Why has the Fed been slow to cut interest rates?

The debt has reached 35 trillion US dollars, and the annual interest expenditure alone is an astronomical figure! The Fed does not want to repeat the mistakes of the stagflation in the 1970s, or the Fed has not thought about it: once the interest rate is cut, the huge amount of excess US dollars will be released from the banking system, where should they be arranged?

If it were in the past, this matter would be easy to handle. Because after the interest rate cut, the excess US dollars can enter the trading of global commodities such as oil and natural gas, taking the opportunity to push up international energy prices and profit from it.

But now, due to the fact that major global energy countries such as Russia and Iran have almost 100% separated from the US dollar trading system; and the countries of the Belt and Road Initiative led by China have begun to use a large number of bilateral local currencies for settlement; the proportion of the US dollar in global energy transactions and major commodity settlements is getting lower and lower. As of the end of April, more than 30% of international oil transactions no longer use US dollars. In 2021, this figure is less than 8%.

Therefore, after the Fed cuts interest rates, the huge amount of excess US dollars will no longer be able to flow into international energy transactions and global trade settlements as recklessly as before; the excess US dollars will be held back in the United States, pushing up the inflation that has finally come down, and repeating the tragedy of the great stagflation in the United States in the 1970s.

Of course, the Fed and the US elite have also planned for the future of excess US dollars. In the past two years, the AI ​​revolution and new energy development that the United States has hyped up are the ways out planned by the US elite for excess US dollars.

Unfortunately, these ways out are far from quenching thirst. Since American AI cannot be combined with physical manufacturing (to improve productivity), the scale of funds that can be accommodated is still too limited.

Maybe the Fed is also thinking about where those dollars will go after the interest rate cut! #加密市场反弹 #美联储何时降息？