The global market seems to be looking forward to a U.S. interest rate cut, as if once the U.S. decides to lower interest rates, all economic problems will be solved. However, as interest rate cut expectations increase, the market generally believes that the Federal Reserve may cut interest rates by 50 basis points this month. But should we really be happy about this? Can the structural problems of China's stock market and property market be solved? Will the global liquidity shortage ease?
In fact, U.S. interest rate cuts often mark the beginning of a deeper crisis. We can look for clues from historical data.
In 1980, the United States entered an interest rate hike cycle, pushing interest rates to 20%. Subsequently, interest rate cuts began in 1981, and a year later, the Latin American debt crisis broke out. In 1988, the United States entered an interest rate hike cycle again and began to cut interest rates a year later. What followed was the bursting of Japan's economic bubble and the disintegration of the Soviet Union. Interest rates were raised again in 1994 and lowered in 1995. Two years later, the Asian financial crisis swept the world, causing a major blow to Southeast Asia, South Korea, Hong Kong and other places.
The 1999 interest rate hike cycle was slightly different, with the crisis erupting before the rate cut. The dot-com bubble burst in 2000, followed by a rate cut in 2001. The interest rate hike cycle in 2004 ended after the interest rate cut in 2007. The subprime mortgage crisis broke out in the United States the following year, followed by the European debt crisis.
The most recent interest rate hike cycle lasted from 2015 to 2018. Although the world has not seen a major economic crisis, this does not mean that the economy is without problems. The United States delayed the outbreak of the crisis through large-scale monetary easing policies, which was similar to temporarily alleviating the condition of seriously ill patients, but did not really solve the underlying problem.
In 2022, the United States will once again start an unprecedented interest rate hike cycle, raising interest rates 11 times in a row, and has yet to cut interest rates. According to historical experience, the cycle of U.S. interest rate hikes and interest rate cuts is often accompanied by a global economic crisis. This time the situation may be more severe because the risks brought by the superposition of two interest rate hike cycles cannot be ignored.
So, where will this crisis break out? It is still unclear, but major global economies such as the United States, China, the European Union and Japan are facing potential risks. After years of economic stagnation, Japan and the European Union do not appear to be experiencing large-scale crises anytime soon. The real risks may come from two major economic bubbles - the US national debt crisis and China's real estate bubble. The U.S. national debt has exceeded 35 trillion U.S. dollars, and the U.S.'s fiscal situation is unsustainable and it relies on borrowing new money to pay off old ones. Once the US national debt crisis breaks out, the global economy will be in turmoil. China's real estate bubble poses systemic risks, and the collapse of the property market will have a devastating impact on the entire financial system.
The United States may try to delay its own crisis by squeezing China. Once China's property market collapses first, the United States can use this to cut interest rates to attract capital to return and alleviate its own difficulties. Therefore, China strives to maintain the stability of the property market to avoid larger-scale economic shocks.
Finally, we cannot ignore a simple logic: If the economy is in good shape, why do we need to cut interest rates? The rate cut itself signals challenges to the economy and could be the prelude to a new round of global economic crisis. $BTC $ETH $BNB
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