Why did the Fed raise interest rates and my country cut interest rates?

The devaluation of the RMB has become a hot topic, which has to be mentioned in my country's interest rate cuts and the Federal Reserve's interest rate hikes. The United States and Western countries ostensibly raise interest rates to curb inflation, so why is their inflation even stagflation? Everything stems from their de-industrialization and de-manufacturing, which is indispensable to a country but requires a lot of manpower and the value created is not considered large in developed countries, so that the average income of their workers engaged in this is not high, so many years ago The manufacturing industry was moved to Japan and South Korea, then to my country, and now to Southeast Asia. The proportion of domestic manufacturing in the United States is extremely small. Therefore, regardless of the import of products from other countries, the number of products made in the United States is limited. Domestic products are in short supply, and the prices of a large number of related commodities have risen. This brings about inflation. Not only does excessive currency issuance cause inflation, but when demand is certain, insufficient supply will also cause inflation. Due to insufficient domestically produced products, a large amount of foreign goods must be imported. A large amount of imported goods will affect the small domestic manufacturing industry in the United States. The U.S. government imposes high tariffs on imported goods to achieve trade protection, which in turn will further Pushing up prices and exacerbating inflation. It is also due to de-industrialization and de-manufacturing. These industries are not very profitable but require a large number of employees. Once this is abandoned, it means that a large number of people will be unemployed, and the total income of a country will be significantly reduced, resulting in insufficient purchasing power. For a long time, people in the United States and Western countries have relied on debt. Consumption and debt consumption cannot grow indefinitely and will soon reach a bottleneck. This is also the reason why their economic development tends to stagnate. Inflation and economic stagnation are both stagflation. In recent years, the United States and Western countries have been working hard to solve this problem, but the results are obviously not good.

It seems that the United States is raising interest rates to curb inflation, but it is not (they also know that inflation is not easy to control). Otherwise, why would they raise interest rates while printing money and releasing money? It is purely to increase the U.S. dollar exchange rate and to quickly return the world's U.S. dollars to the United States to prepare for the next round of harvesting the world. With the U.S. dollar cutting interest rates, people are more willing to increase loan investments. Since the U.S. has been de-manufacturing for many years, you can use this money to purchase assets overseas (many countries can buy directly with U.S. dollars) to earn foreign exchange. Originally, the total number of goods and currency in a country should correspond, but the dollars flowing overseas are printed out of thin air, and when they arrive overseas, they will only increase the country's inflation. After the U.S. dollar raises interest rates, the U.S. dollars flowing overseas will return to U.S. banks through exchange, which will facilitate the next round of interest rate reduction loan business.

Here are a few factors that increase a country's currency exchange rate: the economy continues to grow for a long time, it has more foreign exchange, sells foreign exchange to buy domestic currency, and the inflation rate remains at a low level for a long time. , export > import, fiscal revenue > fiscal expenditure (of course, the actual situation is that all countries have fiscal revenue exceeding their income). These are all ways to increase the national currency exchange rate without side effects, but the effect is not immediate and requires long-term continuous economic development of a country to achieve it. Seeing the United States raising interest rates, other countries have also chosen to raise interest rates, otherwise their currencies will depreciate. Although raising interest rates has a quick effect on improving the exchange rate, the disadvantages of raising interest rates are too obvious. After raising interest rates, corporate loans become more expensive and debt pressure increases, so they are more likely to cause bankruptcy and increase unemployment. Raising interest rates will increase debt repayment costs and reduce loans. The result is an economic downturn. Raising interest rates is not conducive to commodity exports because it increases corporate costs. Raising interest rates will affect the stock market (bank interest rates are much less risky than the stock market. Raising interest rates will cause stock market money to flow into banks, causing the stock market to plummet). The United States has been using this trick to harvest the world by lowering and raising interest rates for many years. Unfortunately, this trick no longer works today. Everyone understands and will not be easily fooled. The United States wants to use U.S. dollars to purchase assets of other countries overseas, and other countries will try their best not to accept them. International commodity trade among non-U.S. dollar countries has also reduced the use of U.S. dollars. This U.S. dollar is purely printed out of thin air. If a large number of U.S. dollars are printed out of thin air, Returning all the dollars to the United States will only lead to domestic inflation in the United States (which is already serious). Even if you take these dollars to consume in the United States, you will be able to buy less than before.

In the past, my country exported a large number of cheap goods to the United States. Now that the exchange rate between the two countries has increased, the prices of my country's exports to the United States are lower than before. However, in order to protect related industries in the United States, the United States has also imposed high tariffs. As a result, on the one hand, it has indeed inhibited imported goods from seizing the U.S. market, and on the other hand, it has aggravated inflation. Even if the United States still imposes high tariffs on Chinese goods during a period of high inflation, this proves that the United States does not attach much importance to reducing inflation. Their purpose is to reduce U.S. imports.

During the epidemic, the United States placed large orders for many Chinese companies, but my country basically refused to accept them. Their purpose is nothing more than to make our country's cheap goods reduce domestic inflation in the United States, so that people in the United States who have no savings can obtain various goods at lower prices. What our country receives after accepting the order has depreciated and will continue to depreciate in the future. Dollar. Can’t you understand this little trick?

The United States continues to raise interest rates in order to increase the exchange rate of the U.S. dollar (to allow the return of U.S. dollars to facilitate the next round of harvesting). Many countries are worried about the decline in the exchange rate of their own currencies and will also raise interest rates. In order to promote the economy, my country continues to lower interest rates. The reasons for the depreciation of the RMB. my country's CPI value is almost the lowest in the world. It will be almost close to 0 in the first half of 2022 and 2023. There is no risk of inflation at all (of course it is not what some people call deflation). Of course, interest rates must be cut to promote the economy. An interest rate cut means that loan interest rates and deposit interest rates fall at the same time. Of course, loan interest rates must always be higher than deposit interest rates, so that banks can make profits. When the loan interest rate drops, more people will take out loans to invest in buying houses because of the lower interest rates, which will lead to more employment in real enterprises in the society. However, because everyone’s expectations for the future are not very good, even if the interest rate is lowered, there will be very few borrowers. , our country originally printed a large amount of money, but because the loan currency per person has been carried in the financial system, it has not flowed into the market to promote the economy and the CPI has not increased (since 2021, 2022, and 2023, the CPI has been at a low level of less than 2% for several months. wandering). When the deposit interest rate drops, people's willingness to deposit will also decrease, and they will use more money for consumption, which will stimulate the economy in a two-pronged manner. Although the decline in interest rates will cause the RMB exchange rate to fall, there is no other way. Economic issues must be based on domestic priorities. Cutting interest rates will do more good than harm to our country. After all, the benefits of my country's economic development outweigh the harm of cutting interest rates. For example, the disadvantage of a reduction in the total export trade is that the RMB exchange rate will fall, and goods exported to other countries will be cheaper when sold in other countries' currencies. People will increase their purchases of Chinese goods, which can make up for the unit price of export goods in terms of total volume. losses. In addition, Chinese enterprises have borrowed foreign debts. Because the RMB exchange rate has dropped, they need more RMB to convert and repay. Because the U.S. dollar exchange rate has risen, many investors holding U.S. dollars in our country will withdraw from China and deposit the U.S. dollars back to U.S. banks, which will in turn affect our country to some extent. Economy, and the increase in the U.S. dollar exchange rate can also reduce the international payment ratio of other countries' currencies, especially the RMB. Who would do international trade with a currency destined to depreciate instead of the U.S. dollar? The above involves the financial war between our country and the United States. This article will not go into details about the specific situation. Of course, our country is very clear about the disadvantages of raising interest rates. It will lead to the collapse of a large number of companies or at least a large number of layoffs, followed by bank closures and a sharp decline in the stock market. Because loan interest rates have increased, many companies cannot afford to repay their loans and have no choice but to go bankrupt. Even if non-bankrupt companies have to lay off employees because they need to pay more expenses, banks cannot recover the money they originally lent and have to go bankrupt. If the deposit interest rate increases, no one will invest their money in the stock market. After all, the stock market has risks. Wouldn't it be better to deposit it in a bank and get interest without risk? For the same reason, no one is speculating on real estate anymore. The result is a pummeling of the economy.

The decline in the RMB exchange rate has also expanded the scale of the Sino-US economies. Using today’s exchange rate to convert China’s GDP into US dollars, our country’s GDP has not grown much or even declined. The problem is that a country’s GDP can only be calculated according to its own country’s GDP. Monetary calculations, otherwise what's the point? Of course, this method of comparing GDP through exchange rates is purely theoretical and does not make much sense.