Ji Qi: Global Liquidity Spawned Asset Bubbles

In November, the United States announced the resumption of quantitative easing monetary policy. Following the 1 trillion and 700 billion round of the first round of the economic crisis, it will increase the money supply of US $600 billion in the next 8 months, and try to further stimulate economic growth so as to maintain the strong competitiveness of the US economy.

The United States' action has brought great influence to the countries all over the world. Countries have also issued corresponding policies, some have appreciated their currencies, and some have printed banknotes to cope with them.

Someone called the trigger.

Next, let's take a closer look.

In the US, printing money desperately, reducing interest rates and increasing liquidity (assuming depreciation of the US dollar), assuming that the RMB circulation remains unchanged, means that the relative appreciation of the Renminbi (relative purchasing power) is relatively high; however, the appreciation of the RMB will significantly affect exports, which will cause heavy losses to the export economy of one of the three carriages of China, and the decline of exports will affect employment. This is not only an economic issue, but a political issue, so the Chinese government is sticking to the exchange rate barrier. Then another way is that China also desperately prints money so that the purchasing power of the people's currency relative to the US dollar will come down, and the pressure of appreciation will be reduced.

In fact, that's what China does.

In addition to investing 4 trillion in response to the economic crisis, the Chinese government has been solving a lot of economic problems by issuing a large amount of Renminbi.

From the balance of M2 in October, the circulation of Chinese currency has exceeded that of the United States according to the current exchange rate of 70 trillion.

Over the past few years, the circulation of RMB has increased at an annual rate of 21-23% (09 years, 30%). In fact, China has surpassed the United States in 09 years and has become the largest currency issue in the world.

In principle, such a large supply of money should be caused.

But the consumer price index (CPI), especially the core consumer price index after excluding food and energy consumption prices, did not rise significantly.

The main reason is that a large amount of money growth is used to purchase foreign exchange settlement on the one hand. On the other hand, it promotes the rise in asset prices (real estate is typical) and digested a large number of new currencies.

In recent years, prices of calligraphy, painting, art, antiques, gold and jewelry have been rising.

As long as small commodities (such as works of Art), as long as scarce commodities (such as Hai Nan Huang pear), it provides a pretext for speculative capital speculation.

This is actually a direct consequence of the excessive growth of M2.

If M2 continues to increase, real estate prices will continue to grow.

And the government's M2 growth rate is more than 20% per year, so the annual growth rate of real estate over 20% is inevitable.

However, the real estate also involves the basic quality of life of urban residents and some migrant workers.

The rapid growth of real estate has made many middle and low income groups unable to afford housing.

To live in peace and to be happy, the soaring price of real estate has aroused popular resentment and affected people's satisfaction and trust in the government.

As a result, the central government has attacked the real estate industry in a round and round way, but in essence it can not play a real role. It only expects to slow down the real estate price.

Besides, this is also a gesture of the government, telling the people that the government is concerned about people's livelihood.

To suppress real estate, excess liquidity will either flow into the stock market or start to hype other commodities.

The most dangerous and clever thing is to promote mass consumer goods such as grain, food oil, vegetables and so on.

CPI rose 4.4% in October compared with the same period last year, with the highest increase in food consumption, reaching 10.1%, while consumer goods rose 5%.

A large number of currency issues seem to solve some problems, such as the appreciation of the renminbi and the stimulation of economic growth, but the consequent side effects are not small.

The biggest problem is wealth distribution.

Excessive liquidity, resulting in a large number of speculative hype and low tech "Easy Money", brought huge unfair distribution of wealth.

The most typical is real estate.

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Real estate development does not need too much "technology" content, can get the land, it means that can earn a lot of money.

Developers cover up, stir up the land is a low technology means of making money.

This will force developers to engage in public relations with local governments, trustee people, and engage in relations.

In recent years, a lot of corruption cases are related to real estate. Maybe these are just the tip of the iceberg.

In addition, speculation, real estate speculation, speculation and speculation have become the occupations of some people. The more famous one is the "Wenzhou real estate group".

In addition to self owned capital, bank loans and private lending are also heavily utilized.

These speculative funds have been repeatedly captured and further encouraged the whole society to speculate. Do you see that almost everyone is talking about housing prices?

These "low tech" wealth creation and speculative accumulation of wealth encourage rent seeking and speculation, which is based on power, relationship and capital distribution of wealth rather than distribution according to work.

It has attacked the driving force of social progress, such as industry and innovation.

It is a bit like drug addiction, and it can achieve a period of satisfaction and happiness through drugs rather than through actual labor and practice.

If the harm of drugs lies in the destruction of the body, it is better to say that drugs do harm to the whole society.

These speculative behaviors are much more important than drugs, because they are more extensive and influential, and lack corresponding legal checks and balances.

Another problem with massive issuance of currency is inflation, which is the decline in real purchasing power in the hands of money.

For individuals and businesses with lots of cash in hand, that means money is being diluted.

Just like a man holding 99 gold and gold ingots in his hands, he did nothing. The gold treasure turned into 95 gold and 92 gold.

I often say that inflation is equivalent to bloodless "all rich and poor".

For inflation, the absolute maximum loss is the rich and the wealthy.

This is equivalent to a "cash tax" on individuals and enterprises every year, with a tax rate of 17% (1-1/1.2).

Where did the diluted "money" go? To the central bank, that is, the state benefited from it.

For ordinary white-collar workers and grass-roots people, the same is "diluted", but the amount is not large.

It is precisely these "small" amounts that reduce their quality of life, and anticipate and plan for their future lives.

For the sake of children's education, for medical care and for housing, a greater proportion of income must not be used to save the bank.

But as in the dwelling, deposits always keep up with the rise in house prices.

Moreover, in fact, the money deposited in banks is still "depreciating" and "being diluted".

Inflation is the biggest loss of the rich, the most affected is the common people.

So in China, your wealth growth or the company's performance growth is more than CPI (October is 4.4%) is not enough, but also more than M2 growth rate (09 years to deal with the financial crisis, 30%, usually about 22%) can be balanced.

China's employment problem concerns stability, politics and the key.

To ensure employment, we must ensure the relative competitive advantage of export enterprises, and the pressure of RMB appreciation is even greater after the recent issuance of large amounts of currency in the United States.

Therefore, to cope with the pressure of RMB appreciation, we must increase the supply of money. In order to ensure employment and ensure the standard of living, we must ensure the growth of GDP8% (Wen Jiabao language). Therefore, the room for raising interest rates is also limited. We must relax loans and implement "appropriate loose monetary policy". Therefore, increasing the supply of money is also inevitable.

This is the development mode of China's "high growth and high inflation" in recent years.

Those who fight against real estate and small increases in interest rates are phased technical means, which will not affect the general trend or direction.

China's money supply will continue to rise, and inflation and inflation expectations are also inevitable.

For our business operators and individuals, it is necessary to make corresponding plans and arrangements.

As central banks around the world are printing banknotes, a time of global liquidity will be coming. Stock prices will continue to rise in the market-based securities market (except in China's stock market), and commodity prices will continue to rise, such as housing prices, oil and gold.

This is just like what I predicted in the financial crisis. After every crisis, the nature of human greed always retaliated the loss of the past, always with more insanity.

I do not know where, when, and why the asset bubbles caused by the liquidity boom will be shattered.

This is human nature.

After all, maybe we can all become Buffett.