After the Federal Reserve's interest rate cut, I've observed many domestic "elites" once again trumpeting the U.S. economy, as the rise in the U.S. stock market has become their latest gimmick.

However, no one ever mentions why the Federal Reserve decided to cut interest rates in the first place, or what risks a 50 basis point cut is meant to guard against.

What is the magnitude of the current financial risks in the United States?

When a financial crisis strikes, who will the smartest capitalists take advantage of?

With multiple banks facing bankruptcy, the current situation in the United States is that the dollar, U.S. Treasury bonds, and the stock market may all collapse.

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The Federal Reserve will pay the price for its previous mistakes in raising interest rates.

The essence of the Federal Reserve's rate cut is the tight liquidity within the United States, with the banking industry facing a large-scale shortage of unsettled cash flows under high interest rates.

According to the latest FDIC data, unrealized losses in U.S. banks have seen an unprecedented continuous increase.

The current scale of unrealized losses is approximately $512 billion, with significant losses for 40 consecutive months.

What are unrealized losses?

They are losses on paper, but since banks have not sold off U.S. Treasury bonds for settlement, they are still hoping for a chance to turn things around in the future.

This was also the main factor in the collapse of Silicon Valley Bank.

If the Federal Reserve does not urgently cut interest rates significantly, the scale of the next bank to fail may be even larger.

At present, Bank of America has the highest losses, with a loss of $1.139 billion as of now, but its capital is only $1.9 billion, with the loss ratio approaching 60%.

Wells Fargo ranks second, and JPMorgan Chase ranks third.

The current state of the U.S. banking industry can be seen from the next chart, where many U.S. banks have long been insolvent.

However, the United States can only keep it a secret, as doing otherwise would cause panic, leading to greater financial risks and a run on banks.

From the chart above, we can see that four banks have long been insolvent, and more than ten banks are on the brink of insolvency.

Precisely because of these reasons, the Federal Reserve announced a 50 basis point rate cut.

If it still cannot save the crisis between U.S. banks, it is not ruled out that the United States will cut interest rates by another 50 basis points in November.

However, U.S. Treasury bonds did not rise as expected after the rate cut, but the yield to maturity has been gradually expanding, which means that the crisis in the U.S. banking industry has not ended.

The current question is, who will pay for the financial crisis caused by U.S. interest rate hikes in the future?

Will the Chinese pay for the U.S. financial crisis?

Even in the face of a financial crisis, the smartest capitalists will not suffer losses, as the financial crisis from 2007 to 2009 has already shown.

On the surface, it seems that a group of capitalists have taken advantage of another group of capitalists, but is this the whole truth?

In fact, the 2008 financial crisis directly led to the evaporation of nearly $5 trillion in U.S. pension funds, real estate values, retirement benefits, savings, and debt, with 8 million people unemployed and 6 million people homeless.

We will find that due to the greed of capitalists, it is still ordinary people who pay the bill for the financial crisis.

The essence of finance is actually buying and selling, and the price of buying and selling determines the asset price.

However, I have found that the current financial circle in China, which is now a financial economy, is covering up for the Federal Reserve, saying that even if interest rates are lowered, U.S. capital will not flow back to China, and is still promoting U.S. stocks as the best investment market in the world.

Now buying U.S. Treasury bonds and enjoying high returns, on the surface, the yield on 10-year U.S. Treasury bonds is higher than that of 10-year Chinese government bonds.

But what is the real data?

After the Federal Reserve cut interest rates by 15 basis points on September 19, the yield on U.S. Treasury bonds actually increased, indicating that those who bought U.S. Treasury bonds before have sold them for cash.

So many people selling U.S. Treasury bonds and holding dollars, according to reason, the U.S. dollar index should rise, but it still broke through the low point to 100.21, only 0.21 away from breaking through the integer level of 100.

After the rate cut, only the U.S. stock market has risen beyond expectations, but this is even more abnormal.

Because when the Federal Reserve raised interest rates, the U.S. stock market did not fall, but kept setting new highs.

Since 2023, the market has been trading the expectation that the Federal Reserve will cut interest rates.

This speculation has lasted for a year and a half, and the Nasdaq index has risen by 70%.

At this time, many people can see that the U.S. stock market has entered a vicious circle, but many "elites" in China still believe that the United States will continue to rise under the interest rate cuts of the Federal Reserve.

I think this is exactly what the capitalists on Wall Street like to see, after all, they have eaten, and it is time for someone to pay the bill.

China cuts interest rates to cope with the Federal Reserve's interest rate cut, and after the Federal Reserve's interest rate cut, China also chose to cut interest rates slightly to cope with the pressure on the exchange rate of the yuan.

At 9 a.m. on September 24, the People's Bank of China reduced the interest rate of the 14-day reverse repo by 10 basis points.

Compared with the interest rate cut, the United States chose a large interest rate cut of 50 basis points, and China only reduced the interest rate of the 14-day reverse repo by only 10 basis points.

But this is in line with market expectations.

Today, the entire Asia-Pacific market has given positive support for the central bank's operation: A-shares have risen slightly, and the offshore yuan exchange rate has fallen slightly.

Many people do not understand why the central bank does not want the yuan to appreciate?

The main reason is that China's exchange rate greatly affects the profits of China's import and export enterprises.

China is at a critical moment of economic restructuring in recent years, and if the exchange rate remains stable, the profits of import and export enterprises will continue to grow stably.

China does not need to over-stimulate the economy by cutting interest rates to stimulate a certain industry, such as real estate.

Secondly, when the Federal Reserve raised interest rates in 2022, China did not follow the central banks abroad to raise interest rates.

In order to maintain the stability of China's economy, it has also slightly cut interest rates through interest rate mediation tools, so for China, unless the Federal Reserve reduces the dollar interest rate to below 3% in one step, there is no need for China to cut interest rates significantly.

But even so, the yuan is still facing the pressure of appreciation.

According to the latest data, the bank's foreign exchange settlement deficit has declined sharply in August, and the foreign exchange settlement deficit has turned positive in September.

A large amount of funds are flowing to China after the Federal Reserve cut interest rates.