The Construction Of Financial System Should Shift From Heavy Savings To Heavy Investment.

In a market economy, money should be a medium for pmitting information and allocating resources.

After the 1929 economic crisis, the US government injected capital into Keynes's theory to support employment and boost consumption.

Consumption has become the driving force of the economic development of the United States, and the personal consumption of American residents has accounted for over 70% of GDP over the years.

After more than 80 years of development, this practice has formed some solidified ideas.

First, because consumption requires money, the pursuit of money has become the core value of all kinds of ideology.

Money is alienated from the medium of consumption as the purpose of economic activities.

Secondly, as the economic development is funded by the government, the injection of capital by the government and the speed of economic development seem to establish a natural relationship.

After the financial crisis, because of the support of the Federal Reserve's monetary policy to the US economic recovery, every economic development has a setback. It has become a natural expectation to solve the problem by issuing more money.

As a result, money has been changed from economic instruments to economic development.

Third, in the traditional economic theory, wealth outside the capital has no theoretical status, and profits should be used for production reinvestment.

Because of the increase of modern production efficiency and the imbalance of economic development, an industry or a country may generate profits higher than reinvestment in a certain period.

In addition, due to aging and the need of oil and other resource countries to pform short-term profits into long-term wealth, the surplus currencies move between various assets to seek profits, so the money has the illusion that it can generate wealth.

Money is thus alienated from the carrier of wealth into the noumenon of wealth.

Fourth, the core of the free market theory is that everyone is rational in pursuit of personal interests in economic activities. Money movements can effectively regulate market relations, and market activities can rationalize various social and economic relations.

Under the guidance of this theory, the richest 400 families in the United States today have 2 trillion and 400 billion dollars in assets, and the government is in debt of 17 trillion dollars. There is still no money to update the old social infrastructure, and the gap between the rich and the poor is widening and the economic recovery is weak.

Adjusting social and economic relations through money is the core of traditional economics theory.

Because this theory is pushed to the extreme, money is alienated from the information pmission tool to "invisible hand".

Another blind spot in macroeconomics is a closed analysis of the isolation of economies.

It assumes that all economies operate on the same economic level at the same level.

When the developed countries' dominance of the global economy was broken, and the large scale economic entities entered the global economic system, not only did this economic theory lose the ability to explain reality, but also the existing international monetary system under the guidance of this economic theory became a shackle for economic development.

When the Bretton Woods treaty established the dollar standard system, manufacturing output in the US accounted for 60% of the world's total, and exports accounted for 80% of the world's total.

Under such circumstances, the US dollar has the economic foundation as the major international currency of circulation and storage.

Now, the industrial output of the developed countries is less than 50% of the world's total, and the United States is less than 30%, and the US trade deficit for many years.

The world's major commodity trade and financial activities are still settled in US dollars, and more than 60% of the reserve currencies are dollar assets.

Under such circumstances, the demand for us dollars by international economic and financial activities is far greater than that of the US economy.

Since the financial crisis, central banks have injected 7 trillion US dollars into the global economy. The shortage of US dollar is still a headache for international financial institutions.

Many economists believe that savings deposits in emerging economies such as China are the cause of the financial crisis.

In fact, as in the US, emerging market economies, especially oil exporting countries, can not reinvest all the surplus generated from production into consumption and reproduction at any time point.

Under the Bretton Woods treaty, gold is the carrier of wealth. The United States could therefore solve this contradiction by holding the vast majority of the world's currency gold. For China and other emerging countries, because its currency is not an international currency and reserve currency, the government has to save accumulated wealth through US dollar or us dollar assets.

It is impossible for the central bank to hold large amounts of currencies that are bound to depreciate.

Therefore, from the perspective of security, liquidity and value preservation, holding treasury bonds has become a natural choice.

This creates strong demand for both the US dollar and the US Treasury bonds.

If money can be printed freely without penalty, few governments will give up such opportunities.

The United States issues currency that exceeds economic output and needs to issue bonds as collateral.

The global circulation of the US dollar is about 6 billion, and the US Treasury bond has about 9 billion US dollars.

Since the US dollar is needed, there are also some needs for treasury bonds, so printing money has become the main driving force for us economic growth since the beginning of this century.

However, interest is payable on treasury bonds.

The new debt can only be formed after paying interest on the old debt.

Printing money became a vicious cycle of drinking poison and quench thirst.

At present, the total debt of the state and the private sector in the United States is about 56 trillion dollars. If we calculate the interest at 4%, we must issue a new debt of 2 trillion and 200 billion US dollars per year, so that we do not have to sell assets to pay interest.

Fundamentally speaking, like other countries, the United States itself is also the victim of the existing international monetary system.

First, because the demand for the dollar exceeds the needs of the US economy, the US dollar often has upward pressure, and the US economy is facing the threat of deflation.

The appreciation of the yen in the 80s of last century shifted deflation pressure to the United States.

Today, emerging economies, which account for more than half of the world's industrial output, are not currencies of international circulation. In the current international monetary system, the dollar can not dissolve such deflationary pressures.

Second, printing money can not be prosperous for a long time.

Economic innovation needs institutional reform as support.

Because of the support of monetary policy, the US government lacks the impetus to carry out financial, economic and social reforms.

In the long run, loose monetary policy is emptying American innovation capability.

Finally, issuing debt for economic development (thus generating money) is a healthy debt. Issuing debt for the purpose of generating money is an unhealthy debt.

The interest paid for unhealthy debts is an unreasonable tax on the social economy.

The debt is too high, and any country may be defaulted.

If this is the case, the global status of the United States will be a heavy blow.

The massive issuance of money in the US, Japan and Europe is, in a way, a very effective way to make up for the disadvantages of the international monetary system.

These extraordinary measures dilute the value of money and distort economic relations.

However, due to ideology and international factors, this system is likely to continue for quite some time.

If economic development is evolved into a game of money, if the initiative to decide the gold content of money is not in its own hands, then how to preserve the wealth value (or purchasing power) created by the real economy for the well-being of the society and the people becomes a special challenge.

To get out of this trap, China needs to rely on the advantages of economic development and build a financial system centered on saving as a core financial system.

Savings and investment are both manifestations of wealth.

To put it simply, saving is seeking risk-free return. Investment is seeking risky but higher returns.

In the arrangement of high return - no risk return - low return (negative return), savings close to the middle term, investment may fall on the left or right side of the item.

If the risk-free interest rate is higher than the investment return, wealth will naturally flow into savings and become rent-seeking funds; if the return of investment is higher than the risk-free interest rate, wealth will flow into investment and turn into capital.

The relationship between risk and return is the main sign to distinguish between savings and investment.

In the paper money economy, even if there is no policy of width, wealth in the form of money will naturally be reduced.

According to the observation by Steve Forbes, President of Forbes magazine in his new book "money", the purchasing power of the US dollar has dropped by 80% since its decoupling from gold in 1971, and has fallen by 26% since 2000.

As a mirror, the value of assets is relative appreciation.

In other words, if money exists in banks, even if interest is added, the actual purchasing power may still be reduced; in investment assets, even if other values remain unchanged, the compensation for inflation and risk-free interest rates will be reflected in the appreciation of assets.

Bank deposit rate and inflation rate are upside down in many countries.

Natural interest rate is the price of funds determined by the relationship between supply and demand of society.

The interest rate without risk actually does not exist.

Generally speaking, the risk-free interest rate refers to the interest rate of the government borrowing money, and the interest rate of the government bond is not too far from the inflation rate.

Even if banks can provide risk-free interest rates, they must also deduct operating costs.

Therefore, the bank deposit rate is lower than the inflation rate is a natural phenomenon.

If the government guarantees the agreement interest rate above the natural interest rate, it will distort the natural relationship between risk and return and distort the financial structure of the whole society.

Financial operation can help the real economy create wealth, but it will not create wealth itself.

The wealth increase generated by financial operation will become a diluent of social wealth and a corrosive agent of the real economy if it is not derived from a reasonable commission of return on investment.

In the twenty-first Century capital, Thomas Piketi pointed out that if the return of financial capital is higher than the growth of national output and income, it means that the operation of financial capital is not the function of wealth production, but the function of redistribution of wealth.

In developed countries, it creates false demand; in emerging countries, it impede capital flows to the real economy.

Money stored in savings is money with thermal energy and no kinetic energy.

In other words, it is valuable but not capable of creating value.

Transforming such wealth into kinetic resources depends on investment, and investment comes from the needs of the real economy.

This is like water in a stationary container. Without external heat, it will not boil and turn into steam for electricity generation.

The negative interest rate and zero interest rate of developed countries are to squeeze money out of static state. However, due to the lack of economic actual demand, water flows from one container to another.

In China, high interest rates are used to introduce capital from one savings to another, which is exactly the same as that of developed countries.

The shadow banks in the United States are financial intermediaries that create quasi money products through time mismatch and leverage. Domestic shadow banking is largely a risk free arbitrage between financial institutions using common deposits and institutional interest rates.

After more than 30 years of rapid development, China's economy has accumulated huge amounts of wealth.

Much of that wealth is deposited in deposits or other monetary products.

If the global circulation reserve currencies compete to depreciate and all kinds of assets continue to increase, the value of the wealth held in the form of cash savings will be faster than the wealth held in the form of assets or investment.

From savings to savings is idling. Only by investing in the real economy can money absorb the benefits of economic development and wealth can preserve its value.