In order to maintain the hegemony of the dollar and protect the private property of capital and bankers from shrinking and evaporating, the Federal Reserve can be said to have tried its best.
In the face of US dollar hegemony, the debt problems of the US government are all small problems. Americans themselves also publicly admit that to maintaining the dollar's monetary reserve status, military hegemony is still needed. But the problem is that the current US military hegemony no longer exists. Can the US dollar's reserve status in the money market rely solely on the hard support of the Federal Reserve? When the dollar hegemony collapses, global wealth will be reshuffled. Can RMB and RMB assets benefit from it?
Game of Thrones, the peak showdown between the White House and the Federal Reserve
According to the latest report from the Wall Street Journal on September 10, the U.S. court ruled that President Trump cannot fire Fed Director Cook at present and allowed him to continue his duties. At the same time, the judge also determined that the public's interests in the independence of the Federal Reserve also "inclined to support Cook's reinstatement."
This ruling means that at the September interest rate meeting, there was another vote against the interest rate cut. Trump's plan to force the Fed to surrender failed.
Essentially, the US judicial system is also supporting the Federal Reserve. After all, all capital and bankers do not want the Federal Reserve's right to print money will eventually fall into the hands of the White House or Trump.
The bankers who really took power behind the scenes suddenly realized that the president who once threatened to "make America great again" was reshaping financial rules in a more radical way. Trump's ambition is obvious: turn the Fed into a policy tool.
The so-called mortgage misconduct may and support Trump’s removal of Cook with the Federal Reserve Act, and President Trump’s dismissal of Cook may violate the due process rights granted to her by the Constitution.
Cook's lawyers also said in a statement that allowing the presidential opportunity to be unproven, vague allegations of illegal removal of Director Cook would violate the stability of the U.S. financial system and undermine the rule of law.
The intervention of the judiciary interrupted Trump's dangerous move, but Trump is not an easy person to give up. This matter is expected to eventually hit the U.S. Supreme Court.
Meanwhile, the Justice Department has launched a criminal investigation into whether Cook is guilty of mortgage fraud.
Dollar crisis, cracks appear in the foundation of hegemony
The reason why Trump attacked the Fed without a legal basis is to force the Fed to cut interest rates in the short term.
He believes that the current Fed is controlled by Democrats and insists on maintaining high interest rates during his term of office, so he will not easily achieve political achievements in the process of governing the country, which is not conducive to his governance of the country and later elections.
More on the further, Trump's bigger plan is to control the dollar's right to print money, and to take the rights and wealth of his family to the next level through struggle.
In addition, Trump is so anxious to cut interest rates. The scale of US federal debt has exceeded US$7 trillion. For every percentage point increase in interest rates, the government has to pay hundreds of billions of dollars in additional interest expenses every year.
Apart from tariffs, Trump has been unable to find more money to enrich the U.S. Treasury Department.
The interest rate cut can directly reduce the cost of issuing new US bonds and alleviate the government's debt repayment pressure. If interest rates fall by 1 percentage point, the government can save hundreds of billions of dollars in interest expenses each year.
But this kind of political interference in the Fed's operations is shaking the foundation of the dollar's hegemony. Market concerns about the independence of the Federal Reserve have caused the dollar to weaken in the foreign exchange market, and non-US currencies to rise sharply against the US dollar.
The US dollar index has fallen by more than 8% this year, and non-US currencies such as the euro, the yen, and the Swiss franc are collectively caring. Unlike traditional logic, the decline in the US dollar was sold out simultaneously with US bonds: in the three-year U.S. Treasury bond auction in April, the allocation ratio of domestic investors was only 6%, setting a historical freezing point.
The surge in US Treasury yields and the depreciation of the US dollar have completely subverted the "USD-US bond" risk aversion logic and exposed the market's deep suspicion of US national credit.
The RMB rises, global capital is looking for a new safe haven
In sharp contrast to the US dollar dilemma, RMB assets are becoming a value depression for global capital. RMB and RMB assets have become the highest value assets.
Recently, many international investment banks have raised their forecasts for China's economic growth in their research reports, and at the same time, their allocation suggestions for China's assets have also shifted from neutral to "over-allocation".
The latest report released by the International Finance Association (IIF) shows that foreign investors invested nearly $45 billion in emerging market stock and bond portfolios in August, the highest in nearly a year. Among them, the funds flowing into the investment portfolio of the Chinese market accounted for the majority.
The People's Bank of China is not idle either, and has signed a bilateral local currency swap agreement with the European Central Bank, the Swiss National Bank and the Hungarian National Bank.
The scale of local currency swap between China and Europe reached RMB 350 billion, equivalent to 45 billion euros.
This is far-reaching. European countries have realized that the collapse of the dollar hegemony is only a matter of time, so they reach a currency swap agreement with China as soon as possible.
The global de-dollarization process is accelerating. Trade settlements in BRICS countries bypass the US dollar, Saudi Arabia's oil RMB settlement accounted for a proportion of RMB, and 90% of China-Russia trade uses local currencies. Global central banks' gold reserves hit 20-year highs, and digital currency practices accelerated the collapse of the dollar settlement hegemony.
The judge's ruling temporarily preserved the independence of the Federal Reserve, but the cracks in the hegemony of the dollar are already difficult to repair.
From Singapore to London, traders are adjusting their strategies: reduce US dollar dependence and increase RMB allocation.
China's Treasury bond yields remain stable at around 2.2%, while US bond volatility remains high, and capital always flows to safer waters.
The multipolarization era of the global monetary system is not coming, but is happening.
