Everyone is betting whether Powell's speech at the Jackson Hole Economic Policy Symposium this Friday will release signals for interest rate cuts. This has been a 'time bomb' from the very beginning!
Those people on Wall Street create an 'illusion' with soaring stock indices, flowing capital, and the countdown to interest rate cuts: as long as Powell speaks, easing is a certainty! But the truth? The Federal Reserve now stands at a historical crossroads, with the 'ghost of inflation' tightly gripping its left hand, the precarious job market in its right hand, and stepping into the quagmire of 'political pressure'! Has inflation truly cooled down? Don't kid around!
The media shouts about CPI falling and PPI cooling every day, but that’s just a numbers game! Tariff policies are a ticking time bomb that can explode commodity prices at any time; companies hoarding goods drive up costs, and inflation can strike back at any moment! Powell says 'inflation is controllable', but he knows very well—this battle is far from over!
Is the job market cooling down or frozen? The July non-farm data is weak, and the unemployment rate has slightly risen. These numbers are being labeled as 'ironclad evidence for interest rate cuts'. But looking beyond the surface, 1.6 million workers have disappeared into the statistical shadows! Either they have completely stopped job hunting or are forced to take low-paying part-time jobs. While bosses are laying off workers, they simultaneously shout 'we can't find people'; the cracks in the labor market are much deeper than they appear!
Policy shift? Is it a proactive breakthrough or a sign of surrender? In 2022, Powell shouted 'as long as inflation exists, interest rates will not stop', but now he is worried about 'when to cut interest rates'! This is not the Federal Reserve suddenly softening; it's economic data pushing it into a corner! Shrinking corporate profits, plummeting consumer confidence, and an increasingly looming local debt crisis... Is cutting interest rates a gift? It's just a shot of adrenaline for an economy on the verge of collapse!
Ideally, the Federal Reserve should control inflation, protect employment, and stabilize finance simultaneously, but the reality is that these three have long fallen into the 'impossible triangle'—saving one requires sacrificing another! The seesaw between inflation and employment has already lost balance! Traditional economics says high inflation comes with low unemployment, but the U.S. is now directly overturning that theory: inflation has decreased, yet the unemployment rate has risen! What does this mean? Businesses would rather hire fewer people and produce less than take on the risk of rising costs!
Powell says he 'doesn't want the job market to cool down', but bosses have already voted with layoffs and hiring freezes! Policy lags and market expectations are in a tug-of-war, and the Federal Reserve's decisions are always chasing data: June's non-farm data was bad, so the market bets on a July interest rate cut; July's CPI rebounded, and expectations changed to wait-and-see... This 'data dependency' makes policy a reactionary measure! What's worse is that once market expectations fail, it can trigger a stampede! Just like after the Federal Reserve raised interest rates in 2022, the U.S. stock market plummeted by a thousand points!
The double-headed game between global central banks and Trump is even more stimulating! Trump publicly shouts 'the Federal Reserve must cut interest rates significantly', but Powell's independence is facing unprecedented challenges! If the Federal Reserve yields to political pressure and cuts rates quickly, it may replay the 'dumb spiral' of the 1970s; if it holds its ground, Trump will again use tariffs to exert pressure! This power game has no winners, only a more fragile global economy!
The Federal Reserve's dilemma is essentially a crisis of trust in the modern monetary system! Government debt has exceeded $37 trillion, corporate bond issuance rates have soared, and ordinary people's deposit rates are near zero... The script of printing money is becoming less effective! The marginal utility of monetary policy is decreasing: ten years ago, QE could stimulate the economy, but now it has become 'pushing a rope'—money poured into the market just doesn't flow into the real economy! Companies hoard cash without investing, and families are busy repaying debts instead of consuming... Powell's interest rate cuts are just hitting the pause button on a dead cycle!
The 'wolf is coming' effect in global capital markets, from the 2008 financial crisis to the 2020 pandemic, the Federal Reserve has repeatedly used easing to rescue the market, and the market has long formed a conditioned reflex: as long as Powell speaks, anything he says is good news! But this time is different—behind the market's euphoria, more and more people understand: easing can only solve immediate problems, not cure structural ailments!
How should ordinary people fight to protect their wealth? While the Federal Reserve struggles in a policy maze, ordinary people are being squeezed from three sides: deposit rates can’t keep up with inflation, wages aren’t rising, and asset prices are wildly fluctuating! The so-called 'benefit of interest rate cuts' could mean skyrocketing bills for those with mortgages and layoff risks for wage earners! The rules of this game have never been designed for ordinary people!
In the face of this grand drama, most people only care about 'which stocks to buy, whether to exchange for dollars', but the real question should be: if interest rate cuts can't save the economy, what else does the Federal Reserve have? With global central banks collectively easing, who will pay for the debt crisis? In this uncertainty, how can ordinary people protect their wealth? The answer is not in financial news headlines, but in understanding the essence of economic laws!
Every move of the Federal Reserve is a microcosm of the tides of the times! Understanding the direction of the tide is the only way not to be overwhelmed! Powell's speech hasn't started yet, but the curtain of the grand drama has already been drawn! Remember: the market always rewards rationality and punishes blind conformity! Stay clear-headed when everyone is celebrating; observe calmly when everyone is panicking! True wealth does not come from chasing highs and killing lows, but from deep insights that see through the essence!
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