China Must Be Vigilant Against The US Shift To Crisis

Last Thursday the US stock market Plunge The Dow fell more than 512 points, or 4.31%, and Nasdaq fell more than 5%, the largest single day decline since the 2008 financial turmoil. We can not help but ask, is the crisis of the US debt default gone by surprise? Why did the stock market pass through the US debt ceiling agreement?
 

In fact, thinking carefully, the US debt ceiling act has three main points: the debt ceiling is increased by three steps, the range is 2 trillion and 100 billion - 2 trillion and 400 billion dollars; the deficit must be reduced by 2 trillion and 400 billion US dollars, and it is also divided into three steps, which is synchronized with raising the debt ceiling; no mention is made to raise the tax rate for the rich. I can see clearly these three points.

On the one hand, the biggest Ponzi scheme in history will continue to play, but one day it will bid farewell to this game. Now it is the first time that we can't hide fifteen. In Obama's words, "the problem of bankruptcy in the United States has been kicked like a canned duck for a year." Obviously, the US debt problem has not yet been solved.

On the other hand, if the United States reduces spending, reduces consumption, and does not increase taxes on the rich, it only needs to cut expenditure and not open source. Specifically, the US government will cut back on social welfare, medical and military expenditure in a big way, which means that military and armament related industries need to lay off workers, and domestic consumption will continue to shrink in the short term. The US economy can only be driven by internal consumption and investment. When the private consumption of the United States falls due to the government's shrinking expenditure, the willingness to invest will naturally drop and the unemployment rate will continue to deteriorate. Consumer spending, investment and manufacturing will all be frazzled, and the property market will have no end. If the US economy fails to find new impetus for growth, it is no doubt that the recession will be worse than it did in 2008.

The United States will fall into a longer period. Recession period In addition, if the European debt crisis does not happen alone, can the stock market not fall?

In addition, the US debt ceiling agreement did not raise taxes on the rich in major tax increases. This actually sacrifices the interests of the lower middle class of the United States, making the income of the large middle class lower. The rich in the US are the largest ethnic groups in the United States. The US debt is not only a default, but also raises the upper limit and does not impose taxes on the rich. When wealth is concentrated in the hands of a few people, the productivity will go far beyond the consumption ability of the middle and lower levels of people, resulting in overcapacity. The failure of commodities is the root cause of the Great Depression of the United States in the last century. Unfortunately, this situation is now repeating itself.

However, we must soberly realize that although the United States will face the great depression, it is still the most powerful in the world.

First, the United States remains a solid foundation and one of the richest countries in the world. In addition to the developed high-tech and powerful military power, the United States is also storing vast amounts of oil, forests and various resources, and their resources are basically unexploited.

Second, the wealth of the United States lies in the hands of a few. In fact, more than 70% of the US Treasury bonds are in the hands of the American rich. As long as northern Europe has high tax rates on the rich, there is no problem in paying the debts.

Third, the attractiveness of American talents to technology and art remains the number one in the world. This makes the US's technological innovation capability ahead of the world. Although military spending is huge, its new military technology can soon be converted into civilian use.

Fourth, the consequent economic deflation or even depression in the United States needs only moderate regulation. In the long run, it is a kind of adjustment to the United States.

In the final analysis, the "disease" of the United States is only a trauma, and recovery is only a matter of time. Once the rich are willing to give in, they can be cured, and the US economy will soon recover.

For the global economy, governments in many European countries have been forced to make drastic changes. Cut down There is no improvement in spending and debt reduction. In other words, the European Union's economic performance in the coming period will be constrained by tight spending. Even if it does not fall into recession, it will be difficult to achieve strong growth.

With the loss of the economic locomotive of the United States, the global economy is bound to move towards low growth and recession. The boom in emerging economies is hard to sustain, especially in countries that rely on exports to boost economic growth. It is important to note that every crisis in the United States is ultimately spent on outward transfer. The last time it was passed on to Japan, the goal now is obviously China. China needs to be vigilant and prepare for the worst.