You have all been deceived. Central banks around the world are staging a great escape, and Powell's speech this Friday is likely to become the last straw that breaks the dollar's back.
Recently, many people have been betting heavily on a rate cut by the Fed in September, but the truth is often more brutal than it seems. When Europe, Japan, and Australia are rushing to cut rates, Powell suddenly finds himself as the last central bank head in the world who dares not cut rates. What kind of thrilling game lies behind this?
Just yesterday, the European Central Bank announced its third interest rate cut of the year, bringing rates down to a historic low. But do you know? This is not a sign of economic recovery, but rather a desperate struggle of the European economy that is in dire straits. Their manufacturing sector has shrunk for 18 consecutive months, and the energy crisis has rendered factories unable to operate. Apart from reckless money printing, there is no other way out.
Ironically, Japan is facing inflation of 3%, yet they dare not raise interest rates. Because they know full well that this inflation is entirely driven by rising prices of imported goods, and if they raise rates in line with the U.S., it could collapse their economy in an instant.
But the worst off is Australia. As the world's largest iron ore exporter, they have cut rates three times this year. Why? Because the slowdown in China's infrastructure investment has directly cut off their financial lifeline. These countries appear to be cutting rates to save their economies, but in reality, they are fleeing in panic under the knife of dollar hegemony. They know better than anyone that if they wait for the Fed to cut rates first, then hot money will escape wildly, and their currency will instantly become worthless.
So now, this wave of global rate cuts is essentially a monetary escape race to see who can run the fastest. At this moment, the Fed is caught in an unprecedented dilemma. On one hand, the Trump administration pressures for rate cuts daily, with some reports suggesting that the White House is interfering with economic data. On the other hand, U.S. core inflation made a surprising comeback in July, with giants like Nike and Walmart recently announcing price hikes.
If Powell dares to hint at cutting rates this Friday, inflation could give him a demonstration of what it means to take off from the ground. But if he continues to stubbornly resist cutting rates, the bubble in the U.S. stock market, inflated by expectations of rate cuts, could explode in an instant, leaving Wall Street in ruins.
But do you know what the most exciting part is? While the whole world is begging the Fed to cut rates, the People's Bank of China has taken a path that the West cannot understand at all. We neither followed suit in reckless monetary expansion nor stubbornly held off on rate cuts, but instead created precise control tools like technology innovation relending and special consumer pension instruments.
By the end of June, the M2 growth rate was controlled at 8.3%, far below the levels during the pandemic, but at the same time, 500 billion in consumer relending has stimulated a trillion-level domestic demand market. It's like acupuncture for the economy, with each needle precisely hitting key points, avoiding a flood of liquidity that creates bubbles while accurately activating economic vitality.
Now global capital is making choices with their feet. Buffett suddenly made a massive reduction in U.S. Treasury holdings last quarter and turned around to increase his position in Chinese real estate company bonds. Even more shocking is that the proportion of gold in China's foreign exchange reserves has quietly risen to an 18% historic high. What does this mean? When the dollar system begins to falter, we have long been prepared with a triple insurance of gold + industrial upgrading + domestic demand circulation.
Now you understand why the yuan can stand out amidst the chaos of global currencies, right? When it comes to industrial upgrading, we must mention that data that keeps the West awake at night: the tax deduction rate for R&D investment by Chinese companies has already increased to 120%. What does this mean? For every 100 yuan a company invests in R&D, the government subsidizes 20 yuan. Under such policy stimulation, key fields like semiconductors and biomedicine are breaking through bottleneck technologies at an unprecedented speed.
In contrast, the tech giants in the United States are busy with layoffs and stock buybacks, and no one is willing to make long-term investments. So back to the original question, how will Powell choose this Friday? In fact, no matter how he chooses, he has already lost. Choosing to cut rates is surrendering to inflation, while choosing not to cut rates is surrendering to the stock market; this is the vicious cycle leading to the demise of dollar hegemony.
But for us, this is precisely a once-in-a-century strategic opportunity. While Americans are still embroiled in debates over whether to cut rates, our new energy vehicles have already captured 60% of the global market, the fifth-generation fighter jets are beginning mass production, and quantum computers have already surpassed 1,000 quantum bits.
Finally, I leave everyone with a thought-provoking question: when the tide goes out, what kind of assets can truly withstand the test of time? Is it those U.S. tech stock bubbles inflated by rate cuts, or is it the Australian and Canadian dollars burdened by the resource curse? Perhaps the answer lies in the brightly lit factories of the Yangtze River Delta and the Pearl River Delta, in the mobile payments that every Chinese person uses daily, in the wave of industrial upgrading sweeping through this country.