On July 25, alarming reports emerged detailing a staggering decline in the American stock market, with the so-called "Big Seven" technology giants alone losing a jaw-dropping $550 billion in valueThis sharp nosedive sent shockwaves through Wall Street, sparking discussions on the potential ramifications for the broader economy.

The S&P 500 index fell significantly by 2.3%, shattering a 356-day streak without a drop of 2% or more—a record set since February 2023. The Dow Jones Industrial Average also succumbed to the market pressures, down by 504 points or 1.2%. However, it was the Nasdaq Composite that bore the brunt of these losses, plummeting 3.6% to mark the steepest single-day decline since October 2022.

As financial analysts sift through the rubble, two primary rumors are circulating regarding the Federal Reserve's forthcoming monetary policies: firstly, there is speculation that the Fed might remove the term "elevated" to describe inflation in the upcoming monetary policy meeting

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Secondly, there are whispers that both current and former Federal Reserve officials have pivoted sharply from a hawkish stance to a more dovish perspective, indicating a call for interest rate cuts.

The term "elevated" was first adopted by the Fed back in September 2021 when inflation rates consistently exceeded the 2% target for three monthsRecent data shows that the personal consumption expenditures (PCE) price index, utilized by the Fed to gauge inflation, has dropped to 2.6% as of MayGiven this decline, the continued use of "elevated" seems increasingly misaligned with the current economic realities.

Market analysts are now anticipating a significant pivot in the Fed's policy framework, potentially signaling the most explicit easing message to dateThis suggested shift could imply that the Federal Reserve might indeed lower interest rates as early as September, potentially reversing the trends surrounding the dollar circulation.

Former Deputy Chair of the Federal Reserve, Richard Clarida, who served from 2018 to 2022, noted that with inflation rates descending and the labor market cooling, he expects the Fed to enact two, if not three, interest rate cuts before the year draws to a close.

Esther George, a former president of the Kansas City Federal Reserve, reinforces this sentiment by stating the Fed is observing the signals they had long awaited to facilitate interest rate reductions.

In light of these developments, discussions on the resurgence of the dollar's circulation become more pertinent

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One must wonder what has propelled experts like Dudley to advocate for immediate rate cuts, feeling even a month's delay could be detrimental.

Could the urgent need for rate cuts be directly tied to the tumultuous decline in U.Sstock prices? This raises critical questions about the interconnectedness of global markets and the cascading effects of domestic fiscal decisions.

Looking ahead into 2024, analysts foresee the reemergence of favorable dollar circulation factorsThis raises a crucial point on how quickly these policies might manifest—will the transition be slow or abrupt?

On May 1, the Federal Reserve disclosed plans to slow the pace of balance sheet reduction beginning June 1. The cap for monthly reductions of U.S

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Treasuries will decrease from $60 billion to $25 billion.

Conversely, discussions about potential interest rate cuts by the Fed remain speculative as no official announcement has yet been madeMarket expectations regarding the number of anticipated rate cuts in 2024 have been gradually waning, reflecting growing uncertainty.

As we move into the first half of 2024, a notable trend surfaces—major global economies, extending from Israel to Mexico, and including Switzerland, Sweden, and the European Central Bank, are already implementing interest rate cutsOut of the G7, four countries namely Germany, France, Italy, and Canada have also joined this trend.

Despite the Fed holding back from initiating a revival of dollar circulation, a reversal is already evident within the global monetary landscape

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Internationally, the dollar flow has begun to warm up gradually in response to central banks worldwide easing their monetary policies ahead of the Fed.

As July presents a changing scenario with positional analysis meetings scheduled, these upcoming discussions may critically shape the trajectory of U.Seconomic policy.

The Federal Reserve maintains a facade of addressing the employment market and inflation data as rationale for potential rate cuts, pushing the narrative that the "market has sent signals" conducive to such shifts.

However, these signals warrant skepticismFor instance, while U.Snon-farm payroll data often beats estimates, subsequent downward revisions raise concerns about the reliability of such dataAn example surfaced on July 5, where April's job data was adjusted from 165,000 to 108,000 and May's from 272,000 to 218,000—an alteration that surpasses statistical error margins.

When examining the PCE price index from a macroeconomic lens, the deceleration of inflation in the U.S

does not equate to a complete conquest of inflationary pressures.

What might truly underlie the Fed's push for rate cuts? Several compelling factors come to light:

Firstly, there is acute deterioration in the liquidity of the U.STreasury marketThe significance of this market to global financial stability cannot be overstated; as liquidity worsens, volatility inevitably escalates, magnifying market risks compounded by high-frequency trading occurrences.

This kind of substantial volatility could prompt flash crashes driven by algorithmic trading.

Secondly, the repo market exhibits abnormality characterized by soaring SOFR (Secured Overnight Financing Rate) levelsThis has been aptly characterized as constricted blood flow in the "heart" of dollar liquidity—indicating a dangerous instability within the framework that supports financial markets.

Thirdly, there is an unusual spike in daytime overdraft levels in reserve accounts

During the week of March 6, banks overdrew $11.9 billion from the Federal Reserve, a significant increase from the prior two-week average of $6.6 billion, hitting the highest level seen in four years amid the crisis faced by mid-sized banks in the U.Sin 2023.

Such overdraft figures suggest that banks are drawing funds exceeding their reserves, enhancing the potential for payment crises and immediate bankruptcies if fund accessibility doesn't improve swiftly.

If one considers the U.Sfinancial market as a patient, it presents symptoms of multiple cardiovascular issues, all interlinked and intensifying each other while jeopardizing the overall system.

This critically ill patient demands intricate treatment and monitoring, akin to intensive care, where any lack of financial support could lead to dire consequences.

Despite this, the U.S

financial market remains in a state of heightened uncertainty, with both internal and external struggles displayed.

Currently, the tranquility observed in the U.STreasury market is merely superficialUnbeknownst to many, it teeters on the brink of significant instability, presenting an imminent threat that could trigger severe financial crises requiring immediate intervention.

The mounting pressure exerted on the Federal Reserve is rendering financial markets increasingly brittle.

This tumultuous "Black Wednesday" in Eastern Time translates into a "Crazy Thursday" by Beijing's clock, exemplifies the looming storm clouds over the American economy.

The U.STreasury fully comprehends the severe condition of the financial markets, which explains Yellen's escalating anxiety levels