Experts Say It Is Difficult To Restart &Nbsp With Helicopters And Money, Which Can Solve The Sovereign Debt Crisis.

Comeback

Unlike in 2008, the last crisis originated from the bubble burst caused by market activities. Deleveraging and credit freeze directly led to a deflation of the market, and the government was forced to rescue the market. Now, the crisis is mainly from the sovereign debt of western countries. With the rising fiscal deficit and lower fiscal revenue, debt default is becoming possible.

The starting point of the global stock market's chain reaction is Europe, because the market finds that not only small countries such as Greece or Ireland need to be rescued, but also the sovereign debt of the third and fourth largest economies of Italy and Spain is also facing Default risk. It is almost impossible for them to continue financing in the market to maintain the debt chain. What's worse, most banks hold these bad sovereign bonds, thus dragging the financial system into crisis.

In the United States, although the two parties have succeeded in achieving a stalling and vague deficit reduction agreement, the prospects for economic growth are obviously dim, because the agreement shows that the US government has lost the space to stimulate its recovery by fiscal means, and after the two rounds of quantitative easing policy and the injection of us $2 trillion and 300 billion, the US economy is still in the doldrums, especially after the adjusted data show that the United States never seems to have recovered and the employment rate has never improved.

That means the European Union and the European Union.

The credit freeze and deflation caused by the collapse of the market bubble are also hard to restart with the way of helicopter money disposal. The Fed's quantitative easing policy and Japan's experience have proved that it is difficult.

However, the government sovereign debt crisis can be solved by printing banknotes. When the market does not buy these government bonds, the central bank can absorb them indefinitely, that is, the way of clearing accounts through inflation.

Harvard professor Rogoff's research shows that if the current inflation rate in the United States reaches 6%, the proportion of government debt in GDP will drop by 20% in only 4 years.

The United States and the European Union have been trying to avoid inflation. The European Central Bank also raised interest rates in the first half of the year in spite of the fragile recovery, while the United States used various means to intervene and suppress oil and commodity prices.

However, when the risk of default is in sight and there is no way out, the dangerous immoral choice of printed banknotes will be forced onto the agenda of politicians.

Because the framework of electoral politics will guide those leaders or competitors to care only for immediate interests rather than the future.

In fact, the US is still the most competitive economy in the world. It may take time to digest the internal imbalance, and in the process, the US dollar will achieve a historic decline.

More pressing and serious problems in Europe, this is a more difficult national community than the two parties in the United States, and the crisis in Italy and Spain can not see the hope of settlement. The euro zone will probably be the source of the second global recession, which has forced the European Central Bank to continuously buy bonds from these countries.

Therefore, despite the current sharp fall in commodity prices, this is only a temporary panic. The inflation in Europe and the United States may encourage investors to return to the market. If emerging market countries suspend or slow down their tightening efforts in a crisis atmosphere, commodity prices will continue to rise on the support of cheap money and market demand, which poses a threat to export oriented economies, because of the double blow of rising import costs and tight demand in Europe and the United States.

The depreciation of European and American currencies will be at the expense of the appreciation of the currencies of emerging market countries, because this is a zero sum game.

This means that in the coming period, the global monetary war may become increasingly fierce.

The renminbi's de facto pegging to the US dollar will make it depreciate along with the US dollar, which will make the developed and emerging market countries dissatisfied and China will face greater international pressure.

The RMB's rigid exchange rate policy and foreign exchange control have created a rigid appreciation expectation in the environment of China's rapid economic growth and attracted a large number of hot money inflows, which further consolidated the illusion of appreciation.

The dollar dollar, which is expected to attract, has created the problem of excessive issuance of China's basic currency, promoted inflation and asset bubbles, and made the central bank in an awkward position of raising the reserve ratio continuously.

Therefore, in the post crisis era, Europe and the United States may solve the problem through currency devaluation. This requires that China with high inflation must continue to implement tight monetary policy, reform its exchange rate policy, take the initiative to reduce economic growth, focus on solving asset bubbles, inflation and local debt risks, rather than continue to maintain a bubble supporting growth and brewing a bigger crisis.