Dollar Harvesting Bankrupts

The Federal Reserve cannot raise interest rates again.

The recent three actions of the United States have completely exposed their bottom card, proving that after Japan's 9 trillion intervention in the foreign exchange market, the United States could no longer hold on, and it also declared that the nearly three-year dollar harvest was coming to an end.

This is the first failure of the dollar harvest in nearly a hundred years.

Three signals emerged a while ago, including the CEOs of the largest banks in the United States and the hawks within the Federal Reserve, who claimed that the Federal Reserve might raise interest rates to 8%, which scared the global currency market enough, and for a while, the exchange rates of various countries' currencies against the dollar hit new lows.

Except for the Chinese yuan, Asian currencies have all fallen into a continuous decline, but the interest rate hike is likely to be a smoke bomb released by the Federal Reserve.

Now there are three clear signals that show the Federal Reserve cannot raise interest rates again.

First, the hardliners within the Federal Reserve have said that raising interest rates to 8% is just to scare other countries, to scare those heavily indebted countries that are about to collapse.

The Federal Reserve does not want the whole world to know when they will start to cut interest rates, so that countries can form a united front, form a unified expectation to fight against the dollar, and further reduce the exchange rate of foreign currencies through the expectation of interest rate hikes, thereby harvesting other countries' core assets with expensive dollars.

The Federal Reserve also wants to use this to intimidate those countries that are about to be crushed by debt, and they can't wait any longer.

We will raise interest rates, so borrow dollars at high interest rates now, otherwise, the interest rates will be higher in the future.

In this way, the dollar has achieved a perfect harvest.

Once the dollar cuts interest rates in the future, the countries that have borrowed dollars now can only be frustrated, and the assets calculated in the local currencies of these countries are very cheap now, which is also the reason why Japan has been sold out by foreigners recently.

It seems to be very hot, but the bitterness behind it is only known by these Japanese businessmen and the Japanese people.

Japanese prices have risen, and real wages have declined for 23 consecutive months.

The yen has also depreciated by 8% against the Chinese yuan this year, and it is the right time for the Chinese yuan to bottom out in Japan.

Second, the Federal Reserve has announced that it will start to reduce the sale of U.S. Treasury bonds next month.

According to the data from the Federal Reserve, this data will be reduced from the current $60 billion per month to $25 billion.

This point just exposes the real intention of the United States and also indicates that the probability of the United States raising interest rates again is extremely small.

Why?

The purpose of the Federal Reserve selling U.S. Treasury bonds is usually to reduce the money supply and control inflation, which is related to the current inflation pressure in the United States, and the Federal Reserve adopts a combination of reducing U.S. debt, shrinking the balance sheet, and raising interest rates to suppress inflation.

This will increase market interest rates, making market funds more scarce, thereby suppressing economic growth and inflation.

The Federal Reserve may sell U.S. Treasury bonds to cope with fiscal deficits and inflation risks, to deal with the challenges of economic downturn and financial market instability.

For example, from March to May 2023, the Federal Reserve sold more than $600 billion in U.S. Treasury bonds, surpassing the record in 2008.

There is a certain liquidity risk in the global market, which may lead to the early appearance of the global liquidity turning point.

The Federal Reserve may sell U.S. Treasury bonds to cope with the liquidity risks in the global market.

Now the U.S. fiscal deficit is in a severe deficit, and even Butte has said that the fiscal deficit will be a big trouble for the United States.

In the case of the U.S. inflation continuing to rise, the Federal Reserve actually wants to reduce the intensity of selling U.S. bonds.

It can be seen that the trouble faced by the United States is more serious than inflation and fiscal deficits, which forces the Federal Reserve to go against the trend and reduce the sale of U.S. bonds.

This also indicates that the United States has started to let loose again.

This is a significant signal of the Federal Reserve's new round of QE and monetary easing policy.

The United States has gone through such a process many times in history, from tightening to easing.

The first step is to reduce the lock table, slow down the speed of the dollar flowing back to the United States globally, the second step is to completely stop selling U.S. bonds, and even start to release the expectation of buying, and completely end the dollar tide.

The last step is to start to release the signal of cutting interest rates.

This is the judgment of the three steps of the dollar cutting interest rates.

Finally, the Federal Reserve is also holding on, and it doesn't know when to cut interest rates.

After all, the Federal Reserve cutting interest rates is jointly decided by those dozen people in the Federal Reserve, and when the dot chart tends to cut interest rates.

Among these people, the U.S. government accounts for 30%, and the states and banks account for 60%.

They are also executives of the banks.

When the U.S. banks can't hold on, they feel the pain, and they will naturally cut interest rates.

First, let's talk about why the Federal Reserve canceled the interest rate hike at the beginning, and then let's talk about why they decided to reduce the scale of the shrinking balance sheet.

In fact, it's quite simple: that is, because under such high interest rates, and still implementing monetary tightening policies every day, the U.S. market is really about to collapse!

From last year to now, there have been five banks in the United States that have announced bankruptcy, and there are more banks in crisis.

A while ago, the U.S. Republican First Bank actually announced bankruptcy, becoming the first bank to go bankrupt in 2024.

Now it's great, the crisis of U.S. banks has come back again.

In fact, under such a high interest rate environment, U.S. banks simply can't live well.

The bank has always made money by borrowing short and buying long.

Borrow some short-term money from those who deposit money in the bank, and then buy those long-term products, such as U.S. Treasury bonds, so as to earn the interest rate difference in the middle.

The yield of U.S. one-month Treasury bonds is 100 basis points higher than that of ten-year Treasury bonds, and the interest rate of bonds is determined according to the latest one-year benchmark interest rate.

That is to say, if the United States raises interest rates to 6%, everyone will definitely deposit money in banks or buy short-term Treasury bonds, and banks will naturally have no profit.

Coupled with the decline of U.S. industry and the decline of commercial real estate, as long as everyone deposits money in banks, who will take risks to do manufacturing.

So you see that the banks that have had problems in the United States this year, New York Community Bank and Republican First Bank are banks with a larger proportion of commercial real estate loans.

It is very obvious that a bigger crisis has come to the United States, that is, the banking crisis caused by high interest rates, which is likely to evolve into a larger financial crisis.

If the U.S. banking industry has not faced systemic risks and the outbreak of a financial crisis, and can continue to harvest other countries, they will definitely hold on to the end.

Global financial stability and the dollar are like a spring, the stronger you are, the weaker it is, and the weaker it is, the stronger you are.

Recently, Japan spent 9 trillion yen to save the yen exchange rate, isn't it?

The dollar harvest completely bankrupted Japan, and in this round, Japan suffered heavy losses in the harvest by the United States.

Only the two large-scale rescue operations by the Bank of Japan cost 9 trillion yen, equivalent to more than 50 billion U.S. dollars in foreign exchange reserves, which are the wealth accumulated by the hard work of the Japanese people.

Despite this, the rescue operations of the Bank of Japan did not completely stop the decline of the yen.

However, despite the central bank's full rescue, the Japanese have always adhered to their own interests, and the exchange rate between the dollar and the yen has fluctuated violently, while the U.S. debt market has remained calm.

This indicates that the funds used by the Bank of Japan for the rescue mainly come from its liquid assets, such as U.S. cash and spot exchange, and the large amount of U.S. debt it holds has not been touched, ensuring the stability of the U.S. debt market, which is crucial to the United States.

The future fate of Japan depends on whether the United States allows it to sell U.S. debt.

Although Yellen's recent remarks and Japan's insistence indicate that Japan is still under the control of the United States.

This round of the yen index decline crisis seems to have passed, and the exchange rate has returned to the level of half a month ago, but the crisis is far from over, which stems from Japan's current financial policy and economic predicament.

The Bank of Japan has printed a large amount of banknotes, purchased government bonds and high-risk corporate bonds and other risky assets, and injected an excessive amount of yen into the market.

In theory, such a large-scale currency over-issuance should lead to a rapid devaluation of the yen, but the Bank of Japan uses foreign exchange reserves to repurchase the over-issued yen in order to maintain exchange rate stability.

Therefore, the Bank of Japan issues yen on one hand and repurchases yen on the other hand to achieve exchange rate stability.

In the past, the key to Japan's ability to maintain this strategy was that as a major global industrial country and a country with a trade surplus, it could obtain a large amount of foreign exchange by exporting industrial products to buy yen.

However, the situation has changed now.

On the one hand, China's industrial upgrading and South Korean competition have squeezed Japan's export market and reduced foreign exchange income.

On the other hand, the unstable international situation has led to rising prices of energy and resources, coupled with the devaluation of the yen.

As a country highly dependent on imports of food, energy, and resources, Japan's import costs have risen sharply.

The decline in export profits and the rise in import costs have led to Japan's continuous trade deficit, and the foreign exchange reserves of the Bank of Japan have gradually decreased, unable to continue the past operation mode, and the trend of yen devaluation is difficult to curb.

Even with 8 trillion yen in foreign exchange reserves, if the structural problems cannot be solved, it is impossible to stop the losses brought about by the devaluation of the yen.

Although Japan has not directly admitted to intervening in the foreign exchange market, the Federal Reserve has released data, and the United States and Japan have not publicized it, which also verifies their double standards.

Many times before, the United States and Japan have included China as a "currency manipulator".

Now they are also manipulating the exchange rate, isn't that a slap in the face?

In fact, maintaining the stability of the national currency is a basic responsibility as a major country.

If China lets go of foreign exchange control, it will fall into the abyss like Brazil and Thailand, which were harvested by the United States.

The detailed numbers released by the Federal Reserve reveal that in the past week, the Bank of Japan seems to have adopted two measures to raise funds for itself, and then use it to support the yen exchange rate that is under great pressure.

First of all, the Bank of Japan can actually use a special financial tool called the "foreign reverse repurchase agreement".

As the name suggests, this thing actually gives the central banks of various countries an opportunity to deposit their idle overnight cash in the United States in exchange for a certain market interest rate return.

According to the data provided by the Federal Reserve, the total amount of funds held by their so-called "foreign reverse repurchase agreement" financing mechanism has decreased by about $8 billion from the previous week, directly breaking through the $36 billion mark.This is the first decline since the week of April 10th.

Furthermore, the Bank of Japan may have used a separately established cash account, which has also shrunk by approximately $17.8 billion.

Thus, it is highly likely that Japan's decision-makers have twice entered the foreign exchange market for intervention.

As the weakest performer against the US dollar among the top ten global major currencies this year, the Japanese yen naturally becomes the focus of everyone's attention.

In general, if we add up the total scale of the Bank of Japan's two interventions this week, it is truly astonishing, possibly reaching as high as 9 trillion yen.

To put it bluntly, this is Japan's hard-earned money, and it has become solid evidence of the US's exploitation of Japan.

So, can we conclude that this round of US exploitation has been declared "bankrupt"?

Considering Japan's perspective alone, perhaps the mere 9 trillion yen, equivalent to $60 billion, might still be too little.

However, if we combine this with the performance of the Federal Reserve I mentioned earlier, we can draw the conclusion that before the US announces a rate cut, the yen still faces the risk of further devaluation.

Whether these 9 trillion hard-earned yen can play a role depends on whether the US lets Japan off the hook.

To let Japan off the hook would mean that the history of US exploitation has come to an end.

What would a failure in US exploitation mean?

It would mean that the US dollar hegemony would gradually be dismantled, just as Musk said, the dollar will become worthless.

Over the past few decades of China's rapid development, Chinese goods have flowed to the global market, acting as a huge sponge absorbing the dollar bubble, allowing the US's over-issued currency to be consumed by the world.

Not only does the US not appreciate China now, but it also demands decoupling and breaking the supply chain with China.

With so many dollars naturally having nowhere to go, returning to the US would lead to inflation.

The inflation in Japan, Europe, and even South America and Africa is related to this.

Because while the dollar is over-issued, the currencies of these countries or regions are mostly issued pegged to the dollar.

The US, due to its own economic cycle, is forced to withdraw liquidity, causing the economic collapse of these countries.

China, due to its connection with the US, has also been affected.

Now Yellen asks for Chinese goods to rise in price but does not allow China to develop high-tech value-added products like chips, which is to make China continue to endorse the dollar and to keep China trapped in the middle-income country trap.

Naturally, China will not submit.

After so many rounds of competition, the US is also on the verge of collapse.

This is inevitable on the road to China's rise.

As long as our steps for economic development are not disrupted and we do our own things solidly, the dividends of a great power's rise will also follow!

Of course, with our large population, we also face challenges that other countries have not encountered.

With a little more patience, I believe that with the wisdom of the Chinese people, the Chinese nation will once again stand at the top of the world's nations!