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Brothers and sisters, everyone is currently concerned about one issue: what impact would a Federal Reserve rate cut in September have on us? Will our 3,000 yuan salary increase? Can we afford cheaper houses? And what will be the trend of our stock investments? Compared to grand narratives, these are the issues that people care about the most.

Today, I will discuss these questions with you.

Let's first talk about the principle of the United States raising or lowering interest rates, which is the basic premise for understanding this matter.

As everyone knows, the US dollar is the world's currency. Countries around the globe need to use dollars to pay for oil, grain, iron ore, industrial goods, and so on. Other currencies, such as the euro, yen, and renminbi, may not be recognized in some countries. Precisely because of this, the whole world wants to keep some dollars on hand for emergencies, which has led the dollar to evolve from the national currency of the United States into a de facto global currency.

Understanding this will help you grasp the role of US interest rate hikes and cuts.

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Let me illustrate with a simple example.

Suppose you have 100,000 yuan in hand, and the country suddenly announces an interest rate hike. By depositing your money in a bank, you can gain a risk-free 5.5% return annually. Upon hearing this news, you would undoubtedly rush to deposit your money. However, since the renminbi is only the currency of China, it mainly attracts Chinese investors.

But the US dollar is different; it is the world's currency. So when the United States announces an interest rate hike to 5.5%, investors from all over the world will take their dollars to invest in the United States to make a profit, because a risk-free annualized 5.5% investment product is definitely a rare commodity globally.

When everyone takes their money to invest in the United States, it leads to a massive outflow of capital from our country. I know some people will say, isn't there capital control? How can these funds escape? I can only say that their methods are beyond your imagination, and I won't go into the specific operations; everyone understands.

Let's get back to the main topic. When there is a large-scale capital flight, the domestic real estate, stock market, and real economy will all be short of money. Our asset prices will fall, factories will close down, and the number of people facing unemployment and pay cuts will increase, leading to a series of consumption downgrade issues. This is why everyone has felt increasingly challenged since 2022. In March 2022, the United States began to raise interest rates, leading to a massive outflow of capital from our country and the real economy falling into difficulty. You can see this clearly by looking around at the closed restaurants and supermarkets; it is indeed very challenging.And this is one of the important objectives of the current round of interest rate hikes in the United States. On one hand, it suppresses inflation within their own country, and on the other hand, it triggers economic collapses in other nations.

I know some people will ask, what benefits does the United States gain by triggering economic collapses in other countries?

The answer is that when a country's economy collapses, it is often accompanied by a collapse in currency exchange rates and asset prices. For example, if a house in China is currently priced at 7 million yuan and the exchange rate of the US dollar to the Chinese yuan is 1:7, then an American would need to spend 1 million US dollars to buy this house. However, if our exchange rate and asset prices collapse, the price of the house could drop to 3.5 million yuan, and then the exchange rate of the US dollar to the Chinese yuan could become 1:14. In that case, an American would only need to spend 250,000 US dollars to buy the house, reducing the cost to a quarter.

Of course, on that day, what Americans would bottom-fish would definitely not be houses, but our oil fields, copper mines, uranium mines, nuclear power plants, state-owned assets, and so on. In short, they would harvest our national wealth at extremely low prices, making all of our citizens work for them.

Therefore, when the United States wants to trigger our economic collapse, we must not back down but must hold on until the Americans themselves can no longer persist.

I know some people will ask, why do you think the United States will not be able to hold on? The answer is simple because the scale of US national debt has now exceeded 35 trillion US dollars. If it maintains a high interest rate of 5.5%, that means the interest it pays in a year will account for one-third of the US fiscal budget. If this continues for a few more years, Americans may not even be able to afford the US military and may have to sell aircraft carriers to survive.

Moreover, the more interest rates are raised, the more people will deposit money in banks, leading to a decline in domestic consumption and profits of industrial enterprises in the United States. Over time, Americans may even rise up against their own government.

For these reasons, Fed Chairman Powell has repeatedly stated that interest rates will be lowered in September.

Having explained the principle of interest rate hikes, let's now look at the impact of interest rate cuts on us.

Since interest rate hikes lead to a global flow of US dollars back to the United States, causing a shortage of money in the market, then interest rate cuts must be about releasing a large amount of US dollars into the market circulation, creating an abundance of money in the market. This is a very simple principle.So once the Federal Reserve cuts interest rates, it will at least bring us four intuitive changes:

Firstly, the value of the Chinese yuan will appreciate because the increased issuance of dollars will lead to a devaluation of the dollar. When the yuan appreciates, it means that the cost of purchasing imported goods, oil, iron ore, and rice will decrease, which will somewhat reduce some of our living costs.

Secondly, if you plan to travel abroad or study overseas, the yuan will be more valuable, and the money in your hands will go further, which is beneficial for everyone's foreign travel.

Thirdly, the real economy will get some relief. Companies that were previously short of cash suddenly receive cash flow, which may lead to rehiring, pay raises, and expansion of production, overall benefiting the recovery of the employment situation.

Fourthly, the downward trend in real estate will be somewhat curbed. Housing prices in first and second-tier cities may slightly rise in the short term, but housing prices in smaller cities will continue to decline.

As for the stock market, which everyone is very concerned about, I can only say that it has long jumped out of the realm of economic laws. You don't need to think too much about it; just keep an eye on it.

Finally, it needs to be reminded that the Federal Reserve's interest rate cuts will not happen overnight, but will be carried out gradually over several years, just like interest rate hikes. So don't fantasize that your life will immediately improve as soon as the Federal Reserve cuts interest rates, because there will be a complete process of transmission, and the entire cycle may last 2-3 years. During this process, what we need to do is to identify the direction, wait for the right time, and seize the appropriate opportunities for financial investment.