Trump's recent fiery rhetoric, though wrapped in political garb, unexpectedly exposes a harsh reality: the Federal Reserve stubbornly maintains high interest rates even as inflation appears to be retreating, effectively shackling the wealth accumulation path for ordinary citizens. Let us delve into the logic behind this:
The 'Dull Knife Cuts' of Interest Rates: Silent Wealth Erosion
Currently, mortgage rates in the U.S. hover above 7% (compared to the 3% low in 2021, it feels like a different era). Consider a $500,000 loan, with monthly payments surging from about $2,100 to over $3,300. This is no longer a simple 'discouragement' of home-buying intentions but a 'physical destruction' of the purchasing power of ordinary families. Trump's criticism of Federal Reserve Chairman Powell for 'acting too late' stems from the Fed's habitual 'rearview mirror decision-making' model—always waiting for clear signs of economic recession before shifting course. However, the lagging effects of policy often make such adjustments feel like closing the barn door after the horse has bolted, with heavy costs.
Beneath the Surface of 'Inflation Retreat': Under Currents Raging
Trump claims 'all signs indicate inflation is dead,' a conclusion that is somewhat biased. The recent drop in the CPI (Consumer Price Index) is largely due to falling energy prices. However, the stickier core inflation—especially in services (such as rent, healthcare, education)—remains robust, like lurking reefs. If rates are hastily cut now, it would be tantamount to 'adding fuel to the fire' for these still smoldering inflation embers. Meanwhile, the real estate sector is bearing the brunt in a high-interest environment: new home starts are suppressed due to high financing costs, builders face inventory backlogs, and the entire market is caught in a vicious cycle of 'unable to buy homes' and 'unable to build homes.'
The 'Liquidity Game' of Risk Assets: A Ray of Hope?
Historical data shows that during the past 7 rate cut cycles by the Federal Reserve, the performance of Bitcoin in the first half from rising rate cut expectations to actual cuts often significantly outperforms the Nasdaq index (with an average lead of about 40%). For example, during the 2019 rate cut cycle, Bitcoin surged by 210%, while the Nasdaq only increased by 35%. The underlying logic is clear: rising rate cut expectations → market anticipates improvement in dollar liquidity → expected decline in the denominator of risk asset valuation models (discount rate) → funds accelerate towards high-volatility, high-growth asset classes (like cryptocurrencies).
Ultimate Warning: The Art of 'Braking' on the Edge of a Cliff
Currently, Powell's situation is akin to a driver at the edge of a cliff, gripping the brakes tightly. Releasing too quickly (cutting rates too early or too aggressively) could send the vehicle hurtling off the cliff due to inertia (resurgence of inflation); waiting too long or hesitating (keeping interest rates high for too long) could directly lead to the economy plunging into an abyss (deep recession or even depression). How to accurately grasp the timing and intensity of policy shifts while ensuring inflation is truly under control, avoiding prolonged 'dull knife cuts' that could cause greater trauma, is an unprecedented challenge facing the Federal Reserve. The wealth dreams of ordinary people are tied to the delicate balance of this 'braking' action.
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