Two years ago I said, 09, 10 years with no problems, but to be a big problem in 2011, I wrote another article late last year, said in July this year after a new outbreak of the U.S. subprime crisis, look at me right now , while U.S. stocks have occurred since early August, a continuous fall, is the United States entered a new round of financial crisis, warning. U.S. stocks plummeted
the real reason I was asked, would you not say that the crisis emerged in July do, how it happened to U.S. stocks plunge in early August? In fact these people did not notice, the U.S. stock This round drop from July 22 after the start, from July 23 to August 4 U.S. stocks began 8 days before the crash, the Dow has appeared in a rare fell 6.8%. If the The reason why we did not notice
crisis began in late July from the outcrop, because attention has been so much noise Feifei steaming ceiling of U.S. Treasury bonds and debt issues in Europe to attract over. In fact these two problems are not fundamental problems, get debt ceiling issue, related to the U.S. economy, the line between life, the two parties, both houses who do not dare cross this thing a joke, by raising the upper limit of the resolution had no suspense. If you want to discuss the U.S. national debt problem, but should discuss is the additional two trillion national debt who to buy, because even if the U.S. Congress to approve the U.S. Treasury could send ten trillion U.S. dollars of more debt, no one will buy the debt limit is White improved. In the past, the U.S. Treasury more than 60 percent by private institutions and residents of the United States bought, but has started since last year are no longer marketable, which is forcing the Fed to engage the root causes of the QE2. So the real issue in the U.S. debt problem worse, is more and more the more who buy U.S. debt issues, such problems do not stood the discussion, yet one is not a problem of U.S. debt ceiling brought speculation, obviously in order to transfer people’s attention.
European debt issues as well. United States first used in the hands of three major rating companies in some countries of the euro area destroyed the credibility of sovereign debt, but also use their media agencies to issue debt in Europe than the big boast, in fact, to the European economy much healthier than the United States. General use then accumulate new debt and debt to GDP ratio to measure the health of the economy, and last year’s situation is to see the new issued bonds, the euro area is 4%, Japan 6%, the United States is 10%. From the accumulated national debt of view, the euro area is 85%, the U.S. is 100% Japan 200%, no matter how clearly see all of Europe’s most economically healthy, but until now the U.S. national debt has been reduced to junk-level rating in several euro area country, not one of the debt of non-compliance, what is your U.S. triple-A, is three C-level people have it? even more ridiculous is the U.S. in August 2 through debt limit, seems to have a dark cloud had cleared , and has come to a 4 August the U.S. stocks plunged, in the time to explain why, even pull out again to speak European debt problems, debt problem is caused U.S. stocks plunged in Europe, but why that day than the U.S. stocks European stocks fall but still light it? such as Britain, Germany and the stock market is down 3.4 percent, France’s stock market fell 3.9%. U.S. stocks plummeted
Some people say that is because the S & P lowered the credit rating of U.S. sovereignty, but the tone level in the S & P on August 5, crash happened on August 4, not to mention there’s still a eight losing streak.
Overall, U.S. stocks plummeted for a variety of reasons to explain, but in my opinion are far-fetched, I was able to accurately predict the U.S. economy later this year will be a major event in July, according to the U.S. In the subprime crisis, toxic assets and large not been addressed, but are covered and frozen up, so once the freeze period in the past, they are faced liquidation, these toxic assets will be re-the weight of U.S. financial institutions. Moreover, the large U.S. based derivative financial assets, the U.S. financial system on the U.S. real economy approximately 23 to 24 trillion U.S. dollars in loans, these mortgages, auto loans, student loans and credit card loans are securitized after U.S. financial institutions has been derivatized, before the formation of hundreds of trillions of dollars in derivative financial assets, so once the bottom of the collapse, cover the top of this derivative is bound to follow the building collapsed.
in the subprime crisis first broke out, the end of 2008, the United States about 50 million households with home loans, 200 million households appeared to default, then mainly by But the end of last year, the U.S. economic recovery after the crisis has always been weak, the unemployment rate again rose, incomes shrink, so the family mortgage defaults have occurred more than five million, and in September last year, the first new home mortgage defaults of over 10 million. And because prices fell more than 40%, resulting in 85% of the mortgage home loan,home loan, the loan is higher than the price, so the statistics agency said the United States, about 20 million households have mortgages do not want to back the mortgage, anyway by the mortgage down payment at the time when very few or even no down payment, these loans to buy a house with the banks on their own throw more favorable. So, if there are 25 million U.S. households, or more than half of the mortgage home mortgage defaults to occur, more than half of the derivative financial bubble burst would have followed, the massive U.S. financial buildings on non-derivative is not down to the U.S. financial system to form a devastating blow. Therefore, the outbreak of the current situation is already higher than the debt crisis of 2007 and 2008 times more dangerous lot.
problem lies in a standard derivative contracts are generally five years, in the subprime crisis erupted in 2007 when the event of default of financial assets, should be signed in 2002, while the United States only after 2005 derivative financial products into the wild growth of the peak, while the 2009 to 2010 this year because the U.S. freeze of the toxic assets liquidated so far this stage must be liquidated when the maturity of the toxic assets will be more than 2007 time is much greater. And I say that this year the U.S. crisis will occur in July, is based on is the last place in July focus on maturity of financial contracts can not be honored, so presumably in July should focus on maturity of financial contracts is an important point.
I said these many still speculated that under the circumstances of the conclusion, but no relevant news to prove, because the U.S. mainstream media are in the hands of Wall Street’s financial bigwigs, in early 2009 after we U.S. news reports, will no longer see those formed during the last crisis, the huge figure of toxic assets, but we know that, after Japan’s asset bubble burst 15 years, there have been large, continuous on disposal and how to dispose of toxic assets reported.
However, such big contradictions, like how can possession is maintained possession of it? U.S. financial institutions because most insider, so to know when the crisis hit hard to resolve this crisis, so we started sell shares to buy, this is the real reason this stock market crash, but also through the stock market crash this phenomenon, exposing the little fox tail. For example, on August 4 in the U.S. stock market crash, led by banking stocks is, of which Bank of America fell 20 percent, Morgan Stanley fell 14%, AIG fell 10 percent, the day’s decline, the other segment also red and green, all green, only the bank shares set to close. Then we can think of, from July to early August this time, in addition to discussing the U.S. national debt ceiling will have any negative impact, when there are any negative news will make the U.S. bank shares fall does occur? News of course, but no be disclosed, but Wall Street financiers are deeply covered up, but also take the U.S. debt, debt problems in Europe to divert public attention, but they do aim is to cover up the truth, get the truth in order to avoid market will occur in U.S. financial assets more massive sell-off, is to use
before the crash there are some signs that this also shows that the new crisis coming, the U.S. government is again in July for U.S. companies to repatriate profits substantial reduction of income tax, reduced from 35% to 5%, is said to be attracted back to $ 300 billion, and this practice is to Toshitsugu debt crisis in 2008 when it adopted the worst off, so this move also appears surprising, because only when the crisis measures, and Why will not the crisis when they were out for? only one answer, that is a potential crisis can be clearly seen to be quickly taken to hedging measures.
If the tax is fiscal policy, in place before this fall, monetary policy has also debut. Since the new millennium to the subprime crisis, the U.S. broad money (M2) annual increase in the amount of 3,700 billion U.S. dollars, sub-debt crisis in order to save the city in 2008, the United States, broad money M2 jumped by $ 750 billion, followed by 2009 and 2010, respectively, an increase of only 2900 and 2800 billion U.S. dollars, but from the end of last year to 25 July this year, M2 has suddenly soared from the $ 8.82 trillion to $ 9.32 trillion, or 7 months to put 5,000 billion U.S. dollars, the average monthly volume reached $ 71.4 billion invested, has more than 2008 years are $ 62.5 billion bailout level. Which, on June 20 to July 25 this month, in his early years, to be devoted to the $ 248 billion, is a full seven months before half the amount invested, and in 2008 the maximum monthly amount of money invested no more than 2 billion dollars. What if there is no outbreak of the Great Depression, this practice normal? But why all the media has been The Fed put such a large scale currency, plus July 23 starting from the U.S. stock market U.S. financial institutions emergency
crisis will develop
then look at how a new debt crisis in the U.S. this time the prospect of it, I think there are three aspects of the situation is judged based on:
First, as already said, currently has assets of toxic debt crisis than in times when the 2007 is much greater, but due to the size of debts is much greater than the time, so the scale of the crisis only than the last time on the big and no more than a small.
Second, the U.S. government to deal with the crisis means that instead of much less than when the last crisis. Just in the subprime crisis broke out, the U.S. national debt has only 8.9 trillion, debt was 65%, still 2 / 3 of the safe limits, but by now more than 14 trillion dollars debt ratio is close to 100%, so from a financial tool, one can use the space is getting smaller. From monetary policy perspective, the profit has been reduced to is a new, larger liquidity crisis, which are two different kinds of problems. If a lack of liquidity, it means that asset quality is good, but the present moment can not be sold, so long as the banks are willing to finance to help businesses breath over this feeling, companies will be able to live over. But the liquidity crisis is different because the company’s assets have become worthless hands, has been insolvent, and thus the occurrence of massive debt default, not to provide liquidity to solve the problem, so the United States to engage more QE can not resolve the current crisis facing.
Third, this crisis will likely collapse in the dollar. Problems currently facing the United States, due to the huge trade deficit has long been the capital account surplus must be used to make up for the previous financial institution by the output of the production of financial products to maintain the surplus, after the outbreak of the subprime crisis in U.S. financial institutions produce the ability of financial products to be destroyed, only to stand by the U.S. government to sell the credibility of the remaining front of the U.S. Treasury to maintain the surplus of. But the U.S. government’s debt ratio much higher than the warning line after it has started to doubt the credibility of U.S. debt, investors who buy U.S. debt is less and less, so only rely on the Federal Reserve to underwrite, QE2 is so out, so the QE of nature of the changes after QE2, is from the U.S. financial and non-financial corporate finance, into a direct financing for the U.S. Treasury. Therefore, the U.S. launched QE3 no doubt that if the U.S. raised the debt limit $ 2.1 trillion and each of the QE is $ 700 billion, just let the Fed got QE5. But the United States to engage in the QE is more spam bills, and ultimately will lead to dollar devaluation, the U.S. has a surplus when the country would not be willing to accept U.S. dollars, willing to continue to hold dollar assets, and $ U.S. financial markets will crash. So, this time the crisis erupted, the result is likely to collapse in the dollar.
Specifically, the new subprime crisis, U.S. stocks will continue deep down, followed by a number of large U.S. financial institutions to reproduce the closures, the lead is probably Bank of America, Morgan Stan Lee and AIG and so these in the stock market crash in this led by financial institutions. There is also an important indicator of an indicator is to see when will U.S. stocks, U.S. bonds and gold and the dollar alone or together up the situation, then it should be the new U.S. subprime mortgage crisis into a serious moment of alarm. If U.S. stocks fell and gold and U.S. bonds are still up, it shows there is confidence in financial institutions, investment, capital investment is still moving at all, but if all fields or only assets of $ up, it means that U.S. financial institutions has reached the final moment, only desperately grasping cash to meet liquidity crisis.
was referred to the crisis dollar collapse step, may 2013, I had also predicted that the United States subprime mortgage crisis to the most important new time is two years after the outbreak of the crisis, say I actually do not have much basis, simply because the last crisis erupted in mid-2007 to 2008 before entering the most critical moment, the crisis should be more serious than the last, the U.S. government to come up with a means to deal with more fragile, so most important moment of crisis may be a new crisis in more than two years time there.
must also be noted that, in the hands of contemporary American hegemony, in addition to monetary hegemony have military hegemony, and the relationship between the two support each other, so if the U.S. dollar hegemony will end facing the situation, it will use military means to defend its mechanism is that the dollar will collapse because of the large-scale departure of international capital, and international capital flows out of the United States in the direction of focus will be U.S. military strikes or poor security environment manufacturing area, Here I am referring to, or Europe, so the outbreak of the crisis in the shadow of a new world war still exists.
China: policy direction to adjust timely to
the same as last time, the outbreak of the U.S. subprime crisis will not only lead to the new world economy serious negative impact on growth. This effect, mainly through trade linkages to transfer, that the new crisis has led to a U.S. recession, and then lead the world trade recession, the last of shrinking foreign demand by China’s repression of China’s economic growth. The second quarter of this year compared with the first quarter, China’s export growth rate dropped very significantly, although export growth resumed in July, but international shipping situation in perspective, since June, the Baltic Dry Index (BDI) fell sharply, indicating significant contraction in international trade will be coming soon. The Chinese can not but be alert, because China is the biggest economic problem is still serious excess capacity, if you enter a new round of shrinking external demand and production continue to grow, the outbreak of the crisis of overproduction will be a matter within the next two years.
growth in domestic energy investment in fixed assets can amount to reflect, many view this as a demand indicator indicators, I think it just needs a lagging indicator, but the supply of leading indicators, because Total investment of the growth is more representative of the completion of new production capacity has been growing, so demand to see real investment, you should see the Last November, these two indicators were 26.8% and 25.9%, but by July this year were 19.4% and 19.3%, down very significantly. The end of July this year compared with the end of November last year, a total investment of the construction project only from the 49.8 trillion yuan to 50.3 trillion yuan, which increased by only 5,000 yuan, which indicates the future investment demand is very weak , and in such scale of investment, in the context of shrinking external demand Needless to say,
currently facing China’s economic growth in the main contradiction is still the irrational distribution of income in the context of a serious shortage of domestic demand, while the government in improving the distribution mechanisms for the results achieved so far is still limited. The latest development is the increase a tax threshold, but only 120 billion yuan to reduce the personal income tax revenue, equivalent to only 0.3% of China’s GDP last year, compared to a new leaf since consumer spending Millennium 12.6 percentage points decline in magnitude of the income distribution of the degree of improvement is minimal.
larger reality is that until now we still have the anti-inflationary macro-control work on the first, still do not feel the outside of the Great Depression approaching, bearing in mind not living in China and the world economy, the but deeply into them, especially economic ties with the United States, is the highest in the world, crises in the United States will also form the strongest impact on China. Crisis looming in the new time, China should do is to increase the temperature of its economy, rather than continue to cool.
7 in new emerging situation is lower than the growth rate of M2 growth in M1, when residents and business deposits are significantly reduced, the total reduction over two trillion yuan. In general, because of the caliber of the M1 demand deposits plus cash for current transactions and payment of money, so M2 is M1 growth rate is lower than the level of activity marked decline in economic activity, economic activity in the exit from the currency, are will become deposits, resulting in deposit growth. The current situation is substantially the same time businesses and residents’ deposits decreased, so that only one explanation, that money out of the banking system in large-scale free in circulation outside the banking system, it is generally called into the The current description of the survey, underground banking, short-term interest rates as high as 6 percent monthly interest rate is ten times the state-owned banks, while the main body of SMEs who borrow money, such high rates is that they can not afford to back, long duration a large number of small and medium enterprises will inevitably collapse occurred due to absorption of about 70% of SMEs to employment, small and medium enterprises closed down more than they will inevitably bring growing unemployment and social problems, so this is not allowed to develop of.
Therefore, no matter from which side, since last year’s monetary tightening process should end, inflation will indeed continue upward, but is not able to control things of monetary policy, fiscal policy should be to take over, is to use subsidies ways to protect the consumer interest in low-income people. Money growth rate should rise to the economic growth rate and the price of the track, which is In the long term, it must accelerate reforms to rationalize the distribution relationship, and start a large-scale urbanization, and only these practices can fundamentally open China’s domestic demand, thus ensuring a major crisis in China in the world can stand still. (Author: Wang Jian China Society of Macroeconomics, Vice President and Secretary General Published August 14, 2011)
in the macro network editor: Wen Yi Duo