As soon as this news came out, many people fell into an uneasy mood. So four years later, why did the United States start raising interest rates? Do people who are not calm explain that raising interest rates will bring changes to life? What risks will we face because of the interest rate hike across the ocean?
First of all, let's briefly understand what it means to raise interest rates in the United States. Raising interest rates is not a monetary policy to normalize life, but a tight monetary policy to deal with the special economic situation. After raising interest rates, bank interest will increase accordingly, reducing the social money supply, and the money will appreciate.
In this case, the dollar will appreciate, the price of gold will fall, and the currencies of other countries will depreciate, so everyone is more willing to hold dollars. There are only a handful of interest rate hikes in the United States in history. Behind every interest rate hike, it means that the domestic economic situation in the United States has been hindered, but the background of this interest rate hike is different.
Recently, investors who hold American stocks can be said to be miserable, and American stocks have also fallen again and again. The United States chose to raise interest rates at this time because domestic inflation has reached a record high. In order to deal with various economic problems caused by the COVID-19 epidemic, the Federal Reserve adopted the same solution as in 2008 for the first time, and its credit assets soared by $5 trillion.
The results originally envisaged are the same as those in 2008. After domestic inflation, the economy will grow again. But it backfired. This time, inflation in the United States is particularly strong, reaching the highest level in 40 years. The real estate industry in the United States just confirmed the consequences of this inflation.
The United States is in a mess, and so are we. If the United States raises interest rates, the whole world will face the same risk, that is, the capital outflow caused by the return of dollars, which is inevitable for any country. As the value of the dollar rises, capital will naturally choose to flow out to obtain higher interest rates.
Secondly, we will also suffer from inflation, especially imported inflation. The most straightforward examples are oil and grain, which have happened in China, and the upward trend of oil prices at gas stations in recent days is the best evidence. In addition, the prices of imported food such as soybeans and corn in China have also increased.
In addition, in order to promote the smooth return of the US dollar after the US interest rate hike, geopolitical conflicts are also essential. To put it bluntly, in order to maximize the benefits of dollar return, there will inevitably be regional conflicts before raising interest rates, and the ongoing international disputes are the best example.
The United States raised interest rates to ease the decline of the US dollar index brought about by the epidemic. Before the international disputes began, the United States set fire everywhere, which created the regional conflicts that we all see now. After the interest rate hike, the US dollar index has gradually recovered to the level before the outbreak, but now it seems a little weak, so no one knows which country the United States will turn to next.
After we have a preliminary understanding of the risks brought by the US interest rate hike, let's talk about what harm these risks will bring to us.
1. Impact of capital outflow
In order to prevent a large number of capital outflows, many countries will participate in this interest rate hike in the United States and adopt the same method. Of course, national conditions vary from country to country. After joining blindly, the domestic real economy is likely to become a bubble.
The cost of not joining the WTO is that capital flows out in large quantities, intensively and rapidly, which consumes the country's foreign exchange reserves, devalues the currency and raises domestic prices. When the foreign exchange reserves are exhausted and the US interest rate hike is not over, the domestic stock market, bond market and foreign exchange market will face more than a collapse.
Fortunately, the storm of raising interest rates in the United States did not put too much pressure on China's economy. Because our country has begun to prevent from the source, that is, to slow down the capital outflow. If you want to export capital on a large scale, normal legal procedures are not allowed. In this way, we don't need to participate in raising interest rates, and our sufficient foreign exchange reserves are enough to cope with the impact of raising interest rates in the United States.
2. The harm caused by imported inflation
The direct harm to China is still obvious, and the international crude oil pricing is in the hands of the United States. Even if the domestic inflation in the United States is serious, international commodities such as oil and food will not be affected at all. On the contrary, it will raise the prices of such goods in other countries and realize the inflation rate all over the world.
In this case, inflation in the United States is negligible, and the value of the dollar after raising interest rates can even exceed the expected effect. Among them, the commodity that has the greatest influence on us is grain. Among the four major grain producers in the world, Cargill, Gibbon and ADM in the United States occupy three, and grain is the basic factor affecting all inflation. Once the United States began to attack grain, our domestic inflation began to appear immediately. At the same time, it gives greater possibility of capital outflow.
3. Geopolitical conflict is the most terrible.
If the United States aims at us as the next target, the biggest possible breakthrough is Taiwan Province Province, which is why we will face the risk of geopolitical conflict. With the example of the euro, the United States is likely to replicate this international dispute and create the next great return of the dollar.
The country adjacent to us has strong economic strength and good relations with the United States. I believe everyone has already thought of it, and that is Japan. In view of Japan's historical performance, it is hard for us not to imagine this matter, so the impact after the outbreak of regional conflicts is comprehensive.
To sum up, the impact of raising interest rates in the United States is not the biggest, but a series of measures taken by the United States to achieve the best effect of raising interest rates. This is the real risk we are facing, so we should pay more attention to the US interest rate hike instead of taking it lightly.
Finally, I want to ask you a question. Do you think raising interest rates in the United States will bring me the risk of believing? Welcome everyone to leave a message below.