The devaluation of RMB has become a hot topic, which has to mention China's interest rate cut and the Federal Reserve's interest rate increase. On the surface, the United States and western countries choose to raise interest rates to curb inflation, so why is there inflation or even stagflation? Everything stems from their industrialization and manufacturing industry, which is indispensable for a country but requires a lot of manpower. In the eyes of developed countries, it creates little value, so that the per capita income of their employees engaged in these things is not high, so they moved their manufacturing industry to Japan and South Korea many years ago, and then moved to China, and now they have all moved to Southeast Asia. The proportion of domestic manufacturing in the United States is very small, so the number of products made in the United States is limited, domestic products are in short supply, and the prices of a large number of related commodities are rising. This brings inflation. Not only does excessive currency issuance bring inflation, but also insufficient supply will bring inflation under the condition of constant demand. Due to the shortage of domestic products, a large number of foreign goods must be imported, which will affect the manufacturing industry in the United States. The American government imposes high tariffs on imported goods to achieve trade protection, which in turn pushes up prices and intensifies inflation. Or because of industrialization and manufacturing, these industries need a large number of employees, but once abandoned, it means that a large number of people are unemployed, and the total income of a country is greatly reduced, resulting in insufficient purchasing power. For a long time, people in the United States and western countries have relied on debt consumption, which cannot grow indefinitely, and soon reached the bottleneck, which is also the reason why their economic development tends to stagnate. Inflation and economic stagnation are stagflation. In recent years, the United States and western countries have been trying to solve this problem, but the effect is obviously not good.

It seems that the United States raises interest rates to curb inflation, but it is not (they also know that inflation is difficult to control). Otherwise, why print money and release water while raising interest rates? It is purely to raise the exchange rate of the US dollar, let the world's dollars quickly return to the United States, and prepare for the next round of harvesting the world. When the dollar cuts interest rates, people are more willing to increase loan investment. Because the United States has been manufacturing for many years, with this money, they can buy assets overseas (many countries can shop directly in dollars) to earn foreign exchange. Originally, the total amount of goods and money in a country should be corresponding, but the dollars flowing overseas are printed out of thin air, and going overseas will only aggravate inflation in that country. After the US dollar raised interest rates, the US dollars flowing overseas returned to the Bank of America through exchange, which is conducive to the next round of interest rate reduction loan business.

By the way, there are several factors that make a country's currency exchange rate rise: long-term sustained economic growth, more foreign exchange, selling foreign exchange to buy domestic currency, long-term low inflation rate, export > import, fiscal revenue > fiscal expenditure (of course, the actual situation is that all countries can't make ends meet). These are all methods to improve the exchange rate of local currency without side effects, but they are not immediate and need long-term sustained economic development. Seeing that the United States raised interest rates, other countries also chose to raise interest rates, otherwise their currencies would depreciate. Although raising interest rates has quick effect on raising the exchange rate, the disadvantages of raising interest rates are too obvious. Due to the increasing interest and debt pressure after raising interest rates, corporate loans are more likely to go bankrupt and increase unemployment. Raising interest rates will increase the cost of debt repayment, thus reducing loans. The result is an economic downturn. Raising interest rates is not conducive to commodity exports, because it increases the cost of enterprises. Raising interest rates will affect the stock market (bank interest is much less risky than the stock market, and raising interest rates will make the stock market money flow into banks and cause the stock market to plummet). The United States has been harvesting the world by cutting interest rates and raising interest rates for many years, but it is a pity that this move is not working well today. Everyone knows that it will not be easily fooled. The United States wants to use dollars to buy other countries' assets overseas, but other countries try not to accept it. International commodity trade among non-US dollar countries has also reduced the use of US dollars. This dollar is simply printed out of thin air. If a large number of dollars printed out of thin air return to the United States, it will only lead to domestic inflation in the United States (already very serious). Even if you spend this dollar in America, you will buy less things than before.

In the past, a large number of cheap goods from China were exported to the United States, but now the exchange rates between the two countries have widened, and the prices of goods exported from China to the United States are lower than before. However, in order to protect related industries in the United States, the United States has to impose high tariffs at the same time. As a result, on the one hand, it has indeed restrained imported goods from seizing the American market, on the other hand, it has increased inflation. Even if the United States still imposes high tariffs on China's goods during the period of high inflation, it can prove that the United States does not attach too much importance to reducing inflation, and their purpose is to reduce American imports.

During the epidemic, the United States placed a large number of orders for many enterprises in China, which China basically refused to accept. Their purpose is nothing more than to let our cheap goods reduce inflation in the United States and let people without savings in the United States get all kinds of goods at lower prices. Our country has accepted the order to recover the depreciated dollar and will continue to depreciate in the future. Can you understand this little trick?

In order to raise the dollar exchange rate (to facilitate the next harvest), the United States keeps raising interest rates. Many countries are worried about the decline of their currencies and raise interest rates. In order to promote the economy, China keeps cutting interest rates, which is the reason for RMB depreciation. China's CPI is almost the lowest in the world, and it is almost zero in 2022 and the first half of 2023. There is no inflation risk at all (of course, it is not deflation as some people say), so we need to cut interest rates to promote the economy. Interest rate reduction means that the loan interest rate and deposit interest rate fall at the same time. Of course, the loan interest rate will always be higher than the deposit interest rate, so that banks can make profits. The loan interest rate has dropped, because less interest will lead more people to borrow money to buy a house and invest, which will increase the employment rate of entity enterprises in society. However, due to people's poor expectations for the future, even if interest rates are lowered, there are few lenders. China originally printed a lot of money, but because the per capita loan money has been in the financial system, it has not flowed into the market to promote the economy, and CPI has not been raised (202 1 2022 2023). When the deposit interest rate falls, people's willingness to deposit will also decrease, and they will spend more money to boost the economy. Although falling interest rates will lower the RMB exchange rate, there is no way. Domestic priority should be given to economic issues. The advantages of cutting interest rates outweigh the disadvantages. After all, the benefits of China's economic development outweigh the disadvantages of cutting interest rates. For example, the decrease of the total export trade, in turn, the decrease of RMB exchange rate will make it cheaper to sell goods exported to other countries in other countries' currencies, and people will increase their purchases of China goods, thus making up for the loss of unit price of export goods in total. In addition, after the RMB exchange rate drops, foreign debts borrowed by China enterprises need more RMB to repay. Because of the rising exchange rate of the US dollar, many investors who hold US dollars in China will leave China and put them back in American banks, which will affect our economy to some extent. Moreover, the increase of the exchange rate of the US dollar can also reduce the international payment ratio of other countries' currencies, especially RMB. Who will do international trade with a doomed currency instead of the dollar? The above is related to the financial war between China and the United States, so I won't talk about it in this article. Of course, the disadvantages of raising interest rates are very clear in China, which will lead to the closure of a large number of enterprises or at least a large number of layoffs, and then banks will close down and the stock market will plummet. Due to the increase in loan interest rates, many enterprises are unable to repay their loans and have to go bankrupt. Even if enterprises that are not bankrupt have to lay off employees because they have to pay more fees, banks can't recover the money they lent at the beginning and have to go bankrupt. If the deposit interest rate goes up, no one will put money into the stock market. After all, the stock market is risky. Wouldn't it be better to put it in the bank and get interest without risk? Similarly, no one is speculating in real estate. As a result, the economy plummeted.

The decline of RMB exchange rate has also expanded the scale of China-US economy. China's GDP is converted into US dollars at today's exchange rate, while China's GDP has not increased or even decreased. The problem is that a country's GDP can only be calculated in its own currency, otherwise what's the point? Of course, this way of comparing GDP with exchange rate is purely theoretical and doesn't make much sense.