If other conditions remain unchanged, the United States is likely to enter a significant recession cycle. Once the United States enters a recession cycle, the unemployment rate will soar further. In this way, the Federal Reserve will have to take action and cut interest rates quickly to cope with the rapid deterioration of the economy. In this way, the United States will switch from Biden's previous loose fiscal policy and tight monetary policy to Trump's current tight fiscal policy and loose monetary policy.
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Under this combination, what changes will occur in various assets? First, the US dollar will depreciate. After the European debt crisis in 2010, the eurozone adopted such a policy combination, and the euro fell from 1.45 to 1.05 against the US dollar. Japan is similar, and the exchange rate has also fallen by more than 30%. Trump has always said that the Federal Reserve needs to cut interest rates to stimulate the economy, and Powell has always ignored him. Now Uncle Chuan seems to want to stab himself first and splash you first to see if you will obey.
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