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Dollar Tide Harvest Logic Currency War
This is a logical thought map about the U.S. dollar’s tidal harvest around the world, including U.S. dollar hegemony, why it targets China, currency wars, etc.
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Dollar Tide Harvest Logic Currency War
- One Hundred Years of Solitude Character Relationship Chart
One Hundred Years of Solitude is the masterpiece of Gabriel Garcia Marquez. Reading this book begins with making sense of the characters' relationships, which are centered on the Buendía family and tells the story of the family's prosperity and decline, internal relationships and political struggles, self-mixing and rebirth over the course of a hundred years.
- One Hundred Years of Solitude Character Relationship Chart
One Hundred Years of Solitude is the masterpiece of Gabriel Garcia Marquez. Reading this book begins with making sense of the characters' relationships, which are centered on the Buendía family and tells the story of the family's prosperity and decline, internal relationships and political struggles, self-mixing and rebirth over the course of a hundred years.
- Project Management Process Template
Project management is the process of applying specialized knowledge, skills, tools, and methods to project activities so that the project can achieve or exceed the set needs and expectations within the constraints of limited resources. This diagram provides a comprehensive overview of the 8 components of the project management process and can be used as a generic template for direct application.
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The dollar tide harvests the logic of the world
harvest cycle
=Printing money x plus or minus interest rates = Unlimited funds
underlying logic
1. Print money
Issue additional currency
Don’t worry about depreciation when shopping
Ending 1, default
Ending 2, low price repayment
Other countries take over high positions
Repay other countries at low prices
Why
First of all, currencies are liabilities of the central bank, and they must be acknowledged when issued.
Secondly, there must be assets/products corresponding to this part of the currency for the market to be convinced.
It used to be gold
later american credit
Later came oil, export commodity production capacity, and high technology (dominance of the global industrial chain)
Consumer countries: For example, the United States is the world's largest consumer country.
Producing countries: countries with developed manufacturing industries such as China, Germany, and Japan.
Resource countries: such as Russia, Middle East oil countries, and Latin American countries.
In this three-dimensional system, consuming countries have the highest status, followed by producing countries, and resource countries are the weakest. As the saying goes, rich people are the boss.
Stock and bond market values
Now add the trading currency itself and the military threat (because other factors are weak, more weight is needed)
Need to mobilize large-scale political and military force to support
middle east war
The Iraq War
libya war
Kosovo war
the Gulf War
The essence is to manipulate capital market prices, not to optimally allocate resources, create value for others in the financial industry, and not to earn service profits.
Japan’s Great Recession in the 1990s,
1994 Mexican financial crisis,
Southeast Asian financial crisis in 1997,
2008 U.S. subprime mortgage crisis
accompanied by other means
Kill the leader, the leader
Assassinating opposition opinion leaders,
Destroy important infrastructure,
Create public pressure and let people put pressure on the government
Bribing spies to control or prevent core technological progress
Suppressing important technologies and hindering globalization
...
2. Interest rate increase and decrease cycle
1. The US dollar tide: Cut interest rates - Raise asset prices - Shipments - Raise interest rates - Drop asset prices - Buy the bottom
2. Expansion of balance sheet, dollar outflow
"Rising tide" refers to the outflow of U.S. dollars due to the Federal Reserve's implementation of loose monetary policies and QE, purchasing goods from other parts of the world, causing its international expenditure to exceed its income, forming a current account deficit and supplying U.S. dollars to other countries. At this stage, the U.S. external economic pattern was characterized by a current account deficit.
The US Dollar Tide and Previous World Economic and Financial Crisis
A serious economic bubble appeared in Japan: both the stock market and the property market soared. With the recovery of the U.S. economy, the federal funds rate began to rise in 1988, and a large amount of funds returned to the United States from Japan, completing the tidal process of the U.S. dollar, which ultimately directly led to the bursting of the Japanese economic bubble and the long-term depression of the Japanese economy. Japan has since fallen into the "lost thirty years".
In 1991, the overall performance of the U.S. economy was weak, with its GDP growth rate as low as -1% year-on-year, and the inflation rate falling from a peak of 6% to 2%. In order to save the economy, the Federal Reserve lowered the federal funds target interest rate from 8.25% to 3.00% within 36 months, causing a large amount of capital to flow out of the United States, mainly to countries such as Mexico, Russia, and Southeast Asian emerging markets, resulting in economic prosperity and investment in these countries. The economic bubble is serious. Also with the recovery of the U.S. economy, the federal funds rate was raised in 1995, causing a large amount of capital to return to the United States. The dollar tide phenomenon recurred again, triggering the Mexican economic crisis, the Southeast Asian financial crisis, and the Russian financial crisis.
In 2000, the dot-com bubble burst and the U.S. economy began to decline. To prevent a further recession, the federal funds rate was lowered from 6.24% in 2000 to 1.35% in 2004. Persistently low interest rates led to massive inflows into the U.S. housing market, creating a series of low-credit mortgage-backed securities, collateralized debt obligations, and other subprime mortgage derivatives. In 2005, the U.S. federal funds rate began to rise, high real estate prices continued to fall, the mortgage derivatives capital chain broke, and the subprime mortgage crisis broke out, triggering a global financial tsunami.
Since 2009, in response to the impact of the subprime mortgage crisis on the United States, the United States has injected a large amount of liquidity into the market by implementing a zero interest rate benchmark and purchasing bonds. Although it has achieved 128 months of economic growth, a large amount of capital has also flowed out of the United States, leading to severe inflation around the world. The Great Recession in the United States and its balance sheet expansion measures triggered by the COVID-19 epidemic in 2019 are seen as a continuation of the Great Recession of 2007-2009. There are too many dollars flowing around the world, and the Federal Reserve’s balance sheet reduction measures in the past two years may occur at any time. triggering a new economic and financial crisis anywhere in the world.
3. Asset bubbles form in other countries
For other countries, the inflow of US dollars has led to the acceleration of credit expansion and investment. These investments have been mainly invested in the capital market and real estate market, causing stock and real estate prices to rise and forming asset bubbles.
4. Balance sheet reduction, dollar return
"Ebb tide" means that after other countries obtain U.S. dollars, they usually invest most of their foreign exchange reserves in the U.S. financial sector (such as U.S. Treasury bonds), and the U.S. dollars flow back to the United States from other countries. At this stage, the U.S.’s external economic structure was characterized by capital and financial account surpluses.
hard earned money
The first is to use exports or general commercial methods to make money back and eliminate the Fed's liabilities.
The other is to attract funds back for investment through industry/stock market and other investment methods. Although it is in the form of investment, the money also returns to the hands of Americans. The shares are not debts and do not need to be repaid.
The last one is to simply rely on raising interest rates to absorb the funds and turn them into government bonds or similar financial products. This part is still debt.
Get money without working
The most powerful thing is to use financial advantages to increase and decrease interest rates. The essence is to buy low and sell high, and repeatedly rely on speculation to cut leeks.
Result advantage
Financial capital is the largest way to make money, and can only be compared with the military industry and a few high-tech industries.
Therefore, capital will manipulate state theory to suppress new technologies that may break through abroad and companies that occupy large markets. Requiring relevant countries and companies to prevent cooperation with corresponding countries and companies and to cede company shares or technology, including bearing unreasonable fines.
With unlimited funds and complete financial control, it is easy to manipulate the market.
Throughout the cycle, the "long-term average" of asset prices and dollar totals can be maintained at a reasonable level, so it is logically sustainable.
Such a "reasonable" financial capital market needs the maintenance of the US military. If you don't open up the financial market and capital market, the aircraft carrier will wait for you; if you don't open the exchange rate, the aircraft carrier will wait for you; if you want to organize to fight against the bookmakers, the aircraft carrier will wait for you.
China has always refused to fully open its financial capital market because it has seen through the bankrupt nature of Wall Street and has sufficient military power to resist US imperialist armed intervention. In the final analysis, it is not about understanding rules, systems, and techniques, but military strength.
Wall Street's appetite is always getting bigger and bigger, to the point of killing the chicken to get the egg.
Logical method
First print a large amount of money and use these dollars to buy assets in various countries.
If interest rates are cut, a large amount of U.S. dollars will flow to the world. Because of the increase in currency issuance, the prices of these assets will inevitably rise.
Sell these assets, ship them at high prices, and exchange them for U.S. dollars.
Interest rates are raised, the U.S. dollar returns, markets in various countries lack liquidity, and asset prices fall/collapse.
Cut interest rates, and the US dollars are returning to buy assets from various countries, and they are buying low prices.
A complete cycle of "adding interest rates, reducing interest rates, buying and selling assets".
Gain with less work
Help other countries develop production, invest, export technology and management, release water to raise fish, and fatten pigs before eating them.
Other countries can better provide products to the United States, make a lot of money, and support the comprador class.
Providing products to the United States can also make a lot of money, support the comprador class, and use a fraction of the profits to raise agents and losers in various countries, and cooperate to better harvest the masses.
5. Asset bubbles burst and economic and financial crises broke out
If the country's financial system is imperfect, its financial market is underdeveloped, and its macroeconomic policies are not in place, there will be capital outflows, rising interest rates, bursting of asset bubbles, and an economic and financial crisis.
6. Big capital in the United States doesn’t care about small capital in the country.
In the case of an overheated economy, an increase in interest rates will cause asset prices that were already at high levels to fall sharply. When domestic supervision of financial institutions, especially shadow banking, is imperfect, a large amount of funds in the capital market will be lost, leading to the bankruptcy of financial institutions, the collapse of companies, and the outbreak of crises. The subprime mortgage crisis of 2008 is clear evidence. In their own words, these bankrupt banks are rubbish, poorly managed small banks, small consortiums, and small rubbish.
7. Direction. Zhou Xiaochuan, former governor of the People's Bank of China, pointed out: "Rebuilding a new reserve currency with a stable valuation basis and accepted by all countries may be a goal that can only be achieved in the long term. The establishment of the international monetary unit envisioned by Keynes is even more important for mankind. A bold vision requires extraordinary foresight and courage from politicians in all countries.”
3. Strong liquidity (financial closed loop)
U.S. Treasury bonds and U.S. stocks are actually very important tools. For individuals and small countries, if they earn more dollars, they can buy things directly. But for big countries, the dollar surplus has nowhere to go, and the high-tech products and patents they really want to buy are banned. So I can only buy U.S. bonds and U.S. stocks to maintain value. This is equivalent to a semi-forced withdrawal of U.S. dollars. Although it does not have to be repaid, the interest rate is very low, and it is completely controlled by the United States. Therefore, the United States is trying to take advantage of other countries.
Global commodity transactions are traded in U.S. dollars
result
In the half-century-long high-consumption model, Americans spend as much as they want, and people all over the world pay the bill
A false paradise for immigrants, attracting a large number of high-quality immigrants
Cutting edge technology
Highly sophisticated talents
Immigration of wealthy people (property transfer)
Americans make a big profit, other producing countries make a small profit, and resource countries get the leftovers.
Wealth chain (miniature)
This can be seen from the profit distribution of Apple’s industry chain.
For each iPhone, Apple accounts for 58.5% of its profits, companies from South Korea, Japan and other countries account for about 10% of the profits, and Chinese companies only account for 2% of the profits.
In the Apple industry chain, Samsung, which makes the most money besides Apple, has a foreign shareholding ratio of as high as 56%. This is actually an international company controlled by Koreans, but more than half of the money it makes goes to Wall Street.
Apple's own ownership structure is also controlled by Wall Street.
The final result is that as one of the most profitable companies in the world, most of the money Apple actually makes goes to Wall Street.
This is actually a microcosm of the profit distribution of the global industrial chain in the past few decades.
Why target China?
In the past ten years, the reason why the world has not experienced hyperinflation is because China has assumed the role of the world's factory and exported a large number of high-quality and low-priced goods to the world through its low labor value.
Because of the existence of China, the world's factory, the world was able to print money like crazy without triggering hyperinflation.
After harvesting the Four Tigers, the production country moved to China. When the United States wanted to harvest China, it found that the Chinese laborer suddenly mounted a horse and became as tall as itself.
What scares the Americans even more is that the Chinese labor force has become disobedient and is trying to snatch the sheep-driving whip (RMB internationalization) in its hands.
Once China is allowed to complete its economic transformation, the global industrial chain led by the United States will fall apart.
Not content with just doing hard work, China began to prepare for economic transformation in 2015. So they launched a frantic attack on the Chinese labor force.
Therefore, we must be patriotic. Without a country, there is no family. Without a family, there is no you and me. Only when the motherland is strong can the people not be bullied by external powers.