Trump and Biden engaged in 3 trillion and 1.9 trillion respectively in two years, adding up to nearly 5 trillion US dollars. This may be the largest water release in American history, and it is directly given to American citizens and enterprises in the form of money. Not surprisingly, the money will be spent at a very fast rate and flood from the United States to the world.
The US dollar is the world currency, and about 60% of the US dollar circulates outside its territory. I don't know how many times this 5 trillion will be amplified under the multiplier effect. This means that a large number of goods, assets and services from other countries will be bought by the United States, and the United States will get these goods for free, just by starting the printing press. The Fed not only prints a lot of money, but also maintains a monetary policy of zero interest rate, which directly drives the dollar to flow to countries with high interest rates and high yields.
The $5 trillion spilled by the US government has increased the government debt, adding up to the previous debt. It's a lot, but it's just a number. The U.S. government will try its best to use its status as a "superpower" to search for countries around the world, and various means emerge one after another. After a complicated process, the dollar will eventually be led back to the United States to reduce its debt scale, which is the Fed's "shrinking table".
In this cycle from "releasing water" to "shrinking table", the United States bought a large number of goods from other countries for its own consumption with dollars, and got a series of figures in foreign exchange accounts of other countries. Soon, this string of numbers may disappear or decrease and become the part of the United States that is shrunk on the table. So, for the United States, aren't all kinds of crises great opportunities?
A new round of harvesting world has begun.
China is a "factory of the world" and its trade volume with the United States is huge, so it will naturally become one of the "reservoirs" for the United States to "release water". Dollars keep flowing, and goods keep flowing to the United States. Because foreign exchange is controlled by the state, no matter how much the "factory" sells, the RMB will eventually return to the "factory", and the dollars obtained by the state will become foreign exchange reserves. In order to collect these dollars, the central bank needs to issue a corresponding amount of RMB, which is equivalent to the release of water in the United States. We also need to issue more money.
The current interest rate in China is much higher than that in the United States, and the essence of capital is profit-seeking. Large-scale water release in the United States superimposed on zero interest rate, making the cost of foreign investment of American enterprises with loans zero.
As long as these capitals enter emerging market countries with good growth and high returns, they will return after a circle and get the double benefits of investment and dollar depreciation. For example, if a dollar is transferred to a China enterprise for one year, it may earn 10% interest income, plus 5% depreciation income of the dollar against RMB, and finally take away 1 15% investment. If you invest in enterprises or the stock market in China, your income may be multiplied several times. Zero cost, high yield. To put it bluntly, it is to use domestic policy support to enter emerging markets to cut leeks. For the United States, we are a good trade and investment target. It is possible that the trend of "decoupling" between the two sides can stop here in the previous Sino-US trade war.
The United States is now determined to "release water", export dollars, dollar depreciation and global inflation. Isn't this a sharp weapon to harvest weapons from all over the world? I wonder how many victims will appear when the flood recedes.
If you water your fields, you will reap your fields!
The unprecedented "big water release" in American history has directly caused more currencies, not only the US dollar, but also other internationally accepted currencies, because many developed countries will follow the United States to release water. With the increase of the world's major currencies and foreign exchange reserves, RMB was forced to issue additional shares. Inflation will affect the whole world.
For our country, there are several general directions affected:
Causing exchange rate fluctuations, which in turn affects import and export enterprises.
Cause interest rate fluctuations, and then affect all-round economic entities and individuals.
Cause the fluctuation of commodity prices, and then affect the raw material industry, oil, rubber, non-ferrous metals, food and so on. And transmitted to the middle and lower reaches of enterprises.
The price of raw materials in the upstream rises, and the influence of price transmission is not only in the upstream and downstream industries, but also in all walks of life, so inflation and currency become hairy.
For us personally, under the expectation of inflation, we need to start from the direction of consumption, investment and preservation.
Large consumption needs to be advanced. We can do things well at home as soon as possible, such as buying a house, decorating, getting married and buying furniture. If you spend a lot of money in the morning and evening, spending it early may be much worse than spending it late.
Investing in the stock market is the first choice. The stock market is favorable in the early stage of inflation, and it is an important "reservoir" that can accommodate a large amount of capital inflows. The performance of listed companies with rising product prices will change greatly, supporting the stock price to rise. The recent strong pull-up of non-ferrous metal plate is a reaction. If the capital push leads to excessive speculation in some sectors, or the whole stock market is overheated, you need to be careful. Once the policy reduces inflation and bubbles, funds will flow out of the "reservoir". Investment in other markets, such as real estate and foreign exchange, is influenced by national policies. If you don't want to speculate, you'd better not go
Precious metals and collectibles can preserve value. Precious metals are mainly paper gold, and the collections are varied, all based on their own hobbies, not as investments, as long as they can preserve value and fight inflation. But you can't deposit in the bank and need to manage money.
Everyone, combined with their personal situation, should do a good job in coping with the general trend. Inflation is both a risk and an opportunity. Unfortunate people will suffer asset shrinkage, and lucky people will far exceed inflation. Think more about what to do, do what you are good at and be a prepared person. Looking back after many years, I won't regret it.