Family members
At this moment, the whole world is lying in the center of the storm. We are witnessing history again.
As for the situation, I think everyone should know it. Not long ago, the Federal Reserve officially announced that it would cut interest rates again after a lapse of two years, and the rate cut was 50 basis points. Starting at 2 a.m. today, the global order and global capital will usher in the biggest turning point in destiny since the financial crisis in 2008. Many people may not have noticed it yet. The fate of you and me will be redefined at this turning point. Many family members may not understand until now what the Federal Reserve’s large interest rate cut will affect the global economy and ordinary people. What does it mean? Don’t worry, don’t scroll away after reading this, because I will tell you once and for all how the large interest rate cut will change your and my destiny and how it will start a new round of global reshuffle.
In the past 50 years, the Federal Reserve has cut interest rates six times, and the timing of each cut coincided with the start of a new round of wealth reshuffle in China. Don't disbelieve it, you see, between 1981 and 1983, the Federal Reserve cut interest rates, and in those years, foreign investment in China skyrocketed at an annual growth rate of almost 30%, which directly gave birth to the first batch of Chinese billionaires after the reform and opening up.
Well, between 2000 and 2003, the Fed cut interest rates again. During the eight years, China's housing prices rose 20 times, and the A-share market rose nearly six times. In those years, many people said that they made a fortune overnight by buying houses and speculating in stocks. And the most bizarre thing is that according to incomplete statistics, the time when the richest people in at least 10 major economic provinces in China started their businesses coincided with the time when the Fed cut interest rates.
In the past 10 years, China's top billionaires (for example: Jack Ma, Pony Ma, Xu Jiayin, etc.) were born around the time when the Federal Reserve cut interest rates in 2000. This implies that when the Federal Reserve cuts interest rates, a large number of people in China will become new rich people. Not to mention that after the Federal Reserve cut interest rates in 2008, China's housing prices skyrocketed again. Even though the interest rate was cut during the epidemic, the A-share market rose by nearly 1,000 points. So you must be curious, why the interest rate of a country on the other side of the ocean directly determines our fate and wealth in the next 5 to 10 years?
Also, why does the US rate cut have such a big impact on us? And how can I seize the opportunities of this rate cut? Don't worry, let's talk about them one by one.
Let's first talk about the relationship between interest rate cuts and China. The U.S. dollar has been the world's largest currency since the last century. To date, about 59% of global trade has to be settled in U.S. dollars, which directly leads to the Federal Reserve and the United States being able to influence the world. When the Federal Reserve starts to cut interest rates, other countries must also follow suit, otherwise their financial systems will be destroyed by the United States.
Look at the Hong Kong Monetary Authority, which cut its base rate by 50 basis points.
I'll give you a simple calculation, and you'll understand.
Assume that before the rate cut, the exchange rate of the US dollar to the Japanese yen was 1 to 10, 1 US dollar could be exchanged for 10 Japanese yen. At this time, Japan sold a car to the United States and earned 300 US dollars, which would be 3,000 Japanese yen in Japanese yen. However, the Federal Reserve cut interest rates at this time, which would lead to the depreciation of the US dollar. Now, 1 US dollar can be exchanged for 8 Japanese yen. At this time, although Japan still earned 300 US dollars by selling a car to the United States, it would be 2,400 Japanese yen in Japanese yen, which means a loss of 600 Japanese yen. If Japan does not want to make a loss, it can only follow the United States to cut interest rates, so that the Japanese yen will also depreciate and return to the original exchange rate, so that it can continue to make money. So the same is true for major countries around the world. In order not to lose money in export trade, they have to follow the United States to cut interest rates, and the interest rate cut will also lead to a decline in the loan interest rates and deposit interest rates of various countries. So, after such a decline, what about the pressure on corporate loans? If it becomes smaller, people will be more willing to take out loans to expand and grow. Then the yield on residents' deposits will become lower, so they will be more willing to take out the money for consumption and investment, thus further stimulating the economy. This is why it is said that when the Federal Reserve cuts interest rates, China's wealth reshuffle will begin.
Well, after reading this, you may still say, “Oh, what you said makes sense, but it’s all nonsense. Just tell me directly, what opportunities will I have next?”
OK, no problem
I'll talk about them one by one. You have to know that in the past 50 years, every time the Federal Reserve cuts interest rates, it will bring explosive impacts to the world's four major assets: bonds, foreign exchange, stock markets and real estate markets. Let's start with bonds. Bonds are old actors in the era of interest rate cuts. Every time the Federal Reserve cuts interest rates, the yields of national debts of major countries are basically the same as the interest rates of the United States. As soon as the United States cuts interest rates, their prices begin to rise. In fact, the principle is relatively simple. Because the day when the Federal Reserve starts to cut interest rates, there will be a lot of capital that is worried, oh, is the US economy going to fail? Is it going to decline? Oh, that won't do, I have to run away quickly, so I took money out of the stock market. Oh, you said I took it out, but in this chaos, where should I put my money? Oh, so national debts with higher security and good yields have become everyone's first choice for this safe haven. Of course, as more people choose, the price of national debts will naturally rise. So this time is of course no exception. When the Federal Reserve just released the news of cutting interest rates, national debts of various countries began to rise desperately.
After talking about national debt, let's talk about the foreign exchange market. Normally, the Fed's interest rate cut will indeed lead to the depreciation of the US dollar and the appreciation of the RMB in the short term. But if you look at it from a long-term perspective, what is the decisive factor in whether a country's paintbrush is valuable? It still depends on its economic development. So whether the RMB can appreciate strongly this time depends on whether China's economy can grow against the trend during the Fed's interest rate cut cycle. If both can be achieved, international capital will come to invest in China in large quantities, thereby allowing the RMB to appreciate.
Finally, let's talk about the things that are closest to ordinary people: the stock market, commodities, and the real estate market. In fact, we can put these three into one category, because the rise or fall of these three brothers actually has a decisive factor, that is, expectations.
Let me give you a simple example: if the market is in a state of crisis, and people have no good expectations for life, what will happen to companies? They will lay off employees and reduce their scale, and people will save money and reduce consumption, right? No one dares to spend money, so the stock, commodity, and real estate markets will definitely fall.
And every time the Federal Reserve cut interest rates in history, it was precisely because of an economic crisis, such as the savings and loan crisis in the 1990s, the Internet bubble in 2000, the subprime mortgage crisis in 2008, and the most recent mask era, right? So it can be said that as long as you see the Americans cutting interest rates, it basically shows from the side that we are experiencing an economic crisis at this stage.
Well, the bad news is that it is expected, and the good news is that it is expected. So what should we do next? We have to rebound next. Let's think about it carefully. What is the purpose of the Fed's interest rate cut? Isn't it to stimulate the economy?
The interest rate cut allows companies to receive cheap money to engage in production. As long as companies start production, they have to hire people. This will increase everyone's income, complete economic recovery, and drive up the stock market and property market. So we can say that although we are at a low level now, what we may face next may be big positive lines. Now everyone understands, right?
In fact, wealth is a compensation for cognition. Whoever can recognize the underlying logic of the Federal Reserve will have the opportunity to complete class transition and benefit in the next round of welfare. Everyone should take a closer look at the policies of various countries and where the money of central banks of various countries has gone. Maybe that is where the golden key is hidden. Of course, if you are too lazy to think about these things, you can buy some government bonds with your money and deposit them in the bank to earn some interest. The most important thing is not to lose money when the price soars.
Do you see through it this time?