Dumping US Debt for Chinese Bonds Sparks 314-Point Yuan Surge

2024-05-27 31 Comments

The relationship between China and the United States is the backdrop of global relations, and the dollar tide is a means for the United States to harvest globally. It can be said that before China, the United States has almost never been defeated in its harvesting, but now the United States has encountered a real opponent. Moreover, even the Federal Reserve, which has always been tough on interest rate hikes, has recently turned. The interest rate hike cycle in the United States seems to have come to an end, and most importantly, the United States is about to lower interest rates?

We all know that raising interest rates is to collapse the economies of other countries, and how many countries have been collapsed today? Does the Federal Reserve's turn at this moment mean that the United States' interest rate hike has failed, and the Federal Reserve has "surrendered"? Is the scramble for Chinese bonds and the sharp rise in the yuan a sign that the financial war between China and the United States will end in the failure of the United States?

The Federal Reserve turns, and the yuan soars

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The dollar is a benefit for Americans, but a disaster for the world. The dollar tide has always proven this point. Now, the backlash of the dollar may have truly arrived.

Recently, in a meeting related to the Federal Reserve, Powell expressed a completely different view from before, that is, turning from a hawk to a dove. That is to say, the Federal Reserve has also started to consider the issue of lowering interest rates.

We all know that the previous Federal Reserve was quite tough, and its idea has always been to form an interest rate difference through interest rate hikes, allowing global dollars to flow back and ultimately explode some countries' debt problems, and finally the United States lowers interest rates to complete the harvest.

It can be said that since the dollar became the world's currency, the United States has rarely failed. The typical ones are the Latin American crisis and the 97 Southeast Asian crisis, which are all the United States' masterpieces, and even Japan's lost 30 years are all caused by the United States.

And today, the United States still wants to replicate everything from the past. So we have seen that since last year, the United States has experienced a rapid interest rate hike, hoping to be able to complete the dollar tide harvest very well. However, since this year, apart from hearing about problems in countries such as Sri Lanka, few countries have problems. At the same time, it is the United States that has blown up its own assets.

First, it was Silicon Valley Bank in the middle of the year, and then it was the so-called financial information recently released by the Federal Reserve. In the end, the Federal Reserve lost nearly 80 billion. It can be said that the United States wants to complete the harvest by damaging itself by 800 and injuring the enemy by 1000, which seems to be a bit difficult.Moreover, we are aware that the United States has consistently stated that their interest rate hikes are aimed at reducing inflation. However, recently, inflation in the U.S. has also subsided. In November, the U.S. CPI fell to 3.1%, which can be said to indicate that inflation in the U.S. is no longer high.

Thus, whether it is to reduce inflation or to reap gains, it seems to suggest that the Federal Reserve must lower interest rates. There are already media outlets on the other side predicting that if the Federal Reserve continues to raise interest rates or maintains them at high levels, nearly half of the future small and medium-sized banks in the U.S. will collapse.

We also observe that the Federal Reserve is now incurring losses, so one can imagine the immense pressure the U.S. is currently under. If interest rates are raised further, can the U.S. be certain that it is reaping gains from others rather than from itself?

We all know that the 2008 subprime mortgage crisis was a result of the U.S. attempting to reap gains from others through interest rate hikes, but ended up imploding itself. This time, despite raising interest rates to such high levels, the U.S. has not achieved its expected outcomes, and instead, its internal situation is creaking and groaning.

In contrast to the Federal Reserve's interest rate hikes, the Chinese yuan has seen a significant appreciation. The lowest point even reached around 7.1, which can be said to be the lowest point in recent times. Who could have imagined that just one or two months ago, we were desperately defending the high point of around 7.36, and some even said at the time that the yuan would depreciate to around 8.

However, in just a few months, the roles have reversed. The Federal Reserve has begun to lower interest rates, and the yuan has become the darling of the international market. What is even more infuriating for the Federal Reserve is that U.S. Treasury bonds are rarely sought after, while Chinese bonds have become the favorites in the overseas market.

It can be said that behind the interest rate hike game of the Federal Reserve, there is a global capital alignment and a choice made by countries around the world for the future. It can be said that the future has already arrived.

Accompanying the Federal Reserve's interest rate cuts will be the market's most difficult and coldest winter. Because we know that crises never erupt during interest rate hikes, but rather during interest rate cuts, which is also the last darkness before dawn.

The final showdown in the Sino-American financial war.If the past was characterized by the United States unilaterally reaping benefits, then the present is a contest between China and the United States. The U.S. desires a world in chaos, whereas we prefer a world of peace and stability, and the financial showdown will be a key aspect of the Sino-American rivalry.

We understand that the sharpest sickle of the United States is not its guns and bombs, but its financial hegemony. Over the past few decades, it has been almost invincible. According to economic cycles, the U.S. economy should have collapsed long ago, yet it still stands tall, primarily due to the financial hegemony it has established.

However, the current dollar hegemony has encountered an adversary, and that is us. Many may think that China is still weak in the financial sector and not on par with the United States. But what many may not have considered is that capital detests risk above all.

The strength of American finance lies in its ability to provide capital with guarantees of stability and security. Today, we can also offer these, and compared to the United States, we are more creditworthy.

This is why the United States has been creating chaos worldwide; its goal is to drive global capital to the U.S. However, we have given the world a second choice, so how will everyone choose? Moreover, we will not engage in the arbitrary freezing of other countries' capital.

Thus, we observe that although the Federal Reserve has been raising interest rates, the effectiveness has been significantly diminished. Compared to our interest rates, the U.S. rates are considerably higher, yet there are more buyers for Chinese bonds than for U.S. Treasury bonds, indicating that people are starting to vote with their feet.

Now that the Federal Reserve is beginning to pivot, it will only reduce the appeal of U.S. Treasury bonds. Will there be more people buying U.S. bonds in the future?

Furthermore, the United States is currently burdened with nearly $33.6 trillion in debt while raising interest rates. If the harvest fails and the U.S. initiates large-scale monetary easing, what awaits the U.S. may not be just 3.1% inflation.

Thus, this covert financial war between China and the United States has entered its second half, and it is time for China and the U.S. to engage in mutual exchanges. We see Moody's downgrading China's rating, and overseas institutions and individuals have also begun to increase their attacks on us.

Even Janet Yellen, who wants China to buy U.S. bonds, has started demanding that we open our doors wide to allow the U.S. to harvest. It can only be said that the United States has left no stone unturned.But for us, this may also be our last challenge, having withstood the pressure of American financial hegemony, what else does the United States have to offer?

So, in general, the Federal Reserve's interest rate cut not only heralds the arrival of spring, but also the coldest night before dawn. As long as everyone moves in the same direction as the country and gets through this winter, it will be a warm spring. Moreover, we have already come halfway, and as long as we persist, we will see the dawn.

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