ECB Relaxed Expectations To Upgrade Global Stock Markets And Commodities Rebounded

The central bank issued the "monetary policy implementation report for the fourth quarter of 2015" on the last day before the Spring Festival, answering the question of "steady growth" alarm and the downward pressure of the economy. Why did the central bank not meet the market expectations and reduce interest rates?

In the form of columns, the central bank conceded in the form of a column and subsequently accepted the media interview with President Zhou Xiaochuan. In the case of the global economic sluggish, especially the recovery of major economies, including China, is not as good as expected and structural reform is difficult. Reducing interest rates will lead to capital outflows and exchange rate depreciation. Interest rate cuts will also exacerbate asset bubbles such as the property market, stock market and Internet finance.

Therefore, monetary policy no longer supports inertia stimulating demand, large-scale capital construction and real estate investment, because this will strengthen debt risk, aggravate the difficulty of "deleveraging" and "de production", resulting in financial risk cross market infection and systemic risk accumulation.

On the contrary, monetary policy needs to actively cooperate with the supply side reform, which will cause economic growth "pain" in the short term, but it will avoid old growth and accumulate heavy losses. The zombie enterprises are too big to fail, let the new industries, especially the service industry, be liberally open, opening up space for long-term growth.

In fact, in the face of 270 million agricultural pfer population and 150 million "left behind crowd" (the total scale of two reached 55% of the current urban resident population), the huge domestic demand potential of urbanization has great room for reform in the rural collective land system, household registration system, fiscal and taxation system, and the currency policy is also very promising, such as the marketization of factors, the financing of collective land circulation, the reconstruction of policy financial system, and the supplement of Inclusive Finance.

The central bank stressed the importance of "not lowering interest rates". The root is to break the market's dependence on loose monetary policy, break down the downward trend of the economy and make the monetary policy loose, so as to create an appropriate monetary policy environment for the country's "supply side" reform strategy.

Since the beginning of 2016, thanks to Europe

Looser than expected, the Fed opened interest rate hikes and commodity prices plummeted. In just a few weeks, the global capital market fluctuated sharply.

Subsequently, the European Central Bank of Japan and the United States came on the stage to release loose signals.

In recent years, the Fed's rate hike is expected to weaken. Japan has implemented a negative interest rate policy. The ECB has relaxed expectations, and the global stock market and commodities have rebounded.

Since the 2008 financial crisis, the crisis period, as an emergency measure, was put on a large scale. Despite the stable economic downturn, it also covered the urgency of eliminating the old growth and production capacity by the demographic dividend and the external demand.

Before 2008, China's annual average currency growth rate was about 16%, while the average annual growth rate of GDP was over 10% during the same period. After considering CPI, the nominal growth rate of GDP was also around 16%, which is basically the same as that of monetary growth.

Therefore, in the 30 years before 2008, China's currency growth basically reflected the economic growth and price rise for money.

Asset prices did not bubble significantly.

In the 6 years since 2008, China's monetary growth rate remained at about 16% a year, but the GDP growth rate dropped to 8% in the same period, and the nominal growth rate of GDP after CPI was only about 11%.

As a result, the growth rate of money is obviously higher than that of economic and price rising.

Over the past 6 years, property prices have continued to rise, and the property market has not only acted as a leader.

The "sponge", and the high growth of local infrastructure supported by the financial support of the land, the high growth of manufacturing investment and fixed assets investment started from the real estate development investment, and achieved a high growth under the low asset bubble.

More importantly, the high growth under the lower asset bubble obscures the necessity and urgency of "upgrading" the traditional growth mode and the old production capacity.

The new round of projects and capacity also make it hard to get "big but not fail".

Since 2015, although the incentive policy of the property market has been sufficient, the downstream sales side has rebounded, and the area of commercial housing sales has increased by 6.5% over the same period. However, the upstream indicators (land market, development investment and new construction) are always at the freezing point, which has both the impact of high inventory pressure and the reversal of the big cycle of the industry.

With the turning point of demographic dividend, the rapid growth of urbanization and the sufficient use of stock housing, the development space of new housing is at the top.

This means that the ability of the property market to continue to absorb liquidity has diminished.

As a result, the problem of overcapacity and over leveraging has been fully exposed, and the underpinning function of infrastructure investment has lost its source of funds.

At this time, if we continue to implement the "loose water" style, besides the hot oil market that has already been hot, the capital will "spin" in the stock market and Internet banking, and the risk will also spread to the financial markets in various fields, such as the real estate market and manufacturing industries.

The financing support under the reform of supply side reform is actually driven by the economic and financial situation, including the comprehensive exposure and digestion of credit losses, cross market supervision cooperation, and the establishment of macro Prudential evaluation system (MPA).