The Federal Reserve did not anticipate that China's measures to reduce reserve requirements and cut interest rates would so swiftly neutralize the effects of its own rate cuts, leading to a significant weakening of the impact of the rate reduction.

Firstly, China announced a 50 basis point reduction in the reserve requirement ratio, followed by an interest rate cut through the Medium-term Lending Facility (MLF). In addition, central banks from several other countries have also announced rate cuts.

Against this backdrop, the United States is facing two severe crises.

Firstly, the global strategy of dollar harvesting has failed, and the hegemonic status of the dollar has been challenged.

In the past, the Federal Reserve could trigger fluctuations in large economies through interest rate hikes and cuts, and then release liquidity through rate cuts to scoop up quality assets from other countries.

However, this time, the dollar's strategy encountered an unprecedented failure.

The attempt to burst China's debt through interest rate hikes was unsuccessful. The attempt to harvest Japan through currency suppression not only failed but was also met with a counterattack of Japan selling U.S. debt. Over the past four months, Japan has sold a total of $72.1 billion in U.S. debt.

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This time, the dollar hegemony has suffered a considerable blow.

The second major crisis is the debt crisis.

Almost simultaneously with the Federal Reserve's announcement of a rate cut, the U.S. Department of the Treasury also released monthly data, which was unexpected. In July of this year, China, Japan, and the United Kingdom jointly sold U.S. debt.In addition to the aforementioned consecutive sales by Japan, in the latest data, China also reduced its holdings by $3.7 billion, bringing its U.S. Treasury bond holdings down to $776.5 billion.

This year, although China's holdings of U.S. Treasury bonds have fluctuated, they have overall decreased by nearly $40 billion.

The United Kingdom reduced its holdings by $13.2 billion in the month, ranking third in U.S. Treasury bond holdings, just behind Japan and China.

At the same time, France also reduced its holdings of U.S. Treasury bonds by $16.3 billion in the month. Among the top ten holders of U.S. Treasury bonds, six countries reduced their holdings, while four countries increased their holdings.

In fact, not only China, Japan, and the United Kingdom are selling U.S. Treasury bonds, but the Federal Reserve itself is also continuously reducing its holdings to lower the risk of holding U.S. Treasury bonds.

Since June 2022, the Federal Reserve has initiated a balance sheet reduction plan, reducing a certain amount of U.S. Treasury bonds every month. Starting from June this year, the pace of the Federal Reserve's reduction of U.S. Treasury bonds has slowed down, but it still reduced by $25 billion in September.

In the past, within 1 to 3 years after the Federal Reserve lowered interest rates, a global financial crisis usually occurred, but this time the situation is different.

Currently, the total amount of U.S. Treasury bonds has reached $35.35 trillion, and it may not take a few years for this $35 trillion debt to potentially trigger a crisis at any time.