It's probably wise for Powell's Fed to keep maintaining the US's interest rates at a relatively high level relative to the rest of the world in the near future, to prevent non-trivial everything-bubble-popping-induced net capital outflow in the coming US as a result of massive unwinding of current dollar-Asian-currencies carry trades. - The resulting major problem of (much) higher federal-budget interest costs in the US's coming fiscal years that will have to be borne by the US's keep-deficit-spending federal government, whose non-stop Fiscal Dominance has to be maintained by the coming Trump administration to help prevent the US from realizing an eventual harder Main-Street economic landing (the Judgment Day) in the near future, can be alleviated by (i) Elon Musk's coming DOGE, in the shorter run, (ii) the eventual breaking-out of the 4th Industrial Revolution (however defined) mostly in the US alone, in the longer run. --- China may counteract by re-requiring all the Chinese exporters to surrender all or most of their coming UD-dollar-denominated FX earnings back to China's central bank, the PBOC, as in her good old days, to try to (i) prop up much bigger global net unwinding of the above carry trades in the foreseeable future, (ii) further increase the money supply in China's domestic financial ecosystem, and (iii) re-strengthen the current weakening Chinese yuan. (The more and more US-dollar reserves so collected by the PBOC in the coming years, if any, may no longer be used by China to buy say the US's newly-issued long-term government treasuries, perhaps unless merchant-bargaining-like Donald Trump is willing to much reduce his coming restrictive trade tariffs imposed on China.) - Today's Euro, like disinflationary China's yuan, is most probably also (massively) overvalued, and so the latest non-trivial re-strengthening of the US dollar (represented by the US's stronger and stronger DXY) can help reduce the coming mounting pressure of painful internal devaluation say in both Germany and China. ---
It's probably wise for Powell's Fed to keep maintaining the US's interest rates at a relatively high level relative to the rest of the world in the near future, to prevent non-trivial everything-bubble-popping-induced net capital outflow in the coming US as a result of massive unwinding of current dollar-Asian-currencies carry trades.
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The resulting major problem of (much) higher federal-budget interest costs in the US's coming fiscal years that will have to be borne by the US's keep-deficit-spending federal government, whose non-stop Fiscal Dominance has to be maintained by the coming Trump administration to help prevent the US from realizing an eventual harder Main-Street economic landing (the Judgment Day) in the near future, can be alleviated by
(i) Elon Musk's coming DOGE, in the shorter run,
(ii) the eventual breaking-out of the 4th Industrial Revolution (however defined) mostly in the US alone, in the longer run.
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China may counteract by re-requiring all the Chinese exporters to surrender all or most of their coming UD-dollar-denominated FX earnings back to China's central bank, the PBOC, as in her good old days, to try to
(i) prop up much bigger global net unwinding of the above carry trades in the foreseeable future,
(ii) further increase the money supply in China's domestic financial ecosystem, and
(iii) re-strengthen the current weakening Chinese yuan.
(The more and more US-dollar reserves so collected by the PBOC in the coming years, if any, may no longer be used by China to buy say the US's newly-issued long-term government treasuries, perhaps unless merchant-bargaining-like Donald Trump is willing to much reduce his coming restrictive trade tariffs imposed on China.)
-
Today's Euro, like disinflationary China's yuan, is most probably also (massively) overvalued, and so the latest non-trivial re-strengthening of the US dollar (represented by the US's stronger and stronger DXY) can help reduce the coming mounting pressure of painful internal devaluation say in both Germany and China.
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