經濟,財務,統計學,數理科學與政治評論

Dear American people:

  After several weeks observation, it seems that the US Fed should raise its Fed fund rate little by little and maybe 1/8 or 1/4 percent this September. China is an irrelevant issue whether the Fed raise rate or not lately. The rate raising of Fed will have some effect for the US economy which brings the ripple effect to the Chinese RMB eventually. But the interest rate normalization is important to the US today. And the most important issue to the USA lately is it lacks interest rate tool in its toolbox - The USA has no interest rate tool anymore if it faces another crisis in its homeland - because it can not decrease its rate to be negative as European countries do, such as Switzerland. Or will the Fed do that??

  China is an irrelevant issue to the Fed's raising rate due to several observations: (1)China does increase its world trade in different ways: The first one is Chinese people do trade with other nations a lot because they travel and bring foreign-made goods back home. Those figures are included in the outflow of China which largely reduced foreign reserve. It shows that China still trade with other nations, especially Japan. Chinese people travel to Japan will bring a lot of Japan-made or China-made & Japan-Designed goods back home. Those goods are not been taxed by Chinese government and are not counted in its world trade with other nations. The seond one is Chinese students have spent billions of US dollars in the undergraduate or graduate schools abroad, including the US, the UK and others. Those services can not be counted as trade. But Chinese people do increase their tradings with other nations. (2)China should devaluate its RMB currency and it is an inevitable act but with wrong perception of mainland China central government: China has no well-functioning financial market to accomodate its currency movement. It is a price to pay for this second largest economic unit if RMB can not adjust its situation with world economy. The RMB currency rate is set up by the government. It may create a lot of currency arbitrage crises through different channels for China. The one is from attacking the Hong Knog dollar to force HKD abandon the peg to the US dollar. The other is already happening amid Chinese people traveling or buying all over the world. All those kind of things show the wrong RMB pegging to the US dollar. If Chinese people love to use the products manufactured in the Japan and West Europe, then the RMB should be pegged or adjusted with Japanese Yen and the Euro accordingly. The RMB should not peg itself to the US dollar only. It is a wrong strategy because the USA is not the most important trade partner of mainland China anymore.

  American stock and bond markets are relevant to the rate raising issue as follow: (1)The S&P 500, the DJ index and the Nasdaq index are all at their higher levels. Any irrelevant or relevant information can be an excuse making those indices go down horribly. But the US economy is still resilient after those corrections. We may see those corrections become some false alarms. It is a way people try to make money from others in the market without any cost. It is a way to make easy money. So the Fed should look at the economic indicators and true economic numbers seriously without disturbing from those nonsense risk arbitrage actions. After all, the index goes up or down depends on the soundness of economy in the long term. The fed should not consider the short-term market disturbance as an excuse not to prepare itself for a truly rainy day. The lack of interest rate tool is what the Fed faces lately. To raise interest rate to the normal level is a responsible act that the Fed should do for the future of whole American people. To raise rate is a honorable action to the Fed these days. When the US economy finally goes down a couple of years hereafter, then the Fed could have the interest rate tool to tune the US economy. (2)The US dollar appreciation should not be a big concern this time: It is an inevitable action that the US dollars flow from emerging economies to the USA. The reason is due to the several times of US QEs and not because the US has greater achievement in its economy. We do not see those US big corporations bring those manufacturing jobs back to the US when the US dollar depreciates a lot. We also do not see those US big corporations reduce its workload in the US as the US dollar appreciates lately. For the USA, it is just the side effect of US QEs. It is a short term effect because the money knows well where it should go. If those emerging markets have lucrative investment opportunities, the money will flow out of the USA. The Fed should not consider the strong US dollar this time. The US dollar will depreciate as the US economy goes much slower than other nations eventually. But the time has not come yet. (3)To raise rate back to its normal level could be used to prevent the crash of a much higher US stock and bond markets. It may be another crucial thinking for the Fed to raise rate gradually. It is a must-be act for the Fed NOW.