Market Crash Warning! The new Chairman of the Federal Reserve insists on shrinking the balance sheet, and Trump's interest rate cut promise is completely gone 关注马斯克概念小奶狗pu p pi es
Global financial markets sound the alarm for a crash! Trump nominated Kevin Warsh to head the Federal Reserve, whose radical approach of 'first shrinking the balance sheet, then cutting interest rates' directly shatters market expectations for easing, and a liquidity crisis is imminent.
Warsh insists on using balance sheet reduction to curb inflation and create space for interest rate cuts, advocating for the cessation of MBS purchases and the contraction of the balance sheet. However, shrinking the balance sheet is a form of strong tightening, which directly conflicts with Trump's urgent demand for interest rate cuts. The Fed's balance sheet reduction in 2019 once triggered a 'crash' in the U.S. repurchase market, and historical risks are looming large. More critically, during the Fed's expansion of the balance sheet, a large amount of U.S. Treasury bonds were absorbed; once the balance sheet reduction is initiated, the enormous fiscal debt of the United States will face a predicament of no buyers, sharply increasing the risk of a dual blow to fiscal and monetary policy.
U.S. economic data is sounding alarms across the board; the government shutdown has delayed the release of key non-farm payroll data. In January, ADP employment increased by only 22,000, far below expectations, marking the worst January performance in nearly five years, and the economic slowdown has become a fact.
Both the European Central Bank and the Bank of England held steady in February, with significant internal disagreements within the Bank of England, which may see an interest rate cut window in April; the European Central Bank is more hawkish, with the probability of interest rate cuts for the year far lower than that of the UK, further exacerbating the divergence in global monetary policy, and risk assets are under pressure across the board.
In the short term, Warsh may prioritize interest rate cuts due to pressure from the midterm elections, but the shadow of balance sheet reduction always looms over the market. Once balance sheet reduction is implemented, U.S. stocks, cryptocurrencies, and other risk assets will face severe fluctuations.
Will this ultimate game between balance sheet reduction and interest rate cuts trigger a new round of market crashes? Do you think the cryptocurrency market can withstand this wave of liquidity shock?
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