How about does American Federal Reserve Committee succeed
As to world, the best final result is just the stagflation, worse result is the malignant inflation, and may make global economy fall into confusedly
On March 18, American Federal Reserve Committee announces that will buy national debt of 1,250 billion dollars, commercial instruments and mortgage bond. In fact, since the crisis begins, American Federal Reserve Committee has been doing so, already level than the crisis of its balance sheet has looked through 1 time. 3 times that the new plan may make the balance sheet of American Federal Reserve Committee swell before the crisis. American Federal Reserve Committee promises, once economy is powerful enough, or the inflation resumes, it will shrink the balance sheet. However, this kind of expansion trend is so impossible as to turn back. In a situation that other conditions are the same, if the balance sheet of American Federal Reserve Committee swells 2 times instead of 3 times finally, then, debased and half the too U.S. dollars.
However, if other Central Banks cash U.S. dollar and have a appreciation pressure for not allowing the home currency, thus go to print the bank note, then, other currency face the down pressure. It may be that the currency of various countries competitively devalue that global foreign exchange market is balanced, this will make the main economy get deeply stuck in the inflation. I still think, the main road of global economy leads to stagflation. The finance stimulates and inflation, will promote global economy to rebound in the second half of 2009. However, this kind of rebounding is only a false appearance. Global economy will decline again in 2010, till that time, the inflation will begin to dilute the monetary policy and stimulate the economic result.
After American Federal Reserve Committee releases declaring, U.S. dollar drops at the sound, creates the greatest amount of decrease in single week, earning ratio of the national debt and mortgage interest rate drop by a wide margin. Just as American Federal Reserve Committee wishes the response of the market. So long as the market thinks the monetary expansion action of American Federal Reserve Committee is limited, i.e. American Federal Reserve Committee can not print U.S. dollar unrestrictedly, then, the market can fix the price to U.S. dollar again. Following the monetary policy of American Federal Reserve Committee to change too at other assets prices.
The motive of the policy of American Federal Reserve Committee is for stabilizing the price of real estate. So far, through guaranteeing that " poisonous assets " are held With offering the loan to the financial institution gotten into hot water, the attention of American Federal Reserve Committee is to want the steady financial system. Though it has already made some effects, however, this does not have any meaningful contribution to real economy: U.S.A.'s economy worsens continuously, the rate of unemployment of soaring constantly is a clear proof. American Federal Reserve Committee asserts, it must prevent the price of the real estate from dropping, thus hold economy. American real estate trade has already dropped from the summit of 2006 heavily. The stock price dropped the wealth brought shrank to exceed 6,000 billion dollars. Because a large amount of financial products were supported by the price of the real estate, so, the multiplier effect brought is economy and main reason of the financial turmoil that the price of the real estate drops.
Can Gaertner's abacus be sounded
American Ministry of Finance has already released a plan, has determined to buy " poisonous assets " of 1,000 billion dollars from bank gotten into hot water . In this plan, private investors can invest 1 dollar to actually bought " poisonous assets " in the tool of a special use . Meanwhile, the U.S. government will invest 1 dollar to form a complete set. Then, this tool can be assured by the U.S. government, borrow 12 dollars more. This will mean, this new tool can borrow the short debt according to a interest rate, borrow the long debt for ten years according to interest rate of 2.75%. The subsidy of this project, come from the guarantee for debt of 12 dollars of the government actually. Private investors can assure through the debt of the government, will reciprocate and enlarge by 6 times. This is that a private investor will be to the reason why this plan interested in.
However, " Gaertner's plan " Put out with American predecessor's minister of Ministry of Finance Paulsen " The assets succour plan of the question " ( TARP) Original intention,have too great difference. Because the market is right " Poisonous assets " It is too low to fix the price, so that the bank is unable to survive, so, " Paulsen's plan " Not effective. In fact, according to the present market price, the large main bank has already gone bankrupt several times. The hope of the new plan, lie in private investment can be encouraged by the lever investment repayment of 6 times. Under this kind of encouragement, the private department can participate in " poisonous assets " Competitive bidding,thus enable bank can survive. However, I do not have sheer confidence to this kind of wishful thinking. I am anxious, " Gaertner's plan " Defective. If " poisonous assets " The price has not risen, the U.S. government may return to the old road of the nationalization bank.
Bank rescue project concern who come, pay cost, concern banking system need how long return to normal to offer the normal service. The former is a stock right question, and the political complexion is relatively heavy. People hope the storey of shareholder, creditor and manager of the bank is before the taxpayer make contributions, can pay more. The government inclines to keep capability of the banking system. The U.S. government is assuring with the debt, comes to hide it to replenish a manufacturer's fact of crisis. Let us watch Americans quietly and tolerate this kind of behavior. About how the latter minimize confused bank to economic related destruction. Look from this angle, the government will compromise, thus make the system of the bank run well as soon as possible, however, this will make the root of the trouble of making the crisis replenished.
It is that a bear market rebound that the stock market that we see now rebounds. Just as I write at the beginning of 2009, a reliable bank rescue plan will expedite the emergence of a bear market and rebound. But it will not last to rebound. After the foam of credit, reduce the course of the lever to sustain for a long time, this will hinder economy from recovering effectively. The bear market that originates in the autumn of 2007 will last three years at least, may exceed five years too this. Even if lever normalization, global economy still needs to look for the new growth mode. It's a pity, we have not found yet the structural reform has already begun, thus can find out the new growth mode.
I have already discussed, after evaporating in real estate and credit bubble, may have three results: Bankrupt, inflation and government are succoured. The first result will force creditors to accept the losses left after debts are discharged. The second result can make debtors keep the assets, because the inflation makes its debt cut down. In the 1930s, U.S.A. chose the bankrupt solution. In the twenties of the 20th century, Germany chose the inflation. In the 1990s, Japan chose the government to succour. It drops interest rate to zero, thus make the debtor's cost reduce to zero, and allow them to clear off a debt in ten years gradually. Meanwhile, Japanese Government expands the financial deficit, enables debtors to get the cash. This course is course of the debt that the public department bears the private department gradually. At the beginning of 1990s, Japanese Government could bear private department's half the debts. If not carry out the finance and stimulate and bear the private debt gradually, Japan may develop better.
After the foam evaporates, main driving force is the normalization. For example, in a normal economy, the income is 100, the price of the real estate is 100, the debt is 60. In the real estate and credit foam, the price of the real estate rises to 200, the debt turns into 150, but the income is still 100. As the foam evaporates, the price of the real estate will fall back to 100. However, the name value of the debt will not drop. If choose to solve the problem bankrupt, the persons who buy house become penniless. The creditor regains the house property, sell it by 100, record losses 50. Under the scene of the inflation, the income rises to 200. The persons who buy house keep the real estate. The creditor gets 150. But because true value has devalued by 50%, so, the creditor, because of 75 inflation losses. Under the third kind of scene, the creditor pretends debtors have not gone bankrupt, lengthen maturity, reduce the interest. Finally, the creditor can regain 150. However, because monetary value does not have now more, the creditor takes loss part in the future. Can prove, the creditor can only regain 100 at most.
The foam evaporates to make this course make complicatedly dynamically. No matter the price of the real estate drops or inflation will all cause the related damage. The most important thing is the rate of unemployment rises, this is a net loss compared with redistributing, unused workers can always produce something. Policy maker such as American Federal Reserve Committee, usually regard minimizing and damaging the policy goal relatedly as. I do not think, American Federal Reserve Committee has clear plans, only move with pressure. Because it drop, look at, make the No.1 enemy real estate price, attempt to prevent. So, American Federal Reserve Committee will print the bank note to buy mortgage assets, its consequence inhibits the interest rate of mortgage. Drop with the interest rate of mortgage, the risk that the debtor went bankrupt has been reduced, therefore has relaxed the house property to sell depressedly. Certainly, reducing the interest rate of mortgage will increase the demand of the real estate too. Through reducing supply, stimulate the demand, American Federal Reserve Committee hopes to stabilize price and economy of the real estate.
Does it buy stocks to sell the national debt?
Let us suppose American Federal Reserve Committee has succeeded, then, what will the world turn into? If fall and get back to the normal level, the real estate price of U.S.A. has already dropped by half. The policy of American Federal Reserve Committee can be replaced with inflation and further glided. So, as to the normal route, there may be 20% - 25% inflation in U.S.A.'s economy. Assume other conditions are the same, U.S. dollar will devalue from this level by 20% - 25%. American Federal Reserve Committee release week not declaring, U.S. dollar fall about 5%. I think, the story that U.S. dollar devalues will also last.
Because the policy that American Federal Reserve Committee is printing it the bank note, saving the debtor is applied to the unprecedented intensity, as to world, the best final result is just the stagflation, worse result is that the market feels panic because U.S. dollar supply increasing constantly, and sell U.S. dollar at all costs. This will initiate U.S. dollar to collapse, the misfortune of rouble was exactly the same with 1998. Its result is galloping inflation, and may make global economy fall into the confusion.
How does China tackle the policy of American Federal Reserve Committee? It is impossible for China to exert pressure for American Federal Reserve Committee, thus enable its policy of change, protect the foreign exchange reserves of China. Choose to be maximizing for U.S.A.'s intersts in policy of American Federal Reserve Committee, if needing extravagant hope U.S.A., can make contributions to the fact that the benefit of China is maximized. Until I point out, because RMB and U.S. dollar get in touch close, China foreign exchange reserve must take U.S. dollar assets as the core. Only ones that can substitute the American national debt are the American stock. In a situation that it is weak to walk in U.S. dollar, the stock should be better than bonds, they can avoid the inflation and weak tendency U.S. dollar effectively.
First of all, the income of half for 500 indexes of Standard & Poor is overseas. If U.S. dollar leaves weakly, the income by U.S. dollar will increase. Step forward, the American company will increase the competitiveness from weak tendency U.S. dollar, their stock will become more valuable too.
Second, if American Federal Reserve Committee succeeds in improving U.S.A.'s economy, the domestic demand increased will improve the company and make profits.
Third, assets such as brand and technology of the company, will all appreciate in the inflation.
The best method which enters the stock market is to buy 500 indexes of Standard & Poor. It is only assets that can match in excellence or beauty on flowability with the American national debt. Its behavior is superior to 90% of the fund manager's achievements, and is certainly better than the stock which Chinese Government choose. This avoids causing the politics that Chinese Government attempts to control American enterprises to dispute too.
However, I have not supported the Chinese Central Bank to sell the American national debt now, buy in the stock. What the first step will be done is, make the assets make up and approach the cash, reduce long one of the American national debt held as much as possible, that is to say the national debt bought is shorter and shorter on date due.
Can't expect the other countries to protect China's benefit
In order to prevent the foreign exchange reserve from devaluing, China should make great efforts to prevent the foreign exchange reserve from increasing. The only method is to increase the domestic demand, thus reduce the favourable trade balance. Though the export of China drops with about 20% of the ranges, however, import and drop faster, the favourable trade balance will not dwindle at all. This will force China to continue buying U.S. dollar assets. I think, two policies can reduce the favourable trade balance fast.
First of all, in 2009, China can expand the financial deficit to 1,500 billion yuan from 1,000 billion yuan. The extra finance should aim at family's department but not invest in to stimulate. For example, through derating, improve family's department's expenditure ability. The value-added tax can be in order to obviously reduce. It is a kind of business tax, there are the hard properties of retreating, this means greater than the rich to the proportion that the poor collecting.
China should also cut down the highest marginal tax rate of the Individual Income Tax, reduces from 40% to 25%, the same as corporate income tax. The present high tax rate is right to levy taxs and very unfavorable. Individual Income Tax income the proportion very much little of the whole fiscal revenues, and the high tax rate makes people have motive of evading payment of duty. Meanwhile, most entrepreneur keep accounts for enterprise expense their individual expenditure, thus achieve the goal of evading payment of duty. The same company and personal income income tax rate can dispel this kind of motive.
Secondly, the government can give the share of state-owned enterprise that it is held to people, thus stimulate consumption. I have calculated briefly, this plan can stimulate the consumption of 500 billion yuan. Because economy increases with consumption and can be improved, the price of these stocks will rise, and has increased the consumption of 500 billion yuan.
Tax reduction and share of state-owned enterprise of distribution can reduce the favourable trade balance of China to a certain extent, thus avoid holding the U.S. dollar assets. This will change the floating rate into to lay the foundation for RMB too, and become independent strength in global economy.
The U.S. government is doing the thing that is making its economic benefits maximize. China must do so too. The bright idea, i.e. U.S.A. maximize, act for the interests of China, it is sheerly the daydream. In the modern society, everybody is making one's own interests maximize.
As to world, the best final result is just the stagflation, worse result is the malignant inflation, and may make global economy fall into confusedly
On March 18, American Federal Reserve Committee announces that will buy national debt of 1,250 billion dollars, commercial instruments and mortgage bond. In fact, since the crisis begins, American Federal Reserve Committee has been doing so, already level than the crisis of its balance sheet has looked through 1 time. 3 times that the new plan may make the balance sheet of American Federal Reserve Committee swell before the crisis. American Federal Reserve Committee promises, once economy is powerful enough, or the inflation resumes, it will shrink the balance sheet. However, this kind of expansion trend is so impossible as to turn back. In a situation that other conditions are the same, if the balance sheet of American Federal Reserve Committee swells 2 times instead of 3 times finally, then, debased and half the too U.S. dollars.
However, if other Central Banks cash U.S. dollar and have a appreciation pressure for not allowing the home currency, thus go to print the bank note, then, other currency face the down pressure. It may be that the currency of various countries competitively devalue that global foreign exchange market is balanced, this will make the main economy get deeply stuck in the inflation. I still think, the main road of global economy leads to stagflation. The finance stimulates and inflation, will promote global economy to rebound in the second half of 2009. However, this kind of rebounding is only a false appearance. Global economy will decline again in 2010, till that time, the inflation will begin to dilute the monetary policy and stimulate the economic result.
After American Federal Reserve Committee releases declaring, U.S. dollar drops at the sound, creates the greatest amount of decrease in single week, earning ratio of the national debt and mortgage interest rate drop by a wide margin. Just as American Federal Reserve Committee wishes the response of the market. So long as the market thinks the monetary expansion action of American Federal Reserve Committee is limited, i.e. American Federal Reserve Committee can not print U.S. dollar unrestrictedly, then, the market can fix the price to U.S. dollar again. Following the monetary policy of American Federal Reserve Committee to change too at other assets prices.
The motive of the policy of American Federal Reserve Committee is for stabilizing the price of real estate. So far, through guaranteeing that " poisonous assets " are held With offering the loan to the financial institution gotten into hot water, the attention of American Federal Reserve Committee is to want the steady financial system. Though it has already made some effects, however, this does not have any meaningful contribution to real economy: U.S.A.'s economy worsens continuously, the rate of unemployment of soaring constantly is a clear proof. American Federal Reserve Committee asserts, it must prevent the price of the real estate from dropping, thus hold economy. American real estate trade has already dropped from the summit of 2006 heavily. The stock price dropped the wealth brought shrank to exceed 6,000 billion dollars. Because a large amount of financial products were supported by the price of the real estate, so, the multiplier effect brought is economy and main reason of the financial turmoil that the price of the real estate drops.
Can Gaertner's abacus be sounded
American Ministry of Finance has already released a plan, has determined to buy " poisonous assets " of 1,000 billion dollars from bank gotten into hot water . In this plan, private investors can invest 1 dollar to actually bought " poisonous assets " in the tool of a special use . Meanwhile, the U.S. government will invest 1 dollar to form a complete set. Then, this tool can be assured by the U.S. government, borrow 12 dollars more. This will mean, this new tool can borrow the short debt according to a interest rate, borrow the long debt for ten years according to interest rate of 2.75%. The subsidy of this project, come from the guarantee for debt of 12 dollars of the government actually. Private investors can assure through the debt of the government, will reciprocate and enlarge by 6 times. This is that a private investor will be to the reason why this plan interested in.
However, " Gaertner's plan " Put out with American predecessor's minister of Ministry of Finance Paulsen " The assets succour plan of the question " ( TARP) Original intention,have too great difference. Because the market is right " Poisonous assets " It is too low to fix the price, so that the bank is unable to survive, so, " Paulsen's plan " Not effective. In fact, according to the present market price, the large main bank has already gone bankrupt several times. The hope of the new plan, lie in private investment can be encouraged by the lever investment repayment of 6 times. Under this kind of encouragement, the private department can participate in " poisonous assets " Competitive bidding,thus enable bank can survive. However, I do not have sheer confidence to this kind of wishful thinking. I am anxious, " Gaertner's plan " Defective. If " poisonous assets " The price has not risen, the U.S. government may return to the old road of the nationalization bank.
Bank rescue project concern who come, pay cost, concern banking system need how long return to normal to offer the normal service. The former is a stock right question, and the political complexion is relatively heavy. People hope the storey of shareholder, creditor and manager of the bank is before the taxpayer make contributions, can pay more. The government inclines to keep capability of the banking system. The U.S. government is assuring with the debt, comes to hide it to replenish a manufacturer's fact of crisis. Let us watch Americans quietly and tolerate this kind of behavior. About how the latter minimize confused bank to economic related destruction. Look from this angle, the government will compromise, thus make the system of the bank run well as soon as possible, however, this will make the root of the trouble of making the crisis replenished.
It is that a bear market rebound that the stock market that we see now rebounds. Just as I write at the beginning of 2009, a reliable bank rescue plan will expedite the emergence of a bear market and rebound. But it will not last to rebound. After the foam of credit, reduce the course of the lever to sustain for a long time, this will hinder economy from recovering effectively. The bear market that originates in the autumn of 2007 will last three years at least, may exceed five years too this. Even if lever normalization, global economy still needs to look for the new growth mode. It's a pity, we have not found yet the structural reform has already begun, thus can find out the new growth mode.
I have already discussed, after evaporating in real estate and credit bubble, may have three results: Bankrupt, inflation and government are succoured. The first result will force creditors to accept the losses left after debts are discharged. The second result can make debtors keep the assets, because the inflation makes its debt cut down. In the 1930s, U.S.A. chose the bankrupt solution. In the twenties of the 20th century, Germany chose the inflation. In the 1990s, Japan chose the government to succour. It drops interest rate to zero, thus make the debtor's cost reduce to zero, and allow them to clear off a debt in ten years gradually. Meanwhile, Japanese Government expands the financial deficit, enables debtors to get the cash. This course is course of the debt that the public department bears the private department gradually. At the beginning of 1990s, Japanese Government could bear private department's half the debts. If not carry out the finance and stimulate and bear the private debt gradually, Japan may develop better.
After the foam evaporates, main driving force is the normalization. For example, in a normal economy, the income is 100, the price of the real estate is 100, the debt is 60. In the real estate and credit foam, the price of the real estate rises to 200, the debt turns into 150, but the income is still 100. As the foam evaporates, the price of the real estate will fall back to 100. However, the name value of the debt will not drop. If choose to solve the problem bankrupt, the persons who buy house become penniless. The creditor regains the house property, sell it by 100, record losses 50. Under the scene of the inflation, the income rises to 200. The persons who buy house keep the real estate. The creditor gets 150. But because true value has devalued by 50%, so, the creditor, because of 75 inflation losses. Under the third kind of scene, the creditor pretends debtors have not gone bankrupt, lengthen maturity, reduce the interest. Finally, the creditor can regain 150. However, because monetary value does not have now more, the creditor takes loss part in the future. Can prove, the creditor can only regain 100 at most.
The foam evaporates to make this course make complicatedly dynamically. No matter the price of the real estate drops or inflation will all cause the related damage. The most important thing is the rate of unemployment rises, this is a net loss compared with redistributing, unused workers can always produce something. Policy maker such as American Federal Reserve Committee, usually regard minimizing and damaging the policy goal relatedly as. I do not think, American Federal Reserve Committee has clear plans, only move with pressure. Because it drop, look at, make the No.1 enemy real estate price, attempt to prevent. So, American Federal Reserve Committee will print the bank note to buy mortgage assets, its consequence inhibits the interest rate of mortgage. Drop with the interest rate of mortgage, the risk that the debtor went bankrupt has been reduced, therefore has relaxed the house property to sell depressedly. Certainly, reducing the interest rate of mortgage will increase the demand of the real estate too. Through reducing supply, stimulate the demand, American Federal Reserve Committee hopes to stabilize price and economy of the real estate.
Does it buy stocks to sell the national debt?
Let us suppose American Federal Reserve Committee has succeeded, then, what will the world turn into? If fall and get back to the normal level, the real estate price of U.S.A. has already dropped by half. The policy of American Federal Reserve Committee can be replaced with inflation and further glided. So, as to the normal route, there may be 20% - 25% inflation in U.S.A.'s economy. Assume other conditions are the same, U.S. dollar will devalue from this level by 20% - 25%. American Federal Reserve Committee release week not declaring, U.S. dollar fall about 5%. I think, the story that U.S. dollar devalues will also last.
Because the policy that American Federal Reserve Committee is printing it the bank note, saving the debtor is applied to the unprecedented intensity, as to world, the best final result is just the stagflation, worse result is that the market feels panic because U.S. dollar supply increasing constantly, and sell U.S. dollar at all costs. This will initiate U.S. dollar to collapse, the misfortune of rouble was exactly the same with 1998. Its result is galloping inflation, and may make global economy fall into the confusion.
How does China tackle the policy of American Federal Reserve Committee? It is impossible for China to exert pressure for American Federal Reserve Committee, thus enable its policy of change, protect the foreign exchange reserves of China. Choose to be maximizing for U.S.A.'s intersts in policy of American Federal Reserve Committee, if needing extravagant hope U.S.A., can make contributions to the fact that the benefit of China is maximized. Until I point out, because RMB and U.S. dollar get in touch close, China foreign exchange reserve must take U.S. dollar assets as the core. Only ones that can substitute the American national debt are the American stock. In a situation that it is weak to walk in U.S. dollar, the stock should be better than bonds, they can avoid the inflation and weak tendency U.S. dollar effectively.
First of all, the income of half for 500 indexes of Standard & Poor is overseas. If U.S. dollar leaves weakly, the income by U.S. dollar will increase. Step forward, the American company will increase the competitiveness from weak tendency U.S. dollar, their stock will become more valuable too.
Second, if American Federal Reserve Committee succeeds in improving U.S.A.'s economy, the domestic demand increased will improve the company and make profits.
Third, assets such as brand and technology of the company, will all appreciate in the inflation.
The best method which enters the stock market is to buy 500 indexes of Standard & Poor. It is only assets that can match in excellence or beauty on flowability with the American national debt. Its behavior is superior to 90% of the fund manager's achievements, and is certainly better than the stock which Chinese Government choose. This avoids causing the politics that Chinese Government attempts to control American enterprises to dispute too.
However, I have not supported the Chinese Central Bank to sell the American national debt now, buy in the stock. What the first step will be done is, make the assets make up and approach the cash, reduce long one of the American national debt held as much as possible, that is to say the national debt bought is shorter and shorter on date due.
Can't expect the other countries to protect China's benefit
In order to prevent the foreign exchange reserve from devaluing, China should make great efforts to prevent the foreign exchange reserve from increasing. The only method is to increase the domestic demand, thus reduce the favourable trade balance. Though the export of China drops with about 20% of the ranges, however, import and drop faster, the favourable trade balance will not dwindle at all. This will force China to continue buying U.S. dollar assets. I think, two policies can reduce the favourable trade balance fast.
First of all, in 2009, China can expand the financial deficit to 1,500 billion yuan from 1,000 billion yuan. The extra finance should aim at family's department but not invest in to stimulate. For example, through derating, improve family's department's expenditure ability. The value-added tax can be in order to obviously reduce. It is a kind of business tax, there are the hard properties of retreating, this means greater than the rich to the proportion that the poor collecting.
China should also cut down the highest marginal tax rate of the Individual Income Tax, reduces from 40% to 25%, the same as corporate income tax. The present high tax rate is right to levy taxs and very unfavorable. Individual Income Tax income the proportion very much little of the whole fiscal revenues, and the high tax rate makes people have motive of evading payment of duty. Meanwhile, most entrepreneur keep accounts for enterprise expense their individual expenditure, thus achieve the goal of evading payment of duty. The same company and personal income income tax rate can dispel this kind of motive.
Secondly, the government can give the share of state-owned enterprise that it is held to people, thus stimulate consumption. I have calculated briefly, this plan can stimulate the consumption of 500 billion yuan. Because economy increases with consumption and can be improved, the price of these stocks will rise, and has increased the consumption of 500 billion yuan.
Tax reduction and share of state-owned enterprise of distribution can reduce the favourable trade balance of China to a certain extent, thus avoid holding the U.S. dollar assets. This will change the floating rate into to lay the foundation for RMB too, and become independent strength in global economy.
The U.S. government is doing the thing that is making its economic benefits maximize. China must do so too. The bright idea, i.e. U.S.A. maximize, act for the interests of China, it is sheerly the daydream. In the modern society, everybody is making one's own interests maximize.
