The Fed’s first annual meeting is about to be announced. Looking at the reality of the United States, the Fed will continue to maintain the status quo will not make a difference, but the market is concerned about the time limit of the easing policy and quantitative policies The scale. This article from the micro-channel public number: Economic Observer (ID: eeo-com-cn) , Author: AERONAUTICAL (Independent economist of the China Institute of Foreign Exchange Investment, Special Researcher of the Economic Observer Institute of Macroeconomics), original title: “The Test of the New US Treasury Secretary Yellen: The Currency Is Difficult to Retreat and Finance Is Difficult to Advance”, the title picture comes from: Visual China

Guide

1. In the face of the US epidemic and social unrest, the basic policy of Biden’s New Deal is to restore public credibility and strengthen the stability of the domestic foundation. This is an important guarantee and support for the reputation of foreign dollars.

2. The depreciation of the U.S. dollar depends on the technically weighted currency of the U.S., and the weighted currencies are mainly European currencies. However, European politics, economy, policies, structural ills and contradictions are obvious. The U.S. dollar has different strategies and relationships. In the end, the depreciation of the U.S. dollar can be realized because of American intentions and needs.

3. The first annual meeting of the Fed is about to be announced. Looking at the reality in the United States, the Fed will continue to maintain the status quo will not make a difference, but the market is concerned about the time limit of the easing policy and the scale of the quantitative policy.

1. Making up for financial deficits is the focus

In the face of the US epidemic and social unrest, the basic policy of Biden’s New Deal is to restore public credibility and strengthen the stability of the domestic foundation. This is an important guarantee and support for the reputation of foreign dollars. However, financial assistance is an auxiliary means and supporting measures. It is hard to say that the US finances are unable to cooperate. The guidance of public opinion is mainly to inspire confidence, and the actual operation has no confidence and guarantee. Therefore, the market cannot be more clear that the U.S. Treasury bond yields have risen, and the speed and rhythm are closely related to fiscal demand and supplementation.

According to estimates, the U.S. fiscal deficit in the first three months of fiscal 2021 will continue, adding to the huge deficit in 2020Baggage, the current fiscal policy of the United States can be said to be a drop in the bucket. The most important thing in the future is to increase the promotion of treasury bonds in order to increase financial sources, borrowing paths and channels.

So the increase in U.S. Treasury yields is the timing and plan for the U.S. strategic layout. After all, the economic reality is stable, the value of U.S. assets is high, and the U.S. dollar coverage is widely monopolized. Rising U.S. Treasury yields will certainly win the favor and focus of the market. Because the market rate of return, security and liquidity have unique advantages compared to them. This is also the focus and core regulatory focus of the current and future markets, and market psychology will use this as the axis to start the game.

The epidemic blocked the country and bought Treasury bonds to protect capital, weak recession held Treasury bonds to hedge, and panic continued to increase its holdings of Treasury bonds to increase revenue. The United States raised the yield index in a timely manner based on a thorough understanding of facts and reality, which made it stimulating and driving. Obviously effective.

According to reports, within 12 months from November 2019, (before November 2020), overseas investors have accumulated The scale of U.S. stock purchases reached a record $316 billion, which directly stimulated overseas investors to buy long-term U.S. Treasury bonds, agency bonds, corporate bonds and stocks in November 2020.

In November 2020, the combined U.S. bond holdings of China and Japan surpassed the combined holdings of the United Kingdom, Ireland, Luxembourg, Brazil, Switzerland and Belgium, which ranked third to eighth. Among the top 10 countries and regions in terms of holding positions, China, Luxembourg, Belgium and the Cayman Islands will increase their holdings of US debt in November 2020.

Morgan predicts that the future rebound in the U.S. economy may drive the yield of 10-year U.S. Treasury bonds to double in 2021, and it will go straight to the 1% mark at the beginning of the year. The 10-year U.S. Treasury yields will rise rapidly and significantly. This is the future Important parameters and support for US finances. Therefore, market public opinion believes that Biden’s stimulus plan may be delayed until March to April, during which the corresponding process of treasury bond preparation is logical and results.

Second, currency depreciation is the core

The depreciation of the U.S. dollar at the end of the year is very unusual.


On the one hand, it deviates from economic performance. The U.S. economy is very clear, and its representativeness lies in the PMI comprehensiveIntegration, manufacturing, and services are all around 55 points, and even a sprint of 60 points is strong. The unemployment rate is digested quickly and significantly, the consumption index is basically stable, and the savings rate is super high. This is in line with the background and elements of the economic rebound index.

On the other hand, it deviates from the outside. The depreciation of the U.S. dollar depends on the technically weighted currencies of the U.S. dollar, and the European currencies of the weighted currencies are mainly European currencies. However, the structural ills and contradictions of European politics, economy, and policies are obvious. The difference is that the U.S. intends and needs to realize the depreciation of the dollar.

Because the depreciation of the U.S. dollar is conducive to asset purchase sentiment, debt reduction, and global holding coverage, the depreciation of the U.S. dollar is not only conducive to the use of the U.S. dollar, but also conducive to the U.S. dollar’s response to domestic and foreign demand. Therefore, the new Treasury Secretary Yellen’s strong dollar argument is not a strong dollar in terms of currency prices, but a strong dollar of credibility, mechanism, share, and coverage. The value of the dollar is a strong US national interest and strategic appeal.

The U.S. dollar price is inevitable and necessary for the choice of strategy and technology, because the U.S. dollar has gradually weakened from a high of 164 points after the 100-point positioning in 1973. The depreciation trend of multiple bands is very clear, as low as 70 points, but the United States The economy has grown stronger. The United States, which is unique in the new economy, is the most important escort of the dollar. It is precisely the 14% depreciation of the U.S. dollar in 2020 that will keep the U.S. economy recovering by 10%. The use of the exchange rate that the U.S. economy is not weak but strong is the core and key point.

According to the theory, currency devaluation causes prices to rise, stimulates production and drives exports. This is a means to counter the economic crisis and stimulate economic development. Currency control is an important means of macroeconomics, and the depreciation of the dollar is naturally also a means for the United States to fiscally balance the economy.

The U.S. government can control the depreciation of the U.S. dollar by cutting interest rates and RRR, printing banknotes, etc. The depreciation of the U.S. dollar stimulates market liquidity for the U.S. economy, and consumption and investment improve corporate viability and directly stimulate economic recovery. Currency devaluation may be conducive to the inflation cycle, because the U.S. dollar is an international settlement currency, and the U.S. dollar can adjust or pass on inflation risks through devaluation.

The most important thing is to reduce the risk of domestic debt, because all cycles in the United States are allocated by the Treasury, but the Fed is responsible for printing. After the Fed prints money, it will not give the U.S. Treasury in vain, but Borrowing from the Federal Reserve by the Treasury Department.

The monetary easing policy can not only continuously borrow from the Fed, but also reduce the cost of repayment in US dollars. The United States is a country with a credit system. You can print if you have no money, so depreciation can also reduce the risk of your country’s debt crisis. Therefore, the Fed has yet to print money, and the U.S. monetary policy is making money and constantly replenishing fiscal holes. Yellen’s appointment as the new Treasury Secretary as the former Fed Chairman makes it easy for us to discover the ingenuity and dedication of the U.S. currency experience to benchmark fiscal problems.

3. The financial support currency must be coordinated with

The first annual meeting of the Fed is about to be announced. Looking at the reality in the United States, the Fed will continue to maintain the status quo and will not make a difference, but the market is concerned about the time limit of the easing policy and the scale of the quantitative policy.

First, easing has no bottom line, and the Fed will not negative interest rates. Because the U.S. dollar’s ​​reputation is unique and the U.S. dollar interest rate is ambitious, negative interest rates are not suitable for the U.S. dollar, let alone the current U.S. dollar. Even though the new Treasury Secretary Yellen has recently hinted at negative interest rates, this is just a test or gesture. After all, the US money shortage model will not risk negative interest rates, and the cost of negative interest rates may not be affordable to the United States.

Second, quantify or extend, and the Fed will not ignore its finances. Therefore, the Fed will use the depreciation of the U.S. dollar to stimulate inflation, thereby achieving the long-term strategic purpose of the U.S. dollar interest rate—the return of interest rate hegemony. At the same time, it will use interest rates to drive the yield of Treasury bonds upward, thereby stimulating the scale of U.S. Treasury bonds to normalize financial sources. Looking at the relationship between U.S. finance and currency, interest rates and inflation, the United States’ long-term strategic objectives and combinations are the focus of observation.

The U.S. economic cycle and inflation above 2% are the basis for the upward trend of U.S. bond interest rates. Therefore, the Fed recently proposed a countermeasure to raise U.S. inflation to 2.5%~3%. This is to stimulate U.S. 10-year and 30-year Treasury bonds since the beginning of the year. Breaking the 1% upside background. This is because the US Congress has previously passed five rounds of fiscal stimulus bills, providing financial assistance to the household and business sectors of up to 900 billion US dollars.

The current 1.9 trillion yuan rescue plan has once again increased, which indicates that the 10-year yield of U.S. Treasury bonds is more likely to rise above 2%. The sooner the Fed tightens monetary policy in the future, the faster the 10-year yield of U.S. Treasury bonds will rise above 2%. . The U.S. Department of the Treasury released the bond issuance information. It tendered and issued 3 Treasury bonds totaling 79 billion US dollars, 105-day and 154-day cash management Treasury bills issued 25 billion US dollars and 30 billion US dollars, with a duration of 29 years and 10 months 30-year Treasury bonds 240 Billion U.S. dollars; the above-mentioned scale is the highest record for the renewal of bonds of the same maturity.

So, aboutThe announcement of the Fed’s first interest rate meeting will be difficult to change. Stability maintenance and easing will remain the main theme. The relatively loose monetary policy will strongly support the embarrassing and difficult fiscal policy situation. The United States urgently needs monetary policy to give fiscal space and support.

The Fed’s monetary policy will be inevitable in the first half of the year, while maintaining the relative stability of the U.S. dollar to cater to the fiscal is the main focus of coordination. The U.S. monetary policy-led depreciation will be difficult to sustain in the face of external European challenges and obstacles. It is inevitable.

However, there are still variables and risks in whether the depreciation of the U.S. dollar in 2021 is expected to happen. The U.S. dollar has problems and difficulties on its own initiative. How to adjust in the future may inevitably lead to abnormal performance, and the operation method and purpose will not change the world. As a result, the renminbi bears the brunt of being manipulated and hit, and the euro is facing threats and challenges. It is inevitable to disintegrate. The dollar dominance in the foreign exchange market will not change. Even strengthening adjustment flexibility and frequency of adjustment is worthy of vigilance and prevention.

This article is from WeChat official account:Economic Observer (ID: eeo-com-cn) , author: Tan Yaling (China Foreign Exchange investment Research Institute of independent economists, economic Observer special macroeconomic Research Institute researcher)