The test of the kidnapped Fed vs digital currency

"The speculative intelligence will definitely lose the wisdom of investment."

Article introduction:

1. Fed kidnapped by US stocks

2. The Fed’s interest rate cut is small, and there will be no way to face the crisis.

3. Once the crisis comes, funds will flock to gold and digital currencies.

Many of our readers have asked if the Fed’s possible rate cuts will affect the digital currency.

This is a very interesting topic.

In my past articles, I have written several times about the current situation in the US financial system, indicating that some potential risks are accelerating, such as the inversion of government bond interest rates and the continued fermentation of the stock market bubble…

Recently, the Fed’s very dovish attitude has attracted worldwide attention.

1. Fed kidnapped by US stocks

From the current situation, the possibility of the Fed cutting interest rates in the near future is growing. Although this is something that hasn't happened yet, if the Fed really cuts interest rates, it will bring fundamental changes to the world, and this change will be closely related to every digital currency holder.

In a recent speech by the Fed’s key officials and the president, the concerns about the sweater war may affect the US economy are clearly revealed, and the Fed will take corresponding measures if it affects the US economy.

The current Fed has been clearly kidnapped by the stock market. Whether the Fed raises interest rates seems to me to be almost focused on whether its policies can support the stock market.

The trend of US stocks is now extremely important to the US president. It is an important weight for Trump to win hearts. Next year's 2020 general election is coming soon. He hopes that the stock market will not be in a big mess before the election, otherwise it will seriously affect his re-election next year. Every time the US stocks fall a little longer or slightly larger, Trump will severely attack the Fed and even threaten to change.

Trump took office for nearly four years. Basically, everyone has seen that his style of work is his own. If it is not the US Constitution's restrictions on the president's power, I am afraid he has already replaced the Fed Chairman Powell.

So in this case, I can imagine how big the pressure on the Fed is, from the dovish statement at the beginning of the year, the possibility of raising interest rates is getting smaller and smaller, and now it is becoming more and more likely to raise interest rates. The fundamental shift in attitude indicates that the Fed is now involuntarily and there is not much policy independence.

2. The Fed’s interest rate cut is small, and there will be no way to face the crisis.

As of the time of writing, US stocks are still rising, and the Dow Jones index is only about 3% of its historical high. I have repeatedly said in previous articles that I think US stocks are very dangerous. I still think it is very dangerous now.

The difference in the investment market often lies in the more stubborn the market becomes more irrational. But stubbornness is also no match for market rules. The bursting of the bubble is inevitable. What is worse now is the bubble that pierces the US stocks in a seemingly inconspicuous "black swan" event. And once the bubble bursts, the Fed’s interest rate cut is almost a matter of course.

This time, the external environment of the Fed’s interest rate cuts is very different from the past. In the past, when the Fed started to cut interest rates, its interest rate was often between 5% and 6%, so the Fed had enough room to cut interest rates. This time, the current interest rate in the United States is only 2.25%~2.5%, and the space for interest rate cuts will be very small, which means that once the crisis comes, the measures the Fed can take will be extremely limited.

In the past, the Fed cut interest rates. Usually we only pay attention to inflation and the dollar's decline. We believe that the Fed has enough measures to deal with it, but these measures will have negative effects. In the next crisis, we will see that the Fed is very likely to fail to come up with effective policies to deal with the crisis. This means that the Fed will be powerless or extremely limited in its ability.

3. Once the crisis comes, funds will flock to gold and digital currencies.

Once the Fed can't cope, the US crisis spreads to other countries, and the measures that other countries can take to effectively resist the risk will be questioned. This fear and fear of the failure of financial policy will eventually spread to the whole world, so that funds will frantically escape all kinds of risk assets to find all possible safe havens.

So who will take the heavy responsibility? I think gold, silver and digital currency will be on the stage. And the digital currency will debut in the next crisis, accepting the test of all human beings for the first time.