Why seems it difficult to print money!

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Source WeChat official account: Jiubian has been authorized to reprint

Recently, everyone is talking about water drainage. Let me talk about it again today. Let’s not talk about economics. Let’s use the simplest logic in life to help you understand why water drainage seems to be less and less effective.

First of all, I want to talk about the truth that I have repeatedly said that banks release water, not directly print money, and then we line up to get it from the bank.

But mainly through two ways.

The first is to let rich people borrow money.

Why do we emphasize the rich here? Because there is a basic premise for bank loans. You can borrow tens of thousands of consumer loans without collateral (consumer loans also depend on your work unit and bank records). It is almost impossible to get a bigger one.

So those who can borrow large amounts of money are basically very rich. They pledge their assets, then borrow money and make other investments.

The biggest loan that an ordinary person can take in his life may be a house loan. In fact, it is to take the house you just got to the bank for mortgage and then lend it to you. The rich often lend more than one house, not through individuals, but through companies.

Maybe the kids think that how can we stimulate the economy by lending to the rich? In fact, it was really possible before. After all, the loan will come back, right? So when a rich person gets a loan, his first reaction is to think about how to invest and make some money in the future. In a few years, he will return the bank’s money with interest and make more money himself.

It’s not as big as it is now. First of all, we can engage in foreign trade. We can invest in building a factory, recruit a lot of workers, sell the products we produce to earn dollars, and distribute the money to the workers. The rest will be returned to the bank and there will be a lot left.

In this way, money flows from top to bottom. The rich people get loans, and the ordinary people get wages. Everyone gets the dividends brought by the release of water.

If the workers have money, do they want to eat or marry their wives to buy a house? So we borrowed money from the bank to build houses and open restaurants. Do the people have any other needs? So milk tea, werewolf killing, bars, and take-away food also rose. Slowly, the service industry absorbed far more manpower than the manufacturing industry.

Of course, not only the rich can borrow money, but also the government itself can. But it is more complicated because the government cannot directly borrow money, and needs a shell of urban investment.

For example, the local government wants to build infrastructure and a road. What if it has no money? Set up a city investment company, put local canteens into the company, and then go to the bank to borrow money to build roads with the canteens as collateral, and pay back the money from the bank when the roads earn money in the future.

You have to hire workers to build roads, and you have to buy steel and cement. There are workers behind the steel and cement. The capital for infrastructure construction is also converted into the wages of ordinary people, and the water from the bank is poured on ordinary people.

As you can see, banks have issued loans, and people in society have jobs, restaurants, houses, and roads. In a sense, this is the reason why our economy soared in the past few years. At that time, there were many opportunities in our society. We could always make more money from the loans from the banks. After making money, we could borrow, invest and hire more people. The economy was going well, with an annual growth rate of more than 8%.

Looking back on the great economic development in the past 40 years, the earliest driving force is actually the foreign trade after China’s accession to the WTO, which has injected purchasing power from the outside.

What happened now?

There are fewer and fewer projects that can make money, or the purchasing power is getting lower and lower.

First, foreign trade.

When China joined the World Trade Organization, the world market was open to China, and China’s manpower was too cheap to produce. At that time, business owners took money from banks, bought equipment, recruited people, made money from foreign trade, borrowed more money, and expanded production capacity. China’s production capacity rose exponentially.

But we can also feel by common sense that this state itself cannot continue.

There have been problems at last in the past two years. Now the market that can be occupied is basically the same. China’s foreign trade exports account for about 15% of the world’s total. It is unlikely that the scale will continue to expand significantly, or that there is not much room for expansion.

Western countries used to believe in globalization, but after seeing the bad luck of the Germans being controlled by Russia’s oil and gas, they began to deliberately reduce their dependence on China. In fact, the matter of “to rely on” has started long ago, but it has not been brought to light. After the Russian-Uzbekistan War, “not to rely on a country” has become politically correct. Western countries are now openly discussing it.

For example, the largest trading partner of the United States is Mexico, and Europe has also transferred a large amount of production capacity to the former Soviet Union in Eastern Europe, where manpower is cheap, and there are tax incentives within the EU. Türkiye’s foreign trade has also developed particularly fast in the past two years. The last article also said that India requires enterprises to go to India to build factories as much as possible, or they will be subject to heavy taxes. Many enterprises in China have gone. I just searched, and BYD is also making plans. These are not obvious for the time being, and the long-term effect will surely become more and more obvious. Globalization is transiting to “regionalization”.

You should have heard that our foreign trade this year is not very good. I checked the data. It is not because of industrial transfer. Industrial transfer takes a long time. It is not obvious now. The biggest problem now is the weakening of the world economy caused by the US dollar interest rate increase. Why does the US dollar interest rate increase lead to the weakening of the world economy? I made it clear in “Why will the US dollar interest rate increase lead to the collapse of many countries? What about China?”. If you are interested, you can go and have a look.

On the one hand, the increase in US dollar interest rate has brought down the world economy, which indirectly shows that the US dollar is still very strong. In addition, many countries have been exhausted by the increase in US dollar interest rate. Even if the people of those countries want to buy products from China, they still have no US dollar and foreign exchange, and can’t trade. It is estimated that it will be better in the second half of the year or next year.

This year, the domestic consumption suddenly stopped.

Now our banks lend money to rich people, but they lack purchasing power, both overseas and domestic. Rich people dare not invest even if they have money.

Secondly, the return on investment of the government itself is also getting smaller and smaller. For example, the early investment in a high-speed railway between Beijing and Shanghai is hard to get one ticket, and may soon make profits, and then withdraw the investment.

However, projects with high utilization rate and strong profitability have already been built. Projects in other remote areas may use too few people to earn much money. It will take hundreds of years to recover the investment. The problem is that both high-speed and high-speed railways need a lot of money to maintain. Maybe the money earned each year is not enough for maintenance, and the government has to continue to allocate funds or loans to maintain these infrastructure every year.

After the infrastructure construction, it will become more and more cautious, because for many local governments, building another road may not only increase the income, but also be a burden. Besides, the urban investment debt has reached 65 trillion yuan, and it will not be repaid again.

Having said that, it is clear why water release would stimulate consumption in the past:

Because the starting point was low and the market prospect was broad, both foreign and domestic people were willing to consume, and there were always profitable projects that could be invested, so money distribution would become physical projects and further absorb labor.

The purchasing power at home and abroad has been weakening in the past two years. Foreign countries have suffered from the depression caused by the increase in interest rates of the United States dollar, and domestic countries have suffered from the sudden lack of consumption. Everyone does not spend money.

So after the bank issued the money, the money accumulated in the upper layer, which could not be converted into industrial funds that would employ many people, and began to speculate in assets repeatedly, so the release of water had no effect. Not only that, but also lead to “inflation for the rich and deflation for the poor”.

Rich people go to the bank to get money, and there is nothing to invest in when they get money. After all, foreign trade is weak. Open a restaurant, a red sea, what can you do?

I can’t do anything after thinking about it. How about buying a house? Rich people think so, so they all buy the large flat-floor luxury houses that are scarce in first-tier cities. So it’s funny that the economy is not very good, but the first-tier luxury houses have increased significantly. In the past two days, many luxury houses in Xicheng District have risen by more than 10 million yuan in less than two years. You know, this is fantastic during the epidemic.

But the question is, if the rich don’t invest and the factory doesn’t start, what money will the workers earn? The answer is that it’s really hard to make money recently.

As you can see, the lack of purchasing power is the root cause of all problems.

It’s nothing yet. The most frightening thing is the situation in Japan, where the people live or die without spending money.

That is to say, the common people have money, but they are still in the bank. The purchasing power is not enough. The whole market is in a depression. The common people in Japan just don’t spend money and save money if they can, resulting in a mess of house prices and the economy.

For the past three decades, the Japanese government has been threatening to start the banknote printing machine to dilute the wealth of the people. It depends on whether you spend money or not, or even the interest rate to zero (in fact, it is not really zero interest rate, but it is very, very low. I checked that the annual deposit rate is 0.003%). It depends on whether you still save money. And the interest rate is so low, how much money to spend, or buy a house? If they don’t buy oil and salt, they just don’t spend it. They don’t lend money when they die.

The United States sends money to the people. The people spend too much money. The Japanese government is hungry for the high inflation. It also sends money to the people. The people save all the money in the bank, but they don’t spend it.

The embarrassment of Japan now lies in:

The infrastructure has been completed, and there is nothing more to build. A large number of marginal areas have been abandoned, and the infrastructure there has also been abandoned.

Aging and fewer children lead to extremely low social desire, no consumption and weak domestic demand;

Foreign trade has not been very good, and has been completely destroyed by the rise of China and South Korea.

Japan’s transnational capital has done well overseas, but the money has nothing to do with the Japanese people.

The most important thing we should do next is to avoid becoming like Japan.

Is there any way?

I don’t think it’s a big deal. As long as the environment is better, our Chinese people are willing to spend money. They should not be like Japan. It is still in the recovery period, and it should be better after that. After all, the experience of last year has too much impact on too many people, and it will not be eliminated for a while.

However, in the long run, if we want to continue to prosper, we cannot do without “letting the rich invest and the ordinary people spend”.

Or on the other hand, if ordinary people dare to spend money, the society will have hope. After all, your expenditure is the income of others. Everyone will not spend it, and others will have no money. Sooner or later, it will spread to you. Finally, the consequences will spread inward along the outermost circle, first affecting the self-employed and private enterprises, then the state-owned enterprises, and finally the civil servants.

But how can we spend money?

I don’t need to say that. It’s mainly about the sense of security. Now there is a very bad place in the society, which plays up an atmosphere of “there will be big trouble waiting for everyone in the future” all day long. I don’t know where such a trend of thought came from. The COVID-19 aftereffect that was expected at the beginning didn’t appear very often, but such a strange thing appeared.

Almost all the articles and videos advise you to prepare for the winter in the next time, without investment, consumption, job-hopping and entering the system. You said, in this atmosphere, who dares to consume? But how can we do without consumption economy?

You may ask me, what do you say?

I have no choice but to advise you not to invest, consume, change jobs and enter the system. Because once the social concept is formed, it is like a train. It is very difficult to turn around. Everyone thinks that the economic winter is coming, and it may really come. Everyone is like this. As an individual, we can only be conservative, save more money and live, otherwise what can we do? It’s a dead end if you don’t get it right.

Speaking of this, readers may ask, is there any way to solve it?

I don’t know. I just think that if we can return to the path of stable development, confidence should return and consumption will also rise. The most troublesome thing in the near future is the US dollar interest rate increase. Everyone’s foreign exchange has been pumped to the United States. Nobody can think well of it. After the interest rate of the US dollar is raised in the second half of the year or next year, foreign trade should be able to take a breather.

In addition, I suddenly realized a problem recently that we may not be able to avoid the operation of welfare in western developed countries and sending money to the bottom.

In a simple way, without a perfect security system, everyone may start saving money to prevent aging at a certain time, and you don’t know how long you will live, so there is no limit to saving money, so consumption can be good. If domestic demand is weak, we must always rely on Europe and the United States. If Europe and the United States do not buy our goods, we will have problems immediately.

In addition, the traditional “bank loans to the rich” stimulus effect is getting worse and worse. Money is piled up in the rich and can not be transmitted to the bottom. There is no money to consume, and the economy cannot turn. So it may not be a bad idea to send money directly to the people at the grass-roots level. The government will lend money to the people at the bank to supplement their purchasing power. When the economy gets better, they will pay back the money with tax, which can avoid inflation.

In addition, we have been talking about the issue of distribution. As mentioned above, paying people money can raise taxes on the rich. Now more and more economists also realize that the key to overcoming the future crisis is to tax the rich. However, I still want to say that there is no problem with the second and third distribution. The whole world is engaged in it, but we must be within the scope of the legal system, and do not learn from India, otherwise it is easy to make big trouble.

At the end of the article, let’s summarize:

There should be no problem for GDP to rebound by 5% after the opening of the epidemic, but the trouble is still obvious, and the purchasing power at home and abroad is still too poor. The biggest impact in the short term is that the US dollar will raise interest rates. When it finishes raising interest rates, our foreign trade should be better. The long-term key is domestic demand. The key to domestic demand is the sense of security in the hearts of the people. They feel that there will be no big waves in the future. They feel that only when they have a sense of security can they spend money at ease. Only when they have purchasing power can they have everything. This may be what we need to focus on in the future.

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