When everyone in the "investment community" is looking forward to the US interest rate cuts/QE to release liquidity, are you really ready to face inflation? Can the profits in your investment field outperform the "imported" inflation?
At present, the US dollar interest rate cut in September has become a nominally certain event. Although whether the interest rate will actually be cut is still debatable, due to the "Trump note" incident, the risk market has gradually formed expectations of interest rate cuts + Trump notes trading expectations.
Of course, due to the "popularization" of many bloggers before, everyone has realized that interest rate cuts are not directly "releasing money", especially in the early stage of interest rate cuts, when many people expect the Federal Reserve to release money, that is, QE. But let's be honest, are you really ready for the US QE? Let's look at "a certain moment" in history
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In 2007, the US subprime mortgage crisis occurred, and in 2008, the US financial tsunami occurred, which triggered the global economic crisis. Finally, the then Federal Reserve Chairman Ben Bernanke presided over the start of the US super quantitative easing policy. From December 2008 to October 2014, the Federal Reserve released a total of 3.9 trillion to nearly 4 trillion US dollars in liquidity. This resolved the US financial tsunami crisis and also allowed the US economy to rebound quickly afterwards. However, the crisis behind it was borne by the world, even industrial capital countries and third world countries.
At that stage, global economists had discussed together and some provided valid data showing that of the 4 trillion US dollars of additional liquidity, 60% flowed into the international bulk market. At the same time, oil prices quadrupled, grain prices doubled, and iron ore prices tripled. These resources are prone to price increases and are the core resources on which most of the world's industrial capital countries and third world countries rely for survival.
All countries engaged in industry, that is, industrial capital, and countries with livelihood needs (for food and energy) will face rising import prices after the international bulk price increase, and the import prices will enter the country and be passed on to consumers through the price of goods, thus causing inflation and even hyperinflation. If you still remember the price level of those years clearly, if you have been to Southeast Asia or many second and third world countries in those years, you should have a deep understanding of it.
For industrial capital countries or countries with strong livelihood needs, the price of national bulk commodities is the key lifeline, and the release of additional liquidity of the US dollar often makes many US dollar capital like to speculate on these key resources. At the same time, since key resources are necessities for many countries, there is no need to worry about no one taking over after raising the price. Buy low and sell high, and the first wave of tidal harvesting after the release of US dollars will be generated. The high profits generated will flow back to the United States, naturally causing the US economy to rebound rapidly in a V-shape.
The United States has transformed into a financial and economic country since the 1980s. The core of its national economy is finance, financial derivatives and many related service industries. Therefore, financial profits are the main factor in economic growth. The United States took this opportunity to quickly use monetary easing to complete global financial low-buy and high-sell investments, saving itself from the economic crisis.
At the same time, the inflation brought about by the US dollar is transmitted to all parts of the world, and the United States itself only needs to carry out certain regulatory functions to maintain inflation balance. Even if inflation is unbalanced, it does not matter, because the violent profits from investment can greatly increase government tax revenue, thereby bringing many benefits to the people, in other words, giving money to enhance people's purchasing power.
At that time, other countries except the United States that had the ability to regulate their economies were blindly worried about invasive domestic inflation, while those that did not have the ability to regulate experienced hyperinflation at home, and the people lived even harder.
So, as investors, we are always pursuing interest rate cuts and QE easing, but are we really ready for the inflation shock that comes with easing? Do we really have the confidence to make stable profits and outperform inflation in our investments?
If invasive inflation occurs, how can we avoid or beat inflation to the greatest extent possible?
(This question raises an argument, not an answer.)
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