Rebirth of the Industrial Tycoon

A business development forum is being held in a five-star hotel in Beijing.

Although it is called the Enterprise Development Forum, it is jointly sponsored by the National Development and Reform Commission and the Ministry of Commerce. In addition to the heads of major enterprises, there are also some well-known economists and some policy makers participating in the forum.

The theme of this forum discussion is how to deal with the global financial crisis.

Although China's financial system has not yet integrated with international standards, China's economy was still very dependent on foreign trade at that time. The biggest impact of the financial crisis on China was not financial risks, but losses in export trade.

Foreigners have no money to spend, which naturally affects China's exports. Therefore, many export-oriented companies came to participate in this forum, hoping to obtain policy support.

As soon as Li Weidong walked into the venue, he saw several acquaintances, all of whom were well-known domestic private entrepreneurs.

"Chairman Li, sit here!" Familiar people have already begun to greet Li Weidong.

Li Weidong walked forward with a smile and said, "Mr. Zhang, I haven't seen you for a few days. You look thinner. You must be working out recently, right?"

"I am not a person who is thin because of exercise, but because I am worried about being thin!" Mr. Zhang on the opposite side sighed, and then said: "The U.S. economy is not good, and our orders for the next quarter have suddenly dropped by 50%. If we didn't have this 50% With export orders, I don’t even know how to spend the next New Year!”

Another person next to him said: "Mr. Zhang, your situation is good. Our factory has not received overseas orders since May. Now it is all supported by domestic orders. If there are no more domestic orders, , we have to go bankrupt!”

"Chairman Li, how is the situation of your Puppy Group? A large part of your profits come from exports, right?" a third person asked.

"Everyone is similar. The economic environment is like this, and our lives are not easy." Li Weidong paused, and then said: "However, our main business is small household appliances, kitchen appliances and beauty equipment, so the impact will be greater than that of larger ones." Home appliances are cheaper and it’s always easier for female consumers to make money.”

Mr. Zhang said: "Leaders from ministries and commissions will be present soon and may explain the next policies. There are also well-known economists and I heard there are think tank members who will make predictions about the next international economic situation. , we have to listen carefully. If the economy continues to decline next year, I will have to reduce the scale of production quickly. "

"Yes, I also need to make a raw material procurement plan for next year. If the international economic situation is still not good next year, I will not dare to purchase too many raw materials." Another person said.

Li Weidong said: "You guys chat first, I'll excuse you."

Mr. Zhang looked at his watch and said, "The forum is about to start. You'd better find a place to sit quickly, otherwise there will be more people and there won't be any good seats."

"Aren't there still a lot of empty seats in front?" Li Weidong said and pointed to the podium.

"The seats under the rostrum are reserved for leaders of ministries and commissions, as well as economists from think tanks. How can we, the business people, get our turn? Those economists sit in front, and it will be convenient for them to speak when they come to the stage." Mr. Zhang said. replied.

Li Weidong smiled slightly, lowered his voice and said, "Mr. Zhang, I am here to participate in the forum as an economist today!"

…

Li Weidong and three other economists sat on the rostrum.

"There are famous economists on the stage. What is Li Weidong doing up there?"

"I never heard that Li Weidong received any important degree in economics!"

"We people are always so busy. Even if we have academic qualifications, we probably only have a diploma."

Many people who didn't know Li Weidong began to whisper.

"Don't you know it yet? Li Weidong accurately predicted the Asian financial crisis back then. He really understands economics."

"There are rumors that before the U.S. subprime mortgage crisis broke out, Li Weidong also issued an early warning to certain domestic financial institutions."

The two people talking had obviously heard rumors about Li Weidong.

At this time, the host introduced: "Today we have invited four guests to discuss issues related to the U.S. subprime mortgage crisis. First of all, welcome Professor Huang Dongsheng from Renmin University!"

As the applause rang out, Professor Huang Dongsheng stood up and bowed to everyone.

The host then introduced: "Welcome the special commentator of Economic Weekly, Professor Sun Haifeng of the National Institute of Economic Research!"

Applause rang out again. Everyone knows that the National Institute of Economic Research is an important economic think tank, so Professor Sun Haifeng is also a member of the think tank.

"Next, I would like to welcome Vice Dean Cai Guorong of the School of Economics and Business Administration of HKU! Finally, I would like to welcome Chairman Li Weidong of Puppy Group!"

After introducing these four guests, the host got to the main topic of the day.

I heard the person living there say: "The financial crisis caused by the U.S. subprime mortgage crisis is getting worse. Not long ago, Lehman Brothers, the fourth largest investment bank in the United States, filed for bankruptcy. Recently, there was news that Freddie Mac and Fannie Mae will also file for bankruptcy." Bankruptcy. Once Freddie Mac and Fannie Mae go bankrupt, it will be a fatal blow to the U.S. real estate industry.

In response to the financial crisis, the U.S. government recently proposed a financial rescue bill, which will invest $700 billion to purchase financial derivatives related to U.S. subprime loans. Currently, this financial rescue bill is stuck in the U.S. House of Representatives. Does an expert think this bill will eventually be passed? If you think you can pass, please raise your right hand; if you think you can't pass, please raise your left hand. "

All four people raised their right hands in unison.

The host continued: "It seems that the opinions of the four experts are relatively unified. Since the four experts all think that the bill can be passed, when will it be passed? Let the four experts make analysis and predictions. From Professor Huang let's start!"

Professor Huang Dongsheng cleared his throat and said, "In my opinion, the sooner this financial rescue bill is passed, the better. But the problem is that 700 billion US dollars is not a small amount. How will this money be spent?" It’s a difficult question, and I think the time will need to be determined after consultation between the U.S. Treasury Department and the Federal Reserve.”

Professor Huang is a thief. He did not predict the exact time. After all, who can say for sure about this kind of thing! It would be embarrassing if the prediction was wrong.

"What do you think of Professor Sun?" the host asked again.

"I agree with Professor Huang's point of view, but I would like to add a few words. Although this financial rescue bill was proposed by the US government, the specific amount and the specific content of the plan have not yet been finalized. The Democratic Party has not yet finalized this bill. There are still different opinions," Professor Sun replied.

It's also a chicken thief's answer, without giving the exact time.

"Dean Cai, what do you think?" the host then asked.

"Whether this bill is passed will affect the votes in the US presidential election. I think there are two possible time points, one is before the US election in November, and the other is after the US election in November. At the latest It should not be later than mid-December," Cai Guorong replied.

"Chairman Li, what do you think?" The host asked Li Weidong last.

"My prediction is bolder than President Cai. I think the Democratic Party will delay this bill until the end of the election. It is estimated that it will be implemented in late November, and the amount of the bill will increase to more than 800 billion US dollars." Li Weidong replied.

The first question was just a warm-up, and the next step was the real discussion topic. The host then asked: "Four experts believe that the U.S. financial rescue bill can help the U.S. economy get out of the current predicament and recover." To a normal level? If you think you can, please raise your right hand; if you think you can’t, please raise your left hand.”

This time, Li Weidong decisively raised his left hand, while the other three economists raised their right hands.

"It seems that our experts have different opinions. Then I would like to ask Chairman Li directly, why do you think the U.S. government's financial rescue bill cannot restore the U.S. economy to normal levels?" the host asked.

Li Weidong took the microphone and replied: "The financial rescue plan proposed by the U.S. government this time is mainly to purchase derivative financial products of non-performing mortgage loans. The purpose is to stabilize the financial system and rebuild the credit of financial institutions in the form of state guarantees. , allowing credit markets to regain liquidity.

Therefore, this plan can only stabilize the market, but cannot stimulate the economy. The confidence of American consumers lost due to the subprime mortgage crisis will not be restored. I think the U.S. economy wants to return to normal levels, but these hundreds of billions of dollars are far from enough, and more economic stimulus plans are needed. "

Professor Huang was the next to speak. He took the microphone and said, "I'm not that pessimistic. US$700 billion is already a huge financial stimulus package. More importantly, this time it is the US government's purchase of financial derivatives from subprime loans." With the guarantee of government credibility, I believe the U.S. financial market will soon regain confidence and liquidity!”

What Professor Huang said was exactly the judgment of most economists at the time, and everyone was generally optimistic about this financial rescue plan. Not only Chinese economists think so, but American economists also think so.

First, because the amount of US$700 billion is huge and unprecedented, spending such a large amount of money will definitely trigger a strong market reaction.

The second reason is that this time the U.S. government took direct action. The U.S. government purchased financial derivatives of subprime mortgages, which means that the U.S. government is willing to cover the bottom line for subprime mortgages. The academic community is naturally optimistic about the effectiveness of the financial rescue plan.

Dean Cai next to him also took the microphone and continued: "I would like to add to Professor Huang, this kind of financial stimulus plan involving hundreds of billions of dollars is not something that can be launched casually. The first and most important thing is There is enough financial support. With the current financial situation of the United States, borrowing money is already needed to raise this 700 billion, and it is unlikely that there will be more economic stimulus plans in the future.”

Dean Cai glared at Li Weidong as he spoke, as if if you said "more economic stimulus plans" in your mouth, it would be impossible to escape danger.

Li Weidong replied: "Funds have never been a problem. The United States can completely use quantitative easing to solve the problem. By then, let alone 700 billion U.S. dollars, even 7 trillion U.S. dollars will not be a problem."

Speaking of quantitative easing, the other three economists frowned involuntarily.

It was Professor Huang who was the first to say: "This is impossible! Quantitative easing is a powerful medicine for the economy. With the size of the US economy, if quantitative easing is implemented, it will have an immeasurable impact on the world's economy. . There is no need for the United States to use such high-risk economic measures.”

Li Weidong replied: "Professor Huang, since the 9/11 incident, the United States has been at war, and the U.S. finances will definitely not be able to spend this 700 billion U.S. dollars. So I think there is no need to wait until the future, the 700 billion U.S. dollars used in this financial rescue bill." The US dollar needs to be solved through quantitative easing.

And if this 700 billion US dollars cannot solve the problem, there will be multiple quantitative easing in the future. If this 700 billion US dollars is QE1, then there will definitely be QE2, QE3, and even QE4. Quantitative easing will not end until the U.S. economy returns to normal. "

…

People nowadays are no longer unfamiliar with quantitative easing. They all know that it means printing money. After all, many countries are using this method during the epidemic, and they are even competing to see who can print more.

In 2008, quantitative easing was still a new term.

It was the Japanese who first proposed the concept of "quantitative easing". Japan's economy stagnated after the Asian financial crisis. By the beginning of the 21st century, the economies of the Four Asian Tigers and Southeast Asian countries had begun to recover, and the Japanese economy was still No improvement.

So the Koizumi government in power at the time resorted to quantitative easing. Print money and cut interest rates to release money into the market in the hope that inflation will drive economic growth. "Quantitative easing" was proposed at this time.

Japan's quantitative easing policy lasted until Abe's first term. After Abe resigned, the quantitative easing policy ended. It was not until 2011, when Abe became prime minister for the second time, that he used quantitative easing again. The core of the so-called "Abenomics" and "Abe's three arrows" are quantitative easing.

From an economic point of view, since the collapse of the Bollington Woods system, the United States has begun to implement quantitative easing.

Interest rates in the United States are very low, which is very beneficial to consumers and businesses. When consumers go to sell their houses, they see that the annual interest rate is only a few cents, and they can save another house with a thirty-year loan.

Low interest rates make consumers more enthusiastic about taking out loans, not only for buying cars and houses, but also for many basic daily necessities. As for those who are engaged in business operations, they will seek loans as much as possible.

But when people go to banks for loans, the banks don't have the money.

This is of course also caused by low interest rates. The interest rate is not only the loan interest rate, but also the deposit interest rate. The loan interest rate in the United States is low, and the deposit interest rate is also low. The low deposit interest rate also means that no one is willing to deposit in the bank.

Most Americans live on loans. Even though they own several cars and live in large villas in the suburbs, they actually owe a lot of debt. Behind the glamorous appearance, they have no savings.

Rich people in the United States will not choose to deposit their money in banks because bank interest rates are too low. The U.S. finance is so developed and there are many financial products that can make money, so why bother with the low interest rates of banks?

If banks cannot absorb deposits, they will have no money to issue loans. At this time, banks will go to the Federal Reserve to borrow money.

The Federal Reserve also has no money. Fortunately, they have another method, which is to print money.

As a result, the Federal Reserve prints money, then lends the money to banks, and the banks then release the money to the market in the form of loans. When money reaches the market, it is either converted into public consumption or corporate loans, which ultimately promotes the growth of the U.S. economy.

The core of this model is still printing money, which is essentially the same as quantitative easing.

The difference is that this model of money printing is based on market demand, that is, the market first has this part of the loan demand, and then the Fed meets this demand by printing money.

This kind of money printing due to demand is actually something that central banks like to see, because both loan consumption and loan production can promote economic growth. Therefore, central banks in various countries are also doing this kind of thing. Generally, as long as there is market demand, they will definitely release money.

However, in response to the subprime mortgage crisis, the quantitative easing carried out by the United States was not based on market demand, but quantitative easing.

That is to say, regardless of whether the market has such demand, the Federal Reserve will use this money.

The financial rescue bill proposed by the Bush administration is mainly to purchase financial derivatives of subprime mortgages, with the purpose of stabilizing the financial market and releasing financial liquidity.

However, the Bush administration has been fighting wars, and the huge military expenditure has already emptied the US finances. Therefore, the money to save the financial bill can only be solved through quantitative easing. This is the first time the United States has used quantitative easing, so it is also called QE1.

The amount of this bill sent to the House of Representatives was 700 billion. Later, the Democratic Party requested that the amount be increased to 850 billion. In March after *** came to power, the amount had increased to 1.25 trillion. When QE1 ended, the data released by the Federal Reserve was that the total amount spent 1.725 trillion.

In other words, during QE1, the Federal Reserve printed 1.725 trillion U.S. dollars, and this does not include the portion of daily loans issued by the United States.

QE1 was increased from 700 billion to 1.725 trillion, a full trillion US dollars more, but it did not save the US economy as economists predicted because consumer confidence has not recovered.

The hardest thing to build in the market is confidence. When you have confidence in the market, even if you have no money, you will borrow money from loan sharks and invest it in the market. When you have no confidence in the market, even if you have a lot of money, you will not invest a single copper.

Therefore, those international rating agencies often publish various so-called "confidence indexes". Laymen do not understand what these indexes do, but insiders know that they are a barometer of future economic prosperity.

This is also the amazing thing about economics. No matter how sophisticated economic theoretical research is, it cannot restrict human behavior.

Many economists will feel this way. My research is obviously flawless. Why is it completely different from my research when the time comes for market operation?

Therefore, most economists only do hindsight analysis and use market behavior that has already occurred to confirm economic theories.

This was the case with QE1, which did not have the effect that economists expected, so the U.S. government launched the second round of quantitative easing, also known as QE2.

The content of QE2 is to purchase long-term government bonds and release funds into the market, that is, to stimulate economic recovery by increasing the injection of base currency.

As a result, the European debt crisis broke out at this time, completely negating the effect of QE2.

The Federal Reserve had no choice but to continue quantitative easing and launched QE3 and QE4 one after another. The entire quantitative easing process lasted until President Xi Jinping's second term.

The Fed printed approximately 5 trillion U.S. dollars during the four QEs, and the amount of funds leveraged by these 5 trillion U.S. dollars is even more difficult to estimate. Adding so much currency to the market will inevitably lead to inflation.

Fortunately, the U.S. economy is large enough that even if inflation occurs, it will not be apparent immediately, and the market will need time to react.

In order to prevent inflation from occurring, after the end of QE, the U.S. government began to formulate a plan to shrink its balance sheet.

Shrinking the balance sheet refers to shrinking the balance sheet, including the reduction of assets and liabilities. Simply put, it means recovering part of the extra money printed to avoid inflation or economic overheating.

The originator of table shrinkage is also Japanese. In the early 1990s, Japan's real estate bubble burst, and Japan adopted a policy of shrinking its balance sheet.

But unfortunately, the U.S. policy of shrinking its balance sheet has just begun, and President Xi Jinping’s term is coming to an end. The new President Wang Wang is opposed to shrinking the balance sheet.

Understanding King has overturned many policies of the Communist Party, such as medical insurance policies and withdrawal from the TPP. He also wants to stop shrinking the balance sheet. Understanding King believes that shrinking the balance sheet is not beneficial to the economic growth of the United States.

But stopping the balance sheet reduction requires the consent of the Federal Reserve, and the Fed prefers to continue shrinking the balance sheet to prevent severe inflation in the United States.

So King Wang found another way and launched a tax reduction policy. The corporate tax has been reduced from 35% to 15%, the personal income tax has been simplified from level 7 to level 3, and the threshold has been significantly raised. He even wants to abolish the inheritance tax.

Taxes are reduced, and the reduced money will naturally remain in the market. So from an economics perspective, tax cuts are equivalent to putting money into the market.

And shrinking the balance sheet is to recover funds in the market. Shrinking the balance sheet and cutting taxes are completely opposite monetary policies.

Therefore, when balance sheet reduction and tax cuts are carried out at the same time, it is equivalent to filling the pool with water at the same time and draining water out of the pool at the same time. Shrinking the balance sheet becomes a useless effort.

To put it simply, the money printed during the four rounds of QE has not been recovered, but continues to remain in the market. This is tantamount to planting a time bomb for future inflation in the United States.

The next step was the arrival of the epidemic. The United States wanted to send money to the people, but the U.S. government did not have the money. So the market began to predict that the Federal Reserve would start the fifth round of QE.

As a result, the Federal Reserve came even more ruthlessly. What do I want for the fifth round of QE? It’s unlimited QE without even planning. That would save trouble!

During the two-year epidemic, the Federal Reserve has been conducting QE. It is estimated that only the Federal Reserve itself knows how much money they have printed in the past two years. And the sequelae of years of printing money, that is, inflation has finally arrived.

The supply chain disruption caused by the epidemic is the trigger of inflation. Faced with inflation, the U.S. government is clear that it is time to shrink its balance sheet again.

However, the ruling authorities are somewhat hesitant about this. The U.S. economy has not fully recovered after the epidemic. Once the balance sheet is reduced, it will definitely be detrimental to economic growth.

The United States was deciding when to start shrinking its balance sheet, and the conflict between Russia and Ukraine broke out. Inflation, which had been relatively stable, quickly broke out, and it was a global inflation.

What is happening next is what is happening now. The Federal Reserve began to raise interest rates continuously, funds began to flow back to the United States, the euro depreciated rapidly and has become equal to the US dollar, the Japanese yen fell even more fiercely, and the Korean won also fell to the level of the subprime mortgage crisis. .

The United States once again takes advantage of the hegemony of the US dollar to cut Europe and Japan's leeks, just like it did in the "Plaza Accord" more than 30 years ago, but this time there is a new crop of leeks, called South Korea!