#比特币创下一个月内新高 Wosh Nomination Sparks Wall Street: Rate Cuts and Balance Sheet Reduction, the Fed's "Policy Deadlock"?

Trump officially nominates Kevin Wosh as the next Federal Reserve Chair.
This news quickly triggered a strong reaction in the capital markets.
Prior to this, many market observers had already noticed that Kevin Wosh's core policy stance is an extremely rare combination: rate cuts plus balance sheet reduction.
This unconventional stance has indeed caused many financial analysts to panic about the potential for a systemic liquidity crisis in the U.S. capital markets in the near future.
The underlying logic of balance sheet reduction means the Federal Reserve will soon reduce its holdings of various debt assets, including U.S. Treasuries.
This is equivalent to directly draining liquidity from the market and recovering cash, which will inevitably create a larger gap in the already highly strained liquidity of the U.S. capital market.
In the U.S. financial ecosystem, the federal government is the world's strongest credit source, and its debt itself provides the most basic monetary injection for the market.
Only continuous leverage by the U.S. government can inject massive funds into the market, allowing the highly virtualized U.S. financial system to sustain operation.
Therefore, when Wosh, who advocates balance sheet reduction, is nominated, it inevitably triggers market panic selling.

01 U.S. Capital Markets Underperform, Exposing Two Structural Issues

The capital markets have already priced in a pessimistic outlook for this potential crisis.
Over the past month, the U.S. capital markets have been sluggish and have exposed two major structural problems:
First, the three major U.S. stock indices (especially the Nasdaq) have been weak, with tech stocks in a long-term downtrend;
Second, the yield on the 10-year U.S. Treasury has surged again, returning to around 4.3%, a high level.
In a normal macro cycle, as expectations for the U.S. benchmark interest rate decline (e.g., lowered to around 3.75%), long-term bond yields should be below the benchmark rate.
However, the current market shows a deep inversion between long-term bond yields and the benchmark rate.
This inversion indicates that the entire financial system is effectively "raising interest rates" on the U.S.
The core reason for this anomaly is the ongoing escalation of the Middle East crisis, the outbreak of a new Persian Gulf war, which has directly led to a strong upward cycle in global commodities, especially oil.

02 Rising Oil Prices Tighten Global Dollar Liquidity and Push Up the Dollar Exchange Rate
If international oil prices can break through $80 per barrel and remain above that level, the mainstream narrative in global markets will fully shift to a "U.S. re-inflation" mode.
Once the U.S. faces re-inflation backlash, the Fed will be forced to pause rate cuts or even reverse course and hike rates. In this scenario, long-term U.S. interest rates will stay above the current benchmark, sharply increasing the cost of U.S. debt financing and further tightening overall market liquidity.
Conversely, when oil prices surge and commodities collectively spike, global demand for the dollar will increase sharply (as dollar-denominated assets remain dominant).
Therefore, what we see today is a classic scenario where the dollar index and oil prices rise together: rising oil prices lead to tightening global dollar liquidity, which in turn pushes up the dollar exchange rate.
In this environment, the U.S. finds itself in a "stubborn quagmire" similar to the 1970s: if oil prices trigger uncontrollable inflation, the logical response is rate hikes;
but with commodities rising continuously and global liquidity tightening, risk assets including stocks will be ruthlessly suppressed.
Subsequently, markets will frantically embrace the survival rule of "cash is king"—because only ample cash can buy supplies, sustain the economy, and even ensure national security. In this era, there is an urgent need for the U.S. to cut rates to release liquidity, even the heavily indebted U.S. government itself needs rate cuts.

03 The Paradox of Rate Cuts and Balance Sheet Reduction: Trump’s Promise Meets Liquidity Exhaustion
If the U.S. chooses to cut rates to provide more liquidity, it will fall into an unsolvable paradox: rate cuts will raise inflation expectations, causing markets to price in rate hikes spontaneously;
but if the authorities actually raise rates, market liquidity will fracture, likely triggering a liquidity crisis, stock market crash, and even bringing the U.S. debt crisis back to the forefront.
The continuous rise in long-term bond yields indicates that the world is selling rather than buying U.S. Treasuries, undermining confidence in U.S. creditworthiness.
If Kevin Wosh stubbornly pushes forward with "rate cuts plus balance sheet reduction," it means U.S. Treasuries will have even fewer buyers, leading to a larger increase in interest rates.
The out-of-control long-term bond yields will eventually transmit backwards, forcing the current expected benchmark rates to rise passively. Therefore, in a scenario of rising global commodities, Wosh’s "rate cuts and balance sheet reduction" approach is completely infeasible.
What the market truly demands is the opposite: rate hikes and expansion of the balance sheet.
On one hand, raising rates to curb domestic inflation; on the other, secretly expanding the balance sheet to provide liquidity worldwide.
This is precisely the main policy theme of the Biden administration from 2022 to 2024. However, this policy has also led to an upward shift in the median of the benchmark interest rate, sharply increasing financing costs for ordinary residents, businesses, and even Silicon Valley tech giants.
This widespread economic pain ultimately contributed to Trump returning to power with the support of an "anti-high-interest alliance."
Trump promised to cut rates to lower financing costs and maintain social stability, but if he now aggressively pushes for rate cuts, it would completely contradict the latest market demands shaped by geopolitical crises.

 04 The Backlash of Geopolitical Out of Control: Dollar Shortage and Gold’s "Liquidity Catastrophe"
Trump’s scenario planning for the new Persian Gulf war may have already spiraled into an uncontrollable situation he did not anticipate.
His initial idea was "maximum deterrence," keeping the crisis tense but not collapsing. As long as oil prices stay manageable, the dollars earned by energy-producing countries would flow back into U.S. capital markets, replenishing liquidity and supporting the dollar exchange rate.
This way, the U.S. could cut rates while avoiding massive capital outflows, providing sufficient funding for the domestic AI revolution and manufacturing resurgence.
However, if the war spirals out of control and oil prices surge, global dollar liquidity will instantly become even scarcer.
This will cause the dollar to rebound strongly, and the market will quickly adopt the "cash is king" narrative, triggering large-scale liquidity crises in U.S. stocks and bonds.
In this rush for liquidity, even the safest asset—gold—will face triple downward pressure:
First, soaring oil prices push up inflation, increasing the likelihood of the Fed stopping rate cuts or even raising rates, which is directly bearish for gold.
Second, amid the "cash is king" frenzy, the once-popular "Cash is trash" (cash as a poor investment, over-allocating to Bitcoin, precious metals) investment mode will collapse.
When cash becomes expensive again, everyone will start selling assets, naturally suppressing gold.
Third, because of its excellent liquidity and ease of liquidation, gold often faces the first wave of indiscriminate selling before any liquidity crisis erupts (to meet margin calls).
Of course, the geopolitical safe-haven demand from war remains strong, and buying power is still substantial.
Therefore, gold will inevitably experience intense volatility in the near term. But from a cycle perspective, if the oil crisis propagates into an inflation crisis and triggers a liquidity crisis, gold’s trend will typically be "dip first, then rise."

05 Key Indicator: U.S. 10-Year Treasury Yield
With Kevin Wosh’s official nomination, we can clearly predict that in the upcoming 3 to 5 months (before Wosh takes office), the core market indicator for whether the U.S. will cut or raise rates, shrink or expand its balance sheet, and whether inflation will re-emerge or subside, will be the U.S. 10-year Treasury yield.
If U.S. long-term yields surge again above 4.5%, the U.S. will be forced into extreme chaos.
Losing the government’s strong financing ability means the U.S.’s fiscal and war capabilities will be hard to sustain, and the new Persian Gulf war may be forced into a prolonged phase.
In this game, Iran is also closely watching the U.S.’s ultimate war resolve and long-term preparedness.
Once Iran sees that the U.S. cannot sustain itself, it may proactively prolong the war to gain higher bargaining chips. This will further accelerate a comprehensive credit crisis and war capability crisis within the U.S.