Premature Tightening Of The Fed Will Bring The World Into Deflation Disaster.

The global economy is in a very dangerous situation. The only economic engine has been expanding for seven years in a row, and seven years is usually a complete cycle of economic growth.

In the past fifty years, neither IMF nor the US Treasury has successfully predicted the pformation of economic expansion and recession in advance.

The biggest worry now is that if recession occurs, the US may need to cut interest rates by 3-4% to save the economy.

However, at present, the Federal Reserve has no room to cut interest rates.

After 6 years of zero interest rate and QE policy, the US employment market is still in a predicament: the most urgent need for a 25-54 year old male unemployment rate is at a high level.

With the progress of science and technology, more and more enterprises may be closed.

And for

For example, a single structural reform is unlikely to change the job market.

Anything wrong at the moment.

Both may lead to irreversible spiral deflation.

I do not think the Fed has sufficient reason to start tightening.

Without inflationary pressures,

Premature retrenchment will bring the world into a deflationary disaster.

For Summers's view, IMF chairman Lagarde said that if the United States is in trouble, the global economy will be in big trouble.

So I hope Summers's worries will not come true.

IMF expects the Federal Reserve to raise interest rates by the middle of this year.

Summers's view was recognized by Dalio, founder of Bridgewater, the world's largest hedge fund.

Dalio said that compared with the $1980-1985 bull market, the central bank has no more room to cut interest rates to avoid deflation, so the financial market may face extremely dangerous situations.

On the issue of the European Central Bank's QE, Summers believes that QE will not be harmful, but the help of the economy may also be limited, because the European version of QE is too late.

The ECB is doing too much better than doing too little, but it is wrong to think that QE is the panacea.

Summers also believes that the root cause of Europe's economic problems is severe fiscal discipline.

Germany believes that fiscal discipline will collapse, but the result is the economic slump and the rise of political extremism.

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In the European trading session, the euro hit a eleven year low against the dollar and fell below the 1.13 pass to 1.1258.

Overnight, the ECB expanded the scope of its bond purchases, and plans to purchase 60 billion euros of government and private debt from March this year, and is expected to last until the end of September 2016.

After the announcement, the euro fell sharply against the dollar, falling close to 2% on the day.

In today's Asian trading session, the exchange rate remained low.

But the European trading session has again seen a sharp fall.

Marc Chandler, head of global monetary strategy at Brown Brothers Harriman (BBH), Brown, predicts that the euro will fall below 1:1, known as parity, against the US dollar, Brothers.

The euro fell around 1.4000 last May, reaching 1.1362 last night, or more than 18.8%.

Chandler said that the policy differences between the European Central Bank, the Bank of Japan and the Federal Reserve will be bigger and bigger, which will make the euro and the US dollar fall below parity next year.

Chandler believes that the euro will fall to the level from 2000 to 2001, when the exchange rate was below 0.9.

Chandler also believes that although the US dollar has risen a lot, it is still in the early stage of the US dollar bull market.

Chandler does not think that the "global currency war" is going on. He thinks, "this is not a war to depreciate the local currency. This is a race against deflation with low interest rates."

Deflation is partly due to lower commodity prices and weak demand.

There is also a lack of structural reform.

He expects the ECB to take measures to further weaken the euro.

But unlike currency wars, "in the currency war, you are equivalent to borrowing or stealing demand from other countries," he said. "Low interest rates can stimulate everyone's needs. This is not a zero sum game."