The following two aspects:

1. What is a strong dollar?

2. The influence of a strong dollar on China

The adoption of a strong dollar as a "national policy" began with the Clinton administration. The Clinton administration's choice of a strong dollar has gone through a process. When Clinton took office, the main problems she faced were twin deficits-trade deficit and fiscal deficit, and weak economy. Now it seems that although the trade deficit and fiscal deficit at that time were not mentioned, they created a historical record at that time. In addition, the United States just experienced the economic recession in 199-1991, and the GDP dropped by .1% in the first quarter after Clinton took office. Therefore, how to consolidate the fragile recovery momentum is another challenge before the new government.

In terms of reducing the trade deficit, although Clinton appointed Laura Tai Sen, who is famous for advocating active trade policy, as the chairman of the Economic Advisory Committee, in fact, under the circumstances at that time, trade policy did not have much use. On the one hand, the United States is negotiating with Canada and Mexico to sign the North American Free Trade Agreement. On the other hand, the Uruguay Round of GATT negotiations are deadlocked, and the retrogression of the United States will make this round of ambitious negotiations fruitless. Therefore, it seems a natural choice to enhance competitiveness and promote exports through the depreciation of the US dollar. In American history, Democratic President franklin roosevelt used the depreciation of the US dollar to solve the macroeconomic problems he faced. As a Democrat, Clinton also tends to adopt the depreciation of the dollar to solve external imbalances. At least on the surface. In the first two years of Clinton's administration, as an indicator of the trend of the US dollar exchange rate, the US dollar against the Japanese yen dropped sharply from 125 to about 8, even compared with the fluctuations in the 197s and 198s (the abandonment of the US dollar peg to gold led to the depreciation of the US dollar, and the Plaza Hotel Declaration led to the depreciation of the US dollar).

the U.S. congress has shown rare unity in reducing the fiscal deficit. Because the two parties were equally divided in the Senate, many of Clinton's motions were not passed, and the only one that received support was the Clinton-Michelle-Foley deficit reduction bill. However, in the face of a weak economy, reducing government spending without other measures to increase demand will cause the economy that has just begun to recover to die.

under this circumstance, the Clinton administration has formulated a strategy to stimulate private investment to drive economic growth. In order to stimulate private investment, it is necessary to make the Federal Reserve lower interest rates, which is based on the premise of falling inflation. To this end, the Clinton administration has taken two measures. First, it has abandoned the promises made during the election campaign to reduce taxes and increase expenditure on infrastructure and education, and adopted a tight fiscal policy, thus leaving room for a loose monetary policy. Another measure is a strong dollar policy. On the one hand, due to the J-curve effect, the depreciation of the dollar will not immediately stimulate exports, but will lead to an increase in the price of imported products and increase the pressure of inflation. On the other hand, according to the interest rate parity condition, the dollar will depreciate only if the United States maintains higher interest rates than other countries. Therefore, a weak dollar is not conducive to prompting the Fed to lower interest rates.

from the perspective of political economy, there are two important reasons why the Clinton administration finally turned to a strong dollar policy. First, because of the "service" of the economy, that is, the service industry is becoming more and more important in the economy, the influence of American manufacturing industry is far less than before. After Rubin, who was born in Wall Street, became the finance minister, its influence is even less. Another reason is that during Clinton's administration, the Ministry of Finance was in a prominent position, and it strongly advocated a strong dollar policy. As early as the end of 1993, the Ministry of Finance and the Ministry of Commerce were locked in a bitter dispute over the direction of the US dollar. At that time, Summers, who worked in the Ministry of Finance, had many fierce disputes with Kate, the trade representative, and Brown, the minister of commerce. At a meeting held in the summer of 1994, atman, then deputy finance minister, called the dispute a "strong dollar policy", hence the name. (See Delong et al. 21)

After Rubin took over as Treasury Secretary in early 1995, his support for a strong dollar became public. At the meeting of G7 finance ministers held on April 25th of the same year, Rubin broke the convention of not discussing sensitive issues such as exchange rate, and declared that it was more desirable to reverse the decline of the US dollar against the Japanese yen. Subsequently, the United States and Japan, with the cooperation of Germany and other G7 member countries, jointly intervened in the foreign exchange market and boosted the dollar, which indicated that the status of the strong dollar policy was finally determined. By November 1996, the dollar/yen had reached around 12, the highest level in 42 months. Summers continued to pursue a strong dollar policy after taking over as Treasury Secretary.

The United States, which is printing money at full speed, always devalues the dollar, and has gained the exclusive benefit of exploiting the world economic growth in previous devaluations.

In August, under the double pressure of high inflation and sharp economic slowdown in the second quarter of the United States, Paulson once again raised the banner of "strong dollar" made in the United States. However, the trend of the dollar has obviously not given people a chance to secretly rejoice, but the market has become accustomed to the old tune of "strong dollar" of successive US Treasury secretaries, and it is no longer surprising.

Obviously, the increase of China's surplus and the stability of its currency have made the demand for RMB strong, and investors' expectation of selling dollars and holding other currencies is so strong that Russia can't wait to fully liberalize the flow of ruble, and hopes to establish an oil and energy exchange with ruble as the trading currency.

if you count the euro that Iran is going to use as the settlement unit of oil transactions, as long as these currencies really realize their market value, the dollar in the hands of investors will only shrink, and it will never be strong.

The "bad money effect" of the US dollar is difficult to eliminate

Traditionally, the US dollar has a negative correlation with the prices of crude oil and gold. At present, although this negative correlation has appeared obvious errors many times, with the price rising, the trend of the dollar falling again and again is very obvious.

Even if the Fed raises interest rates, it will have no effect on the strength of the US dollar, especially when Japan ends its zero interest rate policy for the first time. The Fed faces many difficulties in raising interest rates, which makes the prospects of non-US currencies more promising.

The dollar in hand may depreciate with the price increase at any time, and less and less things are bought. In this case, the world consumers are more inclined to use the dollar in hand for consumption settlement, while the investment value is inclined to euro, yen and other currencies. In this way, the dollar has largely replaced other currencies as the first choice for trading, which is the "Gresham's Law": bad money drives out good money.

As a result, a large number of US dollars are widely used for international settlement, while other currencies are held by investors. We can't help but say that this is a factor of China's huge dollar surplus. If we consider that the world consumers use the American market to resolve the "bad money effect" of the dollar to consume goods from China, including China's labor, then China's huge dollar surplus is just a scapegoat for the "bad money effect" of the dollar.

In this case, faced with the advocacy of "strong dollar", it is really difficult for world investors who hold dollars to tell whether it is a bludgeon or an attractive carrot.

"Strong Dollar" is the opium of the United States

In the 19th century, western countries used opium as a trade product and plundered the wealth of other countries. Opium became the most important commodity in history.

looking at the course of the development of the US dollar, all of them have the epitome of monetary "opium". After the establishment of the Bretton Woods system, the United States achieved the status of the world currency because of its link with gold. However, with the disintegration of the Bretton Woods system, despite the repeated depreciation of the US dollar, the US dollar still maintained its status as the world currency.

Every time the dollar depreciates, Americans will talk about the "strong dollar", which is not only a kind of American opium in spirit, but also a kind of "financial opium" made in the United States. In this way, world investors have pushed the US dollar to the illusory position of a stronger exchange rate after taking "American opium" again and again.

However, the United States, which is printing money at full speed, always devalues the US dollar, and has gained exclusive benefits of exploiting the world economic growth in all previous devaluations, which is difficult for other countries to share. Therefore, investors now have a clear view of the "strong dollar": as long as the dollar is strong, it will provide opportunities for the United States to print banknotes.

Then, whether we can continue to sell "American opium" as in the past is a historical choice.

Pointing at RMB

Obviously, the current pressure of RMB appreciation is largely due to the scarcity of RMB, because RMB has not become the world currency, which leads to an increase in the demand for RMB. This is because, even if there is a strong demand for holding RMB in the world market, it is impossible to liberalize RMB control at once and make it flow freely around the world.

because the liberalization of RMB control is gradual, it also determines that the flexibility of RMB exchange rate is gradually increasing. It is not the only contradiction as to how much the actual purchasing power of RMB needs to appreciate scientifically.

If we speed up the liberalization of RMB control, the RMB exchange rate may be greatly passive; Without speeding up the liberalization of RMB control, the demand for RMB is artificially suppressed, which can only promote the exchange rate price of RMB to rise all the way.

The "strong dollar" obviously points to the flexibility of RMB exchange rate. In other words, as long as the RMB exchange rate is more flexible, there can be a sharp short of RMB and the goal of "strong dollar" can be achieved, and the dollar can get rid of the "bad money effect". Therefore, if we want to promote "American opium" all over the world, we naturally need the liberalization and flexibility of RMB control.

Exchange rate turbulence will be inevitable

The "strong dollar" is not only dependent on the liberalization of the RMB, but also on the fluctuation cycle of the world financial market and other factors, and there is also the Russian ruble that has been fully circulated freely. However, in any case, the realization of "strong dollar" will inevitably rely on the depreciation and shorting of other currencies, which has laid the groundwork for the turmoil in the world financial system.

From another point of view, although the United States chose to devalue the US dollar sharply at some historical moments, thus gaining huge benefits, in order to maintain the status of the world currency, the US dollar must rebound. The fluctuation cycle of the US dollar exchange rate is a necessary condition for the United States to achieve its policy objectives.

In this way, the United States can implement its policy objectives and realize its various national interests as long as it controls the fluctuation cycle of the US dollar. The "strong dollar" reflects the determination of the United States to try to control the evolution of the world financial system, not just the fluctuation of the exchange rate.

However, during the fluctuation cycle of the US dollar exchange rate, there are always a large number of sniper forces, such as hedge funds, attacking some countries or currencies. The signal of "strong dollar" actually tells us that the exchange rate turmoil in the world financial system will come and the possibility of financial crisis will greatly increase.

it's just one aspect.