Are there obstacles to de dollarization? AI foam in US stocks? Has the bear market in the cryptocurrency industry begun? ——The combination of punches from the newly appointed Federal Reserve Chairman Walsh is too ruthless! The most discussed topic in recent days is the economic proposal of the next Federal Reserve Chairman Kevin Walsh to reduce balance sheets and lower interest rates, causing a sharp decline in global markets Walsh crossed three boundaries and was nominated twice. Born in 1970, Walsh's career spans across politics, business, and academia, making him a versatile financial talent. There is a strange sense of familiarity, He is definitely implementing a set of American style financial supply side structural reforms, The purpose is to maintain US dollar credit, protect US dollar assets, and facilitate the return of US dollars. The means are still very necessary. The combination fist proposed by Walsh has the following moves: 1. Shrinking the balance sheet and cutting interest rates, implementing a prudent and neutral monetary policy, deleveraging to bring finance back to its roots, and moving from virtual to real to support the development of the real economy. Lao Chuan always talks about "interest rate cuts" every day, and of course, Walsh needs to cooperate, However, simply cutting interest rates will weaken the hard currency status of the US dollar and cannot control inflation, So Walsh's combination is to pair with a shrinking watch. He has a viewpoint that most Chinese netizens agree with, that inflation is simply printing too much money, Walsh was once Friedman's research assistant and also regarded him as a teacher, Friedman's classic viewpoint is that all inflation is a monetary phenomenon. Walsh also feels that, Inflation is not caused by supply chain fragmentation, masks, or Russia and Ukraine, It is the responsibility of the Federal Reserve itself, And it is the excessive expansion of the balance sheet that has led to a surplus of currency, not due to interest rate issues. So, the best way to stop inflation is Shrink the QT table, let the printing machine quiet down, recover liquidity, Don't distort long-term interest rates to match the government's deficit spending anymore. This is actually telling the world that the Federal Reserve will not monetize US bonds without restrictions, and the purchasing power of the US dollar will not be diluted. So after Walsh was nominated, Why did precious metals, which have always been seen as "de dollarized," suddenly experience such an extreme decline, One reason is that the market is afraid that he will engage in financial deleveraging and promote a strong US dollar. 2. Using the narrative of 'AI new quality productivity', this is the prosperity and growth of the American supply side. Traditional economics talks about the Phillips curve, which means that low unemployment will lead to high inflation. To control inflation, we need to raise interest rates and pour cold water on the demand side. But he is not a traditional hawk, he is close to Silicon Valley, So he is optimistic and believes that AI will greatly improve productivity, coupled with the relaxation of regulation in Laochuan, All of these can offset inflation. He compared himself to Federal Reserve Chairman Greenspan in the late 1990s, who faced inflationary pressures, Persist in not raising interest rates, Betting on the explosion of Internet technology to achieve high growth and low inflation. This narrative, One is to rationalize interest rate cuts, Secondly, it can tell the world that the real growth of the US economy is driven by AI, It is not the foam produced by printing money, but the fundamental force supporting the dollar system. That's also why in his logical system, I believe that reducing the balance sheet and lowering interest rates can simultaneously achieve a strong US dollar, low inflation, and a return of the US dollar, Because he wants to use AI+to regulate the supply side productivity explosion and lower inflation expectations, At the same time, by shrinking the balance sheet, a strong US dollar can be achieved, Releasing the pricing power of long-term interest rates can achieve higher real yields, In this way, global capital will flock in from other countries and assets such as gold and silver. 3. Establish a new fiscal Federal Reserve agreement, strengthen the coordination and cooperation between fiscal policy and monetary policy, The Federal Reserve he envisioned must return to its roots and be a narrow central bank, not an omnipotent central bank, Don't bother with things you shouldn't care about, For example, purchasing MBS (mortgage-backed securities), The essence is to provide targeted subsidies to the real estate industry, which is actually within the scope of finance. So Walsh advocates that the Federal Reserve should buy short-term bonds and sell long-term bonds, This can meet the short-term liquidity needs of the market, It can also reduce intervention in long-term interest rates, allowing the market to price US dollar assets more efficiently. During this process, To prevent market turbulence, So we need to establish a new mechanism where the two departments work together to manage the national debt, Maintain global capital's confidence in US dollar assets. 4. Shift from "data dependence" to "trend dependence" and engage in cross cycle adjustment Walsh criticized the Federal Reserve for its forward-looking guidance, dot matrix, and frequent public speeches, Relying too much on monthly employment data not only lags behind but also generates a lot of noise, We should consider the medium to long term economic trends. So his style tends to lean towards speaking less and doing more, It is likely that the dot matrix pattern will be abolished or weakened, He neither wants the Federal Reserve to fall into a fiscal quagmire, I also don't want the Federal Reserve to act as a nanny for the market, and the market should bear the pricing risk on its own. But the less you want to appear in public and communicate with the market, On the contrary, with every appearance you make, the volatility will soar significantly, Because market pricing is no longer driven by macro data, Everyone can only guess how policies are played, The strategy is very vague, That rare and seldom seen opportunity is even more authoritative. In terms of financial security, He advocates for the inclusion of stablecoins, We also need to develop a batch of central bank digital currencies, Using blockchain technology to transform interbank clearing systems and ensure the competitiveness of the US dollar in global trade settlements, With this combination of punches, the US dollar system has been strengthened again. Of course, this is the ideal state. I think there are still many contradictions and risks in his propositions, For example, how to ensure that long-term bonds do not get out of control by reducing the balance sheet? If the Federal Reserve does not buy, who will buy it, Of course, the Federal Reserve currently has limited room to reduce its balance sheet. For example, During the Greenspan era, there was actually a significant reason for relying on Dongda's accession to the WTO to provide cheap labor, Help digest the inflation of Americans, Now, if we isolate the production capacity of Dongda, If the productivity of AI does not surpass inflation in the short term, The theory that interest rate cuts do not affect inflation has been declared a failure, For example, He believes that AI can reduce inflation, achieve high growth, and not affect wages and unemployment, This is more like a utopian ultimate form, In the short term, Musk's technological optimism needs to be warned, In 2027, all industries will experience a wave of unemployment, and having a degree is useless, No matter how you look at Walsh's logic, it's more like drawing a cake that a starving person will be able to eat in ten years. Walsh's nomination is the result of multiple games between government and market, White House and Federal Reserve, politics and professionalism. This also means that after taking office, Walsh will have to meet Trump's political demands while maintaining the market credibility of the Federal Reserve. How to balance the policy "balance beam" well may become the biggest test during Walsh's tenure at the Federal Reserve ..... However, the matter has come to this point, The market is still trading based on current expectations, The United States has launched a battle to protect the credit of the US dollar, and AI is the core driving all productivity improvements. That's right. AI。