goals of monetary policy independence, exchange rate stability, and free capital flow at the same time.
At most, two of these goals can be achieved, and one must be discarded.
The policy to be adopted can only be a combination of three marginal policies.
For example, Hong Kong has achieved a stable exchange rate and free flow of capital, but what has been given up is the independence of monetary policy.
After the Federal Reserve started its interest rate hike cycle last year, Hong Kong also began to raise interest rates at the same time, from 05% has been increased to 575%, which is basically in line with the Fed.
So Hong Kong's monetary policy, yesCompletely bound by the United States
For us, we have chosen monetary policy independence and exchange rate stability.
Only in this way can we make counter-cyclical adjustments in this rate hike cycle and stabilize the economy by cutting interest rates.
Otherwise, if we follow suit, the economy will certainly be in much worse shape than it is now.
*, the property market is likely to be in crisis.
At that time, Wall Street capital will definitely buy our assets at the price of cabbage and complete the harvest.
So, onlyMaintain the independence of monetary policyNot following the rate hike is the first key factor in preventing being harvested.
Of course, when it comes to not raising interest rates, we have to mention Japan.
At present, Japan is also not raising interest rates.
However, Japan is not the same as we are.
We areActively choose not to raise interest rates, and Japan is completelyForcedJapanese debt pressureCan't raise interest rates
This is because as soon as Japan raises interest rates, the Japanese debt crisis may erupt.
Therefore, in order to protect itself, Japan can only bite the bullet and not raise interest rates.
The consequence of this is that the exchange rate depreciates sharply.
If you look at the exchange rate of the yen, what has fallen into.
But if Japan does not raise interest rates, the Japanese bubble will not be easy to burst.
If the bubble does not burst, the United States will not be able to reap it.
In addition, the current domestic economy in the United States is also unstable, and the high interest rate range cannot be maintained for long.
Otherwise, it won't be harvesting others, and you will explode first.
So, the next thing the United States will definitely beAll kinds of pressure, trying to get Japan to raise interest rates.
Therefore, before the Fed announces a rate cut, there will definitely be other moves in the United States, so let's wait and see.
Let's go back to the topic just now.
Another key factor in avoiding being harvested is the size of one's own economy.
The larger the economy, the more resilient it is and the more tools it has to deal with crises.
Just like us, foreign exchange reserves are more than 3$2 trillion, enough capital to maintain the stability of the economy.
We are not afraid of capital outflow, because no matter how outflow, in the face of such a huge volume, it will not cause many problems.
So, we just need to solve our own problems.
Moreover, in the early stage, through policies such as the Belt and Road Initiative, we have sprinkled a large number of dollars through investment and other means, and exchanged them for many real assets.
This has also greatly strengthened our ability to resist risks.
However, we also have to beware of some in the United StatesOff-the-shelf moves
For exampleThe situation in the South-East
Because the United States is very good at triggering geopolitical crises and triggering regional turmoil, thereby driving the dollar back.
This is what is needed from usBe vigilantof a point.
The decline of dollar hegemony
However, with the current decline of the dollar hegemony, these harvesting moves of the United States are becoming more and more ineffective.
The most important reason for the decline of the dollar's hegemony is that the bottomless printing of money has caused the flood of dollars, which has caused the United States to suffer its own economySevere backlash
This is the Fed's balance sheet for nearly 25 years, which can be roughly equal to the size of the Fed's money printing.
It can be seen that before 2008, the growth of this line was relatively flat.
But by 2008, things had changed.
When the interest rate hike was raised in 2006, the United States originally wanted to harvest others, but it didn't expect that it couldn't hold on first, and a subprime mortgage crisis occurred.
So what to do? Print money!
As a result, the Federal Reserve, the state apparatus, began to print money frantically to save the market.
At the beginning of September 2008, the Fed's assets were still only905.3 billionDollar.
By the end of December 2008, that number had soared2,239.5 billionDollar.
By September 2009, that number had soared again4.45 trillionDollar.
In other words: from the founding of the United States to September 2008, the United States printed more than 900 billion yuan.
But from September 2008 to September 2009, it took only one year for the Fed to print 3$5 trillion.
Close4 times the sum of history!
What a shameful thing to do.
And, that's not all.
In 2009, it took the Fed a year to print 35 trillion.
In 2020, it took the Fed less than a month to print 35 trillion.
Breaking the record again!
Not only that, but the Fed also privately changed the collateral for printing money.
Prior to 2008, the Fed's primary collateral was U.S. bonds.
For every dollar of money printed, the Fed buys one dollar of Treasuries.
This is equivalent to using the credit endorsement of the United States**.
But after 2008, the Fed's collateral was replaced by a Treasury + mortgage-backed ** combination (MBS) model.
As a result, the credit of the dollar is greatly reduced.
And, that crazy money printing in 2020,The Fed has bought a large number of bonds rated "junk".
It can be said that the face is gone.
Other countries have worked hard for hundreds of years to accumulate a little bit of money.
The results are not as fast as the United States printing money directly.
How does this balance make other countries feel balanced?
So, since then, everyone has seen the true face of the Fed.
In addition, such a huge amount of money printing has brought about huge inflation.
The consequences will be borne by the whole world.
This confirms the words of former US Treasury Secretary John Connally:
"The dollar is our currency, but it's your problem. ”
As a result, the world's major economies have begun to seek "de-dollarization".
The hegemony of the dollar has gradually lost the support of the people.
Moreover, the economic crisis of '08 and '20 has exposed some problems in the US economy itself.
Everyone is starting to find outThe United States is not as strong as it seems
However, the United States will not sit idly by and watch the decline of hegemony.
So he began to play off-board tricks.
For example, the situation in the Middle East has been ignited, geopolitical crises have been detonated, and from time to time they have come to our side to raise the fire.
Actually, it's all forCreate a crisis, so let'sThe dollar repatriated, doneNext harvest
This is the root cause of the conflict created by the United States throughout the world.
In the midst of this great change unseen in a century, what we need to do is to maintain a good strategic focus.
strategically defying the enemy, tactically valuing the enemy".
At the same time, work hard to develop yourself and make yourself stronger.
Only in this way will we be able to accomplish our great cause of rejuvenation as soon as possible.
I'm Yao Sen,If you like my article, welcome to follow.
This article was first published in ***Yaosen Miscellaneous Talks
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