It is both a danger and an opportunity. Once the Federal Reserve officially begins large-scale interest rate cuts, it will usher in a prosperous moment for the U.S. stock market and the cryptocurrency market.

Written by: Deep Tide TechFlow

Recently, both the U.S. stock market and the cryptocurrency market have experienced significant corrections. On one hand, the increase in tariffs has made it difficult for inflation to decrease temporarily, and the U.S. dollar index remains high. On the other hand, poor economic data from the U.S. has made investors uneasy, and the "trading recession" may indeed be approaching.

According to the GDPNow forecast from the Atlanta Federal Reserve on March 3, the projected GDP growth rate for the first quarter of 2025 has plummeted to a contraction of 2.82%. Just on February 26, the model predicted a growth of 2.32%. In just five days (two working days), the expected GDP for the first quarter of the U.S. was rapidly revised down by 510 basis points.

This is also the worst result for the model's quarterly GDP forecast for the U.S. since the COVID-19 pandemic in 2020.

However, in the eyes of some Wall Street insiders, this is Trump's "sunny strategy." Former Lehman Brothers trader Larry McDonald stated in a recent podcast that Trump is attempting to deliberately create an economic recession to force the Federal Reserve to cut interest rates and reduce U.S. government interest expenses.

"You cannot suppress inflation through massive fiscal spending; the Trump team knows this. They need a recession, as only this can lower interest rates and extend the debt maturity. The Trump administration is implementing 'financial repression,' pushing interest rates below the inflation rate, which is the only way to escape the $37 trillion debt dilemma; there is no other way except for default."

Trump and the Federal Reserve's discord has always been on the table. The Federal Reserve, concerned about lowering inflation, hopes to cut interest rates slowly, while Trump demands quick cuts to reduce government debt spending. He wants to avoid falling behind in the midterm elections, needing to cut rates to stimulate the economy, provide ample liquidity to the market, and alleviate the pressure on American borrowers.

According to estimates, if interest rates remain at current levels, U.S. debt interest will reach $1.2 trillion to $1.3 trillion next year, which is significantly more than U.S. defense spending. It is important to note that the current U.S. fiscal revenue is around $4 trillion, with mandatory spending at about $3.5 trillion and healthcare spending at around $2.6 trillion. Adding interest expenses brings the total to approximately 1.7 times the fiscal revenue.

This necessitates that the U.S. continues to finance debt with debt in a high-interest environment. The depletion of market liquidity continues, and the cost of U.S. debt is rapidly rising.

Therefore, in Trump's eyes, not cutting interest rates is equivalent to having an enemy, opposing him.

As a skilled negotiator, Trump chooses to "force the issue" at this time, using the tariff war and DOGE layoffs, even threatening to audit and optimize the Federal Reserve, temporarily plunging the U.S. economy into recession, causing the U.S. stock market to drop, thereby increasing pressure on the Federal Reserve to cut rates, while also shifting blame to the previous administration. Once the U.S. stock market rebounds, he can boast about it as his achievement.

Additionally, Nomura Securities' analysis points out that the Trump administration intends to trigger a "mild recession" by reducing government spending and employment, as well as implementing tariff policies, to achieve a structural transformation of the economy from government dependence to private sector leadership.

This strategy may intensify downward economic pressure in the short term, with the long-term goal of breaking the U.S. economy's long-term dependence on government spending and promoting the private sector as the dominant force for growth, reshaping the growth model of the U.S. economy.

In any case, in the game between Trump and the Federal Reserve, the U.S. stock market and the cryptocurrency market must first endure some hardship. It is both a danger and an opportunity. Once the Federal Reserve officially begins large-scale interest rate cuts, it will usher in a prosperous moment for the U.S. stock market and the cryptocurrency market.

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