U.S. Brewing Hurricane-Like Harvest Storm: Big Reckoning, $36T May Retreat
At present, the U.S. financial market is on the eve of a storm, amidst record-setting uncertainty.
The Federal Reserve has panic-lowered interest rates by 50 basis points, sending the strongest signal of a harvest cycle.
This indicates that the Federal Reserve has shifted from fighting inflation to preserving employment, implying the imminent recession of the U.S. economy.
This is why our team describes this move as the Federal Reserve initiating a dual harvest cycle.
This signal suggests that the Federal Reserve may have overdone it in its previous aggressive rate hikes, and the rising expectation of U.S. economic recession will also bring risks to the market.
By printing money to reduce real debt, the re-stimulated inflation and depreciation of the dollar in the future may devour debt assets, indirectly harvesting the wealth of investors.
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After the market fully digests the optimism brought by the Federal Reserve's rate cut, the high-value U.S. financial market may not be ruled out to experience another major liquidation, especially in the technology industry.
It is clear that the Federal Reserve is now ready to start selling off the huge financial bubble and soaring debt deficit risk accumulated since the subprime mortgage crisis.
In this regard, Jeffrey Gundlach, the founder of DoubleLine Capital and the new king of debt, said on September 21 that the U.S. economy has fallen into a recession, and the Federal Reserve has maintained high interest rates for too long.
Monetary policy is far behind the yield curve.
He urged the Federal Reserve to act quickly and bet on another rate cut of 50 basis points, a total reduction of 125 basis points by the end of the year.
If the Federal Reserve does not start a large-scale rate cut, the United States will face serious consequences.
Our financial research team has noticed that on September 22, the U.S. dollar Libor, which is more important than the Federal Reserve's rate cut expectation, has exceeded the high point of the 2008 financial tsunami in the United States to 5.30%, and has soared by 42.9% since last June.
As we reported last week, the cumulative interest on U.S. debt in the first 11 months of the 2024 fiscal year has exceeded $1 trillion, a historical high, and will reach $1.2 trillion for the whole year.
This indicates that the cost of U.S. debt borrowing has soared, making it more difficult for the U.S. federal government and companies to obtain low-cost funds.
Such a huge and soaring debt increases the risk of the United States ultimately being unable to repay the principal and interest of the debt, further weakening the role of the dollar as the cornerstone of the global financial order, and undermining the consensus of U.S. Treasury bonds as the anchor of world asset prices.
At the same time, it also weakens the Federal Reserve's ability to help the U.S. federal government finance, making the U.S. economy "borrow new to repay old, eat the morning food in the evening" in difficulty, and this is also one of the logics that the Federal Reserve may take a large-scale rate cut.
Subsequently, Wall Street prophet Peter Schiff further analyzed that the Federal Reserve will make a major policy mistake, and the return of quantitative easing will follow the rate cut, which will produce more debt and deficits, and push inflation to soar again, which will crush the dollar and U.S. debt.
This indicates that the United States has once again become a self-fulfilling prophecy of historical debt default and economic recession.
Combined with the historical experience of two technical defaults in the United States, under the background of the Federal Reserve issuing the latest harvest cycle signal, it will accelerate the speed of smart money turning, at least it may cause 36 trillion international funds to withdraw from the U.S. asset market in a few years.
Among them, it includes symbolic U.S. assets such as U.S. Treasury bonds, U.S. securities, the U.S. real estate market, and U.S. bank deposits.
For example, under the expectation that the Federal Reserve is about to press the flood beast-like printing press gate and cut interest rates sharply, the nearly $7 trillion of money funds in the U.S. banking system are also looking eastward to avoid losses in this hurricane-like U.S. wealth harvest cycle feast storm.
This indicates that Wall Street has heard the voice of the U.S. financial market bubble bursting under the expectation of U.S. economic recession, because once the Federal Reserve cuts interest rates by 50 basis points beyond expectation, it will send the strongest harvest cycle signal, and it will be considered that the Federal Reserve has officially admitted the fact of the U.S. recession, indicating that Wall Street's "buy expectation, sell fact" will be confirmed, and the U.S. financial market will be liquidated again, and it is the most dangerous time.
Because Wall Street believes that the Federal Reserve's rate cut action is too late, and it has made a mistake again.
Coupled with the hawkish interest rate hike expectation of the Bank of Japan, the harvest effect of trillions of yen carry trade on the U.S. financial market may have a "flood beast"-like tidal harvest effect on the U.S. financial market.
This kind of turning impact will promote the flow of funds from the U.S. and European markets, accelerate the sale of U.S. debt and stocks, and harvest the United States in reverse.
However, even if the Federal Reserve does not cut interest rates by 50 basis points in the interest rate meetings in November and December this year, the risk to the market is more uncontrollable, and it will liquidate the U.S. financial market even more, because historical data shows that after the Federal Reserve officially started the rate cut cycle, the performance of U.S. stocks, U.S. debt, and the dollar may mainly depend on the health of the U.S. economy.
In a report published on September 22, Goldman Sachs further warned the market that the current market pricing is more aggressive, there is a risk of expectation failure, which may have a negative impact on market sentiment and asset prices, and the subsequent rate cut pace may be slower than the market expects.
This indicates that if the Federal Reserve slows down the pace of rate cuts, the U.S. asset market, including U.S. stocks and U.S. debt, will usher in a long sale.
It is worth noting that the former U.S. Treasury Secretary Lawrence Summers said that the only thing he is worried about now is that people on Wall Street have no fear.
Because for Wall Street, this is the Federal Reserve issuing the latest harvest cycle tide signal, what kind of financial storm will be experienced in the future, no one can predict, and the next major adjustment of the U.S. financial market may be coming.
Up to now, U.S. debt has broken through the 35 trillion mark for the first time in history and is still expanding, indicating that the next recession that the United States will face may not be just a cyclical recession of the economy.
It is suggested that readers and friends should prepare in advance.
In this regard, Frank Holmes, the CEO of U.S.
Global Investors, warned U.S. investors in a report published on September 22, are you ready for these potential destructive U.S. asset price bubble economic storms?
He said that the United States is brewing a hurricane-like harvest storm, and investors need to be prepared for a larger-scale market turmoil.
These hurricane-like harvest storms also include the possibility of reverse harvest under the expectation of continuous interest rate hikes by the Bank of Japan, the possibility of a shutdown due to fiscal debt expenditure disagreements on October 1 this year, the chaos of the U.S. election, and the fierce debate on the huge differences in spending issues in the 2025 fiscal year by Congress, etc.
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