On the screens of Wall Street, numbers flicker and curves undulate, everything seems as usual, filled with the scent of money.
However, beneath this seemingly calm facade, a sense of unease is spreading.
The U.S. stock market, once a wild and unruly behemoth, now behaves like a startled deer, violently shaking at the slightest provocation.
On August 2nd, the Dow Jones Industrial Average plummeted by over 400 points at one point during the session, eventually closing down by 2.06%, marking the largest single-day drop of the year, causing countless investors to tremble with fear.
At the same time, those industries once seen as the pillars of the U.S. economy are now showing signs of fatigue.
The manufacturing PMI index fell to 46.4%, a new low since May 2020, indicating that this former "world's factory" is losing momentum.
Even more alarmingly, the total U.S. national debt has surpassed the 35 trillion dollar mark, equivalent to each American citizen bearing over 100,000 dollars in debt, and no one can predict when this time bomb will detonate.
Faced with such a severe situation, market expectations for a Federal Reserve rate cut are rising, like the last moment of tranquility before a storm.
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Will September become a pivotal turning point for the U.S. economy?
The hands of history seem to have turned back to that scene 26 years ago...
In 1994, to curb the inflation risks brought by an overheated economy, the Federal Reserve initiated an aggressive rate hike cycle, raising the federal funds rate from 3% to 6%, setting a record of 13 rate hikes in 13 months.
This drastic measure, while somewhat curbing inflation, also dealt a heavy blow to the U.S. economy.
The stock market plummeted, corporate investment shrank, unemployment rates climbed, and economic growth significantly slowed.
Faced with the deteriorating economic situation, the Federal Reserve was forced to adjust its strategy, starting a rate cut cycle in July 1995, and subsequently lowering rates three times in half a year, with a cumulative reduction of 75 basis points.
This move, like a strong stimulant, quickly reversed market expectations, triggering a retaliatory rebound in the stock and housing markets, and the U.S. economy also emerged from the trough, returning to the track of growth.
Behind this seemingly successful rate cut operation, however, there were hidden huge risks and hidden dangers.
In order to attract international capital backflow and support the dollar hegemony, the Federal Reserve did not hesitate to sacrifice the interests of emerging markets, opening Pandora's box.
At the end of 1994, the Mexican peso crisis erupted, becoming the fuse of the emerging market financial crisis.
Subsequently, this crisis quickly spread to Southeast Asia, Russia, and other places, evolving into a global financial storm.
In this storm, countless countries and people paid a heavy price.
Asian countries such as Thailand, Indonesia, and South Korea suffered severe economic damage, with significant currency devaluation, debt crisis, and social unrest.
Russia even fell into a prolonged economic recession, with the country almost collapsing.
And the instigator of all this was the rate cut policy adopted by the United States for its own interests.
The rate cut in the United States in 1995 was a "successful" gamble, but also the beginning of a "tragedy".
It brought a brief prosperity to the United States, but also sowed the seeds of crisis for the global economy.
The lessons of history tell us that the rate cut in the United States has never been a simple economic decision, and it often hides complex political and geopolitical strategic considerations behind it.
In 2024, the U.S. economy is once again at a crossroads, with the specter of inflation still hovering overhead, and the shadow of economic recession lingering, and the Federal Reserve is once again on the verge of a rate cut.
However, this time, can the United States still make a good plan?
Compared with 1995, the United States in 2024 faces a more complex domestic and international environment.
The inflationary pressure in the United States is still huge.
Affected by multiple factors such as supply chain bottlenecks, rising energy prices, and labor shortages, the U.S. CPI index has exceeded 5% for several consecutive months, far higher than the 2% target set by the Federal Reserve.
Coupled with sluggish domestic economic growth and increased recession risks.
Although the U.S. GDP growth rate in the second quarter reached 2.4%, it mainly relied on government spending and consumption, and corporate investment is still sluggish, with the manufacturing PMI index continuing to decline, indicating insufficient internal momentum of the U.S. economy.
Moreover, the United States is also facing the pressure of huge debt and fiscal deficits.
In response to the impact of the COVID-19 pandemic, the U.S. government has taken on a large amount of debt in recent years, leading to a surge in the total national debt to 35 trillion dollars, and the fiscal deficit remains high.
Faced with such a severe situation, there is a division within the Federal Reserve on whether to cut interest rates.
Some officials believe that the current inflationary pressure is still large, and cutting interest rates too early may lead to out-of-control inflation; while other officials believe that the U.S. economy has already shown signs of slowing down, and cutting interest rates can stimulate economic growth and avoid falling into a recession.
But no matter what decision the Federal Reserve finally makes, it cannot cover up a cruel fact: the U.S. economy has fallen into the quagmire of "stagflation", that is, the coexistence of economic stagnation and inflation.
In this situation, any policy choice can only be a lesser of two evils, and the negative impact it brings is likely to far exceed the United States' expectations.
What is even more alarming is that behind the rate cut in the United States, there may be more sinister intentions hidden.
Against the backdrop of the increasingly fierce competition between China and the United States, the United States does not rule out the possibility of using the dollar hegemony, guiding capital backflow through interest rate cuts, suppressing the economies of other countries, and thus maintaining its own hegemonic position.
Every turn of the U.S. economy's giant ship will set off huge waves in the global economy, and China, as the world's second-largest economy, naturally cannot stand aloof.
The expectation of the Federal Reserve's rate cut is both a challenge and an opportunity for China.
Once the Federal Reserve starts the rate cut cycle, the dollar is likely to weaken, and the yuan will face appreciation pressure.
This is undoubtedly a huge challenge for China's export enterprises.
The appreciation of the yuan means that the price competitiveness of Chinese goods in the international market will decrease, export orders will decrease, profit margins will be compressed, and even face the risk of being eliminated by overseas markets.
Moreover, as the dollar is the world's main reserve currency, the changes in capital flows brought about by its interest rate cuts will also have a huge impact on China's financial market.
International capital, in pursuit of higher returns, may withdraw from China and flow to developed countries such as the United States, which will intensify the fluctuations in China's capital market and even trigger financial risks.
However, there are opportunities in danger.
The rate cut in the United States will also provide a rare opportunity for the transformation and upgrading of China's economy.
The most basic point is that the appreciation of the yuan can force Chinese enterprises to transform and upgrade, get rid of the dependence on low-cost exports, and turn to high-quality development.
Enterprises can enhance their competitiveness and develop domestic and foreign markets through technological innovation, brand building, and improving product added value.
Moreover, the changes in capital flows brought about by the rate cut will also prompt China to accelerate the pace of reform and opening up of the financial market, improve the efficiency and internationalization level of the financial market, and attract more long-term capital to enter the Chinese market.
Against the background of the difficult situation of the U.S. economy, China can participate more actively in global economic governance, maintain the multilateral trade system, and promote the construction of a more just and reasonable new international economic order.
The rate cut by the Federal Reserve is like a stone thrown into the global economic pond, and the ripple effect it brings will last for a long time.
Faced with an uncertain future, we must not only keep a clear mind, recognize the situation, and predict risks, but also be confident, seize opportunities, and resolve challenges.