Since I wrote about the exchange of governance strategies between China and the United States some time ago, many friends have been asking me whether the United States is about to enter a recessionary cycle.
The stream-saving version of the answer
Trump is trying to stage a fake recession to put extreme pressure on the Fed to lower interest rates, but accidentally screwing up is a real recession.
The underlying logic, is this
Trump and his Republican Party, as the voice of real economy interests, came into office with a huge political mission to drive down long-term US Treasury and Fed rates and lower the cost of financing for the real economy.
From an interest perspective, it is to adjust the ratio of the distribution of interests between financial groups and real groups, so that real groups can grab the vested interests of financial groups.
From the political point of view, is with the entity group to power, amend the financial group interest agent Biden in charge of the government period, all for the financial group services of the wrong policy, to let the financial group to serve the entity group.
However, subject to the system of separation of powers in the United States, Trump wants to achieve this goal, there are great difficulties.
Let’s compare China and the United States, which have swapped places, and look at the governing strategy of the forerunner, China, three years ago in 2022
Policy-wise, it has continuously lowered interest rates, guided down MLF and LPR, narrowed deposit and loan spreads, forced banks to expand credit, and corporate lending rates are the lowest in history since statistics have been kept.
Politically, financial regulation has been long-toothed and barbed, with sharp edges, knocking down a large number of tigers and flies from commercial banks and policy banks.
Financially, the People’s Bank of China was required to pay over 1 trillion dollars in surplus profits, and state-owned commercial banks were required to pay over 1 trillion dollars in profits.
Obviously, China’s rich and effective toolbox, Trump he is one can not use, Musk’s Doge juniors just rushed into the Treasury Department to seize power, was driven out in the name of national security. Forced Trump can only use the way to create recessionary expectations, forcing the independent Federal Reserve to cut interest rates, to the real economy to transfuse blood.
Don’t think that creating recessionary expectations is Trump playing small, his strategy is very plain and unassuming, and has always benefited from threats and blackmail, the
Threatening a trade war against the major economies of the world is forcing America’s trading partners to bleed
Threatening troop withdrawals from Japan, Korea, Taiwan and the Middle East is forcing America’s protection targets to bleed.
Threatening to cut off aid to Ukraine is forcing old money Europe to bleed.
This time he is threatening to create recession expectations, the same is to force the financial group bleeding, for the interests of the entity group Financial Group’s agent Fed hard to not cut interest rates, know the king will continue to create recession expectations to force the financial group to give in.
Of course, the financial group is not soft to pinch, will also manipulate the various forces to hit the king’s soft underbelly, to force the king to give in.
From the perspective of the ecological position, last night was bloodied Tesla, almost standing in the position of Huawei seven years ago, can not give in to know the king, in order to fight against the financial group that rules the world’s hegemony, also can only appeal to the rednecks to buy a Tesla, the end result is that Tesla’s global overseas market share has plummeted, and the U.S. market share and status has risen, taking Huawei’s playbook, becoming the glory of the Republican voters.
And according to Trump’s temperament, before the opponent completely compromised will certainly continue to impose blows, in the face of counterattacks will also be vindictive hit back, so before the Fed turned to accelerate the state of interest rate cuts, Trump has no incentive to restore the U.S. capital markets, the U.S. stock market will not recover the previous point.
This is because before completing the change of the house book, Trump will only engage in friendly targeted stimulus, all comprehensive revitalization of the market action, are in the Biden legacy of the distribution of benefits mechanism, for the financial group to transport benefits, rather than to their own entity interests.
The next plot, is Trump and his entity group and the Fed behind the financial group to carry out the cowardly game, each other through the capital market to the opponents of the extreme pressure, to see who in the recession before the hard landing concessions.
So, with reference to three years ago, this period of time in the U.S. capital markets must not be good either.
The economic system is very fragile, if both sides of the game do not make concessions, once the recession is expected to exceed a threshold, can not be pulled back, may drive the economy into a real recession, to the United States to a solid hard landing.
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