To this day, if there are still people who believe that the Federal Reserve can bring inflation back to 2% by further raising interest rates or maintaining high rates, they are being naive.

In fact, if we take a brief look at the historical data of the U.S. Consumer Price Index (CPI), we will find that: last June, the U.S. CPI (year-on-year) increase had already dropped to 3%, and then after 9 months, the CPI increase was still at 3.5%; during these 9 months, the U.S. CPI fluctuated, but the increase never fell below 3%.

What does this indicate? It indicates that after the Federal Reserve raises interest rates to a certain extent, U.S. inflation has developed resistance to high interest rates. No matter whether you increase or not, the prices are going to rise anyway. So, the question arises, what causes U.S. inflation to develop such strong resistance to high interest rates? I believe it is caused by three reasons.

Firstly, more than half of the world's oil trade is gradually decoupling from the U.S. dollar; the dollar has lost its pricing power over international oil. At least, currently, all of Russia and Iran's oil has completely abandoned the U.S. dollar for settlement, switching to the Chinese yuan, euros, and their own currencies.

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Saudi Arabia and other Middle Eastern oil-producing countries, on the other hand, have a strained relationship with the U.S., refusing to cooperate with the strategy that "to reduce U.S. inflation, one must first be able to reduce energy prices." When the dollar aggressively raises interest rates, aiming to burst oil prices, Middle Eastern oil-producing countries maintain oil prices by significantly reducing production and supply.

So, you will find that even when the Federal Reserve has raised interest rates to 5%, international oil prices have not plummeted at all, and have even surged several times, which has severely impacted U.S. inflation. The rebound of the CPI increase to 3.5% in March, with a significant rise in international oil prices, is one of the important driving forces.

Secondly: while reducing inflation, the U.S. is actually promoting supply chain decoupling. The White House is adhering to a principle, which is: to buy as few cost-effective Chinese goods as possible and to buy more "expensive and inferior" goods from Japan, South Korea, India, Mexico, and even the Philippine nickel material supply chain is about to be launched.

According to the assessment reports issued by Ford and General Motors themselves: the prices of power batteries (required for new energy vehicles) and lithium batteries provided by South Korea's Samsung and LG are generally 30%-50% more expensive than Chinese power batteries. However, the White House insists that Ford and General Motors purchase batteries from Samsung and LG, and not use Chinese ones.

Even if Ford and General Motors want to form joint ventures with Chinese companies to build factories in the U.S., the White House does not agree. You see, with the use of expensive Japanese and Korean batteries, can the prices of American electric vehicles and American cars be cheap?

The so-called "political correctness" of the White House has harmed Americans; it has led to the fact that after the Federal Reserve raises interest rates and the dollar appreciates against the currencies of various countries around the world, the prices of U.S. imported goods have not decreased significantly.In previous US dollar interest rate hiking cycles, the average price of imported goods in the United States could generally be reduced by 15%-20%; but this time, the average price of imported goods in the United States has only decreased by about 7%. And as the United States is still pursuing a more significant supply chain decoupling, import prices will rebound significantly, thereby driving up inflation.

Thirdly: The United States has attracted a large amount of overseas dollars backflowing by raising interest rates, pouring back into the United States. However, the current economic strength and industrial structure of the United States can no longer accommodate so much; the huge amount of overseas dollars backflowing has been divided into three parts, one part flowing into the Federal Reserve's deposit accounts, lying there to earn interest; another part flowing into the Nasdaq, driving the surge of technology stocks such as Nvidia and Microsoft; and the last part flowing into the medical care, real estate and other highly profitable service industries.

According to statistics: In 2023, the price of new drugs in the United States soared by 35%, significantly higher than the previous average (20%). And the price of US apartment rents, doubling at will, is not a fresh thing. It is important to note that medical care and rent happen to be the major weights of the US CPI, as long as the prices of medical care and rent are still rising, the inflation in the United States will not be good.

This has led to a paradox: The more the Federal Reserve raises interest rates, the more overseas dollars flow back; and the more overseas dollars flow back, the more funds will go to highly profitable industries such as medical care, insurance, and real estate for speculation, thereby keeping the inflation in the US service industry high.

Some people may ask at this time: Why don't the backflowing overseas dollars invest in manufacturing? Investing in the physical technology industry is also possible. Physical investment can bring new products and direct wealth, which can effectively suppress inflation.

Ah, this question goes to the core of the problem, why don't the backflowing overseas dollars invest in manufacturing? The United States also needs to have reliable manufacturing industries to invest in.

The United States' automotive, shipbuilding, steel, and electromechanical industries are all in a mess, would you dare to invest? Even the most famous aircraft manufacturing is also a mess, the Boeing 787 is almost becoming a death passenger aircraft, investing in such manufacturing will ensure you lose your investment.

As for the physical technology industry, there is even less. ChatGPT, Sora, and the Metaverse are all very loud, but they have not created new physical products and industries, they are all focused on stocks. Overseas dollars want to invest, but they can't find good objects.

Looking back at the 1970s-1980s, overseas dollars flowing back could invest in emerging IT computer industries, Apple, IBM, Dell, Intel, Qualcomm, Micron Technology, General Electric, Boeing, you can choose.

Looking back at the 1990s, overseas dollars flowing back could also invest in emerging Internet industries, Google, Amazon, eBay, Microsoft, Yahoo... There are many good companies and opportunities.But by 2024, what else can you invest in when you go to the United States? Besides investing in stocks, it can only be high-profit service industries such as healthcare, real estate, and insurance.

But we need to understand that these service industries do not create tangible wealth, nor can they improve production efficiency. They just redistribute wealth. Therefore, the huge profits earned by overseas dollar inflows in service industries such as healthcare, real estate, and insurance can only be borne by the American people, specifically manifested as a sharp increase in medical prices, a significant rise in rent, and a substantial increase in insurance premiums. Inflation makes it unbearable for ordinary people.

Therefore, the current economic strength and industrial structure of the United States can hardly bear too much overseas dollar inflow. If there is too much, it will burst. This is like a martial arts master who used to have strong internal strength and could attract a lot of external Qi to use for himself; now his internal strength is poor, and if he absorbs the same amount of external Qi again, he will be wildly counterattacked.

I don't know if the old men in the White House and the executives of the Federal Reserve have a clear and rational understanding of their own situation. Do they know that the United States cannot withstand too high interest rates and a huge amount of overseas dollar inflow.

If they know, then their current statement that "not lowering interest rates is to fight inflation" is just an excuse. They just want to endure a little longer and see if any overseas countries are pulled apart, so they can go to harvest and refuel.

If they don't know, and they really raise interest rates again, even to the 8% mentioned by the president of JP Morgan Chase, then we will have the honor to witness the history of the United States being internally exploded by overseas dollar inflow.