1. Where did the Federal Reserve go wrong?

  1. 1. Not cutting interest rates when it should have, but instead dragging it out until problems arise

    In June, U.S. employment data has already declined, and inflation has dipped below 3%; cutting interest rates now could save the U.S. economy and attract global capital back to the U.S. to exploit—just like in October 2024, where foreign capital first bottomed out Chinese concept stocks and Hong Kong stocks, then sold them to Chinese retail investors after pushing prices up

    But Powell made two fatal mistakes:

    • Underrating the resilience of Chinese assets: China has maintained its core asset defense line using rare earth control (tightening export approvals) and nationalizing the power grid, making it impossible for foreign capital to break through

    • Ignoring the explosive power of Chinese technology: Cambricon's AI chips increased by 88% in a year, domestic large models are exported to Southeast Asia, northbound capital purchased 80 billion in the first half of the year, and foreign capital has shifted from 'short-term speculation' to 'long-term bets on China'

  2. 2. Engaging in political calculations, but ended up failing

    Powell hesitated to cut interest rates, partly fearing being accused of 'backing down to Trump' (at that time, Trump sent the Treasury Secretary to pressure him to cut by 150 basis points), and partly fantasizing about 'waiting for the Chinese housing market to collapse before bottom-fishing'

    So what happened? China activated consumption and technology using the 'internal circulation' strategy (for example, domestic tea brands opening stores in Europe and the U.S.), while the real estate sector made a lot of noise but little impact—it didn't explode at all

Secondly, it's too late to cut interest rates now, which is even more dangerous

  1. 1. 84% probability of interest rate cut in September, but the effect will be discounted

    The market is now betting that the Federal Reserve will certainly cut interest rates in September, but waiting until now to act is like a patient waiting until a fever reaches 40 degrees before taking antipyretics—

    • • The U.S. dollar weakens, and the RMB appreciates to 7.15: China imports iron ore at a lower cost, which actually improves manufacturing profits

    • The U.S. itself can't bear high interest rates: $36 trillion in national debt, and a 4.5% interest rate means owing $5 billion in interest every day upon waking up; the finances are about to be crushed

    • The longer the interest rate cut is delayed, the less effective it becomes: history shows that delaying a cut by one month requires an additional 25 basis points to achieve the same effect

  2. 2. If interest rates are not cut soon, global capital will 'flow to the East'

    • A-shares are too cheap: The Shenzen 300 index has a price-to-earnings ratio of only 14 times (the S&P 500 is 28 times), and the Hong Kong Hang Seng Technology Index has risen 20% this year

    • • Foreign capital votes with its feet: J.P. Morgan directly states 'Buy China when the dollar is being inflated', buying high-dividend banks (ICBC's dividend yield of 6% exceeds that of Treasuries) while also snapping up AI leaders (Cambricon's stock price has doubled this year)

Three, why do we say that 'the East rises while the West declines' is unstoppable?

  1. 1. Transfer of financial power: RMB settlements are encroaching on the dollar

    After Hong Kong cuts interest rates, Chinese concept stocks accelerate their return (Kuaishou, NIO have already started), Brazil pays for Russian oil in RMB, and the dollar settlement system has been breached.

  2. 2. Industry Counterattack: U.S. Sanctions Instead Help China Upgrade

    • U.S. bans sales of high-end GPUs, resulting in domestic computing chips (Cambricon, Haiguang) performance catching up with NVIDIA A100

    • China restricts rare earth exports, U.S. F-35 parts face supply chain disruptions; Tesla loses 20% revenue by not using CATL batteries

  3. 3. Capital relocation has become a foregone conclusion

    Foreign capital is now divided into two factions: conservative ones buy Moutai (stable cash flow), while aggressive ones pursue innovative drugs (Beigene's new drug listed in the U.S.), not afraid of U.S. interest rate hikes at all

Summary: Powell has nailed himself to the pillar of shame

Misjudgment 1: Thinking that dragging down China would yield benefits, but China has held on through rare earth control and technological independence

Misjudgment 2: For the sake of political face, stubbornly maintaining high interest rates, now U.S. debt interest is crushing the finances, and cutting interest rates still has to look at China's face

The immutable law for the next decade: Capital will only flow to profitable places—China's 1.4 billion market plus the advantages of the entire industrial chain are more attractive than the U.S.'s threats through interest rate hikes

Truth from Fuqi: The Federal Reserve always wants to choke others' necks with monetary policy, but China has built 'technological muscle + financial shield', and now it's the U.S. that can't catch its breath. This game proves that strength is not achieved by raising interest rates but by solidly competing in industries.

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