On the early morning of the 4th, the Federal Reserve concluded its May interest rate meeting. As expected, there was another 25 basis points rate hike, bringing the federal funds rate to the range of 5% to 5.25%. The plan to reduce the balance sheet through bond selling continues, but the wording suggesting further rate hikes has been removed. This is likely to be the last rate hike. Bitcoin experienced a drop followed by a rise, surging from around $28.5k to $29k.
Due to the previous emergency assistance provided to banks, the Federal Reserve’s six-month effort to reduce its balance sheet was undone. The balance sheet regressed by almost half within a couple of weeks. It’s like scooping out two spoonfuls of water while pouring a basin of water back in. This makes the act of scooping out two spoonfuls appear ridiculous, as if it has become a form of performance art.
Powell lifted the stone, but he doesn’t know whose foot to hit.
In 2020, when Powell aggressively expanded the balance sheet and injected liquidity, we were implementing a reverse taper. In early 2022, before Powell initiated the tapering and bond selling, we preemptively sold off US Treasury bonds and accumulated US dollars. In 2023, when the countries unable to obtain strengthened currency swaps from the Federal Reserve found themselves on the brink of crisis due to the circulation of the US dollar, they came to us seeking assistance. We extended the umbrella of US dollar reserves to shield them from the storm.
The US dollar belongs to the US, and China provides the umbrella. Under this umbrella lies the “internal” circulation of the Chinese yuan. Those who join this “internal” circulation system avoid being harmed by the thunder (Powell) and the storm (Yellen) caused by the US dollar.
This scene is reminiscent of a game in which an eagle catches chicks in a kindergarten. Previously, when the eagle was hungry, it would catch two chicks to eat. Now, the flock of chickens has a mother hen who shields the chicks from the eagle’s predation with her broad wings. The hungry eagle jumps left and right, trying both gentle and forceful approaches, but it cannot break through the mother hen’s protective line and cannot catch the chicks to have a hearty meal.
Incidentally, China’s actions have inadvertently helped Bitcoin complete a round of countercyclical adjustments. In early 2021, when the bull market was overheating, we cracked down on mining, preventing this round of bull market from spiraling into madness and avoiding asset over-bubbling, as well as preventing more funds from entering at higher levels. By early 2023, during the strict regulation of the US, we quietly relaxed the narrative around Hong Kong, igniting a rebound in Bitcoin from its bottom, doubling in value in just three to four months. This combination of a crackdown and a rally hit the mark: a crackdown during the Fed’s expansionary monetary policy and a rally when the Fed was tightening. The difference between the high and low was only $30,000 and $60,000, successfully smoothing out the cycle, moving in the opposite direction of the Federal Reserve, and weakening the US dollar’s harvesting power over Bitcoin investors. In reverse, it also means striking at the US dollar’s objective of regaining strength by harvesting external economies.
Bitcoin is like water. It reflects not only the bubble and de-bubbling of the US dollar cycle but also the countercyclical adjustment of the Chinese yuan. It is selfless and actionless, hence it can “follow others while remaining ahead,” “exist externally while surviving internally,” and “act without acting.”
There are ambushes in the front and pursuers in the rear. The pursuers behind Powell are the menacing inflation. He has the intention to defeat the enemy but lacks the power to turn the tide. The US bond market is on the verge of being unable to withstand further selling. If everyone is selling, who will step in to buy? Without buyers, won’t it lead to a collapse?
Therefore, the leaders of the United States chose to collude with financial capital, tearing off the hypocritical mask of the “spirit of the contract,” revealing a fierce and grim face with gleaming fangs. They continue to raise interest rates. This causes small and medium-sized banks holding large amounts of US bonds to be unable to cover their debts, allows interbank market rates to soar, sucking the blood out of small and medium-sized banks, accelerating their collapse, and making the investors and creditors of these banks bear the cost of their personal assets going to zero overnight. Meanwhile, Powell’s big banker friends quickly devour these fallen, nearly dying, and fat lambs at a bargain price.
When pirates fail to plunder externally, they start to fight internally. The most brutal infighting is disguised as nothing. The victims silently fall and are quickly devoured. Everyone talks about the weather today with a smiling face, as if nothing has happened.
Powell’s stone has ultimately landed on the feet of the American people.
When the elder brother becomes ruthless. If he’s not ruthless, how can he be the elder brother? When the elder brother becomes ruthless, he can carve his own flesh to feed himself. This has happened in history before. In 1933, President Roosevelt forced Americans to surrender their gold through fines and imprisonment by issuing Executive Order 6102. Now, 90 years later, President Biden is going to make the American people bear some cost. The difference is that Roosevelt plundered the American people to make America great again, while President Biden is plundering the American people to make the vested interests of the financial group even stronger.
Former President Clinton once said that the power of the Federal Reserve Chairperson is greater than that of the President of the United States.
This time, when Powell lifts the stone and injures the feet of the American people, when the Federal Reserve’s balance sheet reduction has become a form of performance art, when interest rate hikes are nearing their end, when the Chinese yuan seeps into the vacuum zone caused by the US dollar’s withdrawal, and when Bitcoin has returned to the $30,000 level, the Federal Reserve has already declared the failure of this cycle of the US dollar harvesting the world.
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