Monetary Policy

Analyzing the Core Contradictions of the U.S. Economy In this issue, we focus on the most acute structural contradictions currently plaguing the U.S. economy, and how these contradictions will shape the future direction of interest rate policy. Many people harbor unrealistic expectations that the Federal Reserve will cut interest rates, believing that a simple rate cut will solve all problems. This view completely overlooks the fundamental paradigm shift that has already taken place in the global economy. ...

Analysis of the Far-Reaching Impact of the Stablecoin Bill I. New Arbitrage Models Once the U.S. Stablecoin Bill is passed, it will give rise to an entirely new chain of risk-free arbitrage. Stablecoin issuers will attract U.S. dollar deposits by issuing stablecoins. Since holding stablecoins does not generate any interest, holders effectively forgo the interest income they would have earned on bank deposits. After obtaining these funds, issuers will use them entirely to purchase short-term U.S. Treasury bills. At the current interest rate of 4%, this amounts to arbitrage through deposit absorption at zero cost. For holders, the choice is either to invest in high-risk assets like Bitcoin to offset the loss of interest income or to bear the opportunity cost of holding stablecoins. In the long term, the zero-interest characteristic will significantly inhibit the adoption of stablecoins for daily payments, with the only beneficiaries being the stablecoin issuers. The higher U.S. interest rates rise, the greater this arbitrage opportunity becomes. ...