Wealth

Fed Surrenders to Market, U.S. Dollar Faces Existential Crisis: Gold Makes a Triumphant Return

On December 14, the Federal Reserve formally surrendered to the market. Federal Reserve Chairman Powell, who has been trying to curb market expectations of interest rate cuts, stopped suppressing and opened a dovish turn, giving Wall Street an unexpected cut in interest rates at least three times next year, far exceeding market expectations. After the Federal Reserve announced that interest rates would remain unchanged in December, Chairman Powell said that the historic tightening cycle of U.S. monetary policy may have ended and discussions on interest rate cuts began to “enter the field of vision.”

Powell said that while policymakers did not want to rule out another rate hike, it was no longer a “basic scenario.”Believing interest rates may have peaked or are close to it, the latest dot-chart shows the Fed lowering its interest rate forecast for late 2023 to a level consistent with current rates, the strongest signal suggesting the end of the rate hike cycle.

He also revealed that at this meeting, the Fed discussed the timing of interest rate cuts.This makes the “new fed news agency” known as the agency lamented, two weeks, the fed attitude changed dramatically,”new debt king” gundlach commented that the fed may have to cut interest rates more than expected.

Affected by the news, the three major indexes of the U.S. stock market rose across the board, with the Dow hitting an all-time high. The offshore yuan rose nearly 600 points against the dollar and the onshore yuan closed at 7.1301 against the dollar, up 535 points from the previous trading day.Gold prices also rose sharply, continuing to climb, rising more than 2%, rising $48 a day to stand at $2040 an ounce.

At the same time, U.S. bond yields plummeted, hitting their lowest level since August at 4.02 per cent at the end of the day, down 17.6 basis points, one of the main reasons for the weakening of the dollar.According to the analysis, the downward trend of the US dollar is certain, the US dollar index hit a new low since November, and the Federal Reserve surrendered to the market, shifting from its fastest aggressive contraction in 40 years to easing policy, which adds certainty to the downward trend of the US dollar in the medium term.

More importantly, the use of the tight dollar cycle by the United States to harvest global markets and use the dollar as a tool to restrict other countries ‘economies and financial systems will continue to reduce the share of dollars and U.S. debt in global central bank reserves, which means that market forces are repricing the currency status and value prospects of the dollar, especially in the context of a possible recession in the future of the U.S. economy.

Then, Dario, founder of the world’s largest hedge fund company, said in a Dec.14 report that although the Fed is about to turn, looking ahead, the United States will face debt problems, and internal struggles in Congress are affecting foreign demand for U.S. bonds.The U.S. overprinting has dragged the dollar into crisis, and digital currencies linked to inflation or gold may be better options.At this critical moment, something unexpected happened at dollar base.

Building on the success of Arkansas and Tennessee in passing a sound currency proposal in November, Kansas signed a bill (HB2123) on December 13 that eliminates a transaction tax on gold to encourage its use as currency alongside the dollar, not just as collectibles.

This also means that 27 states in the United States have officially declared monetary independence from the US dollar, especially since November this year, four states in the United States have declared monetary independence almost at the same time. The speed of distrust of the US dollar has obviously accelerated, which is beyond Wall Street’s expectations. So far, 45 states in the United States have abolished all taxes on gold purchases.

This partly explains why more and more american consumers and some elites have been hoarding gold this year, doubting whether the dollar can continue to function as a long-term store of wealth. It is clear that the macro environment for the us economy is monetized debt.

Then, following Kansas, Texas authorities also urgently updated a latest draft showing that the state would create a digital currency anchored in gold, which would support the exchange of gold and exist in parallel with the US dollar, indicating that a digital currency backed by gold would become an alternative to the US dollar to recover the losses caused by the US debt crisis and continued high inflation to the current stable monetary system. This will obviously be seen as a “clear warning” to the existing dollar-dominated financial system and the spread of distrust of the dollar.

Therefore, from this point alone, when the United States did not have enough gold reserves to support its gold standard in August 1971, it suddenly announced to the world that it had unilaterally closed the window for direct exchange of US dollars for gold, and the anchor object of US dollar issuance changed from gold to US debt, which in itself indicated that the value and credit of US dollars were losing, which indicated that the United States had defaulted and that US dollars had a shelf life.

More deeply, these moves reflect the return of gold’s financial monetary attributes from the perspective of U.S. monetary history and affect the repricing of tens of trillions of dollars of U.S. Treasury bonds, which also needs readers to pay attention to, in order to express doubts about the credibility and safety of the dollar, U.S. Treasury bonds and the U.S. banking system.

Therefore, some analysts believe that BRICS countries may be preparing ahead of time with their European counterparts to restore the gold standard. They are about to launch a gold-backed trade settlement digital currency. Obviously, in this case, combined with the decentralization function of digital currency, the new currency may become a new global transaction settlement standard parallel to the US dollar.Against this background, at last, another member of the United States proposed or would revert to the gold standard.

A Georgia congressman named Marjorie Taylor Greene submitted a draft to Congress again on December 14, calling for the United States to return to the gold standard as soon as possible while central banks around the world are developing digital currencies anchored in gold, rather than relying on digital currency payment systems, making gold an anchor to replace US debt to determine the dollar, and withdrawing from the proposal of oil dollar carriers (HR4368).

And this is more like a lesson for the dollar, reflecting that another crisis of trust in the dollar is coming. This is the latest example provided by US officials, which is once again unexpected by Wall Street.

Malaysia, Turkey and Qatar followed suit by proposing to use a combination of their currencies, gold and even barter, and announced that they would welcome proposals from BRICS authorities, including Iran, to replace the dollar with digital currencies, which surprised Wall Street.

James Richards, a Wall Street veteran and author of Currency Wars, said: “The development of digital reserve currencies backed by gold or a basket of strong currencies may weaken the role of the US dollar in the international financial system, and the global trend of international payment settlement standards parallel to the US dollar has become unstoppable.”

At present, the latest development of the matter is that according to Iranian state television reported on December 14, Japan is currently negotiating with Iran’s four major banks on the use of digital currency settlement in energy and financial settlement transactions in addition to actively hoarding gold. At the same time, the Bank of Japan has also announced that it is uniting several banks to establish a cross-border settlement system to support digital currency payments, and advocates trading with Iran in the oil field around the US dollar. To circumvent dollar restrictions, increase financial options to increase Iranian oil supply to control rising inflation.

As part of this strategy, Japan and Iran have signed agreements in advance on cargo clearance, financial settlement and digital currency in preparation for de-dollarization in the oil settlement field, and Japan has also reduced US debt reserves by shifting monetary policy to tightening expectations, which shows that the US debt share of the ideal closed-loop system of “oil-dollar-US debt” operated for half a century is being weakened by Japan, the largest US creditor country. Japan is launching a new Pearl Harbor on the U.S. financial system.

In response, the OMFIF Advisory Committee, a world-renowned think tank, further explained in its latest report published on December 14 that creating a legal digital reserve currency that all global central banks can accept or support, combined with the hard currency properties of gold, is certainly the latest solution.

Then, the current growing trend of digital currency development, combined with the monetary attributes of gold, as analyzed by the European Central Bank, will soon lead to a new monetary order parallel to the US dollar, which may be the next Pearl Harbor event for the US dollar system, because gold is more stable than the US dollar, and the Federal Reserve is constantly expelling gold from the world monetary system. With the help of American economic strength and the new carrier of petrodollar, the monetary status of the current dollar was finally determined.

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