China's Housing Prices, US Dollar Policy and the Second Asian Crisis

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China's Housing Prices, US Dollar Policy and the Second Asian Crisis [Copy link]

Netizen: Liu Junluo

The most popular criticism in the Chinese market is against BHP Billiton. This reminds me of Buffett's strange saying: "Who is the fool in the market?" In order to prevent such criticism from appearing in newspapers, I would like to ask economists and bankers whether China's housing prices, China's CPI and global prices of basic commodities such as gold, oil, copper and iron will rise sharply again in the second half of this year. However, I guess they are just following the crowd. I think it's better to ask Greenspan and Bush Jr. The US 　　dollar policy creates global prices 　　How did Greenspan and Bush Jr. know that China's housing prices, food prices and CPI would rise sharply in the second half of this year? Let's first look at how the US dollar policy created Japanese prices in the past. In April 1995, the G7 summit hoped to reverse the changes in the foreign exchange market in an orderly manner. Subsequently, the Bank of Japan and former US Treasury Secretary Rubin entered the market on a large scale to go long on the US dollar. At the same time, Greenspan effectively widened the long-term interest rate gap between Japan and the United States to 5% (7% in the United States and 2% in Japan) from 1996 to 1997. Holding US dollars means appreciation, and with an extra 5% interest per year, Japanese private funds naturally flowed to the US market on a large scale. The US dollar rose from 80 yen in mid-1995 to 120 yen in early 1997, an appreciation of 40%. The huge appreciation and short time made it impossible for Asian economies to coordinate with the current situation of a 40% appreciation of the yen. In the spring of 1997, hedge funds saw that Southeast Asian currencies could not withstand such a high appreciation in such a short period of time and began to short the Southeast Asian economy. Everyone has basically experienced everything that followed. 　　Compare the economic status of Japan and the United States during the same period. In 1998, large Japanese companies such as Nissan Life, Hokkaido Takushoku Bank, and Yamaichi Securities went bankrupt. The average market-to-earnings ratio of the US stock market was 14 times in 1995, 27 times in 1997, 35 times in 1998, and nearly 40 times in the first quarter of 1999. The Dow Jones Industrial Average rose from 4,000 points in 1995 to 10,000 points in 1999. The winning rate of Yahoo, a famous American stock, is 400 times. It can be seen that during the same period, the profits of American companies stagnated, while the stock prices soared. From 1996 to 1998, the securities market increased the total wealth of American families by 5 trillion US dollars. The US government also had the "comedy" of the fiscal surplus given by the Bank of Japan. 　　Even today in 2005, many Japanese economists still call the economic recession in the late 1990s "Hashimoto's tightening" (the fiscal tax increase of the Hashimoto Cabinet). However, it is unknown that the United States used the "small profits" from expanding Japan's exports to drain Japan's funds. It used the rapid fluctuations of the exchange rate to "hunt" the "strategy" of the Southeast Asian yen economic circle formed by Japan's investment of 300 billion US dollars. Therefore, Japan, which has a labor productivity of 20% higher than that of the United States in cutting-edge manufacturing such as automobiles and IT, and is the largest contractor of national debts in the US Treasury, can only be a "dinosaur" of the global economic entity and a "civilian" of the free world. Can you say today that Greenspan and Bush Jr. do not firmly control the interest rate gap and exchange rate between the United States and Japan in 2006? 　　In the second half of 2003, China's housing prices, food prices and CPI rose sharply 　　. The author pointed out in the article "Trade Protection, Inflation and China's Economy" in the Shanghai Economic News on April 23, 2003: The Fed's reflation policy will soon significantly increase the cost of living of Chinese residents. I believe that the extent of the cost increase today has been appreciated by all Chinese people. So why did Bush know that China would have inflation in the second half of 2003? First of all, we need to understand a simple economic concept, the term "double deficit" that appeared in the mid-1980s. It shows that the US budget deficit at that time caused the simultaneous deterioration of the trade deficit. This is now synonymous with the macroeconomic policy prescriptions of American politicians and the Cambridge School. Bush's budget deficit in 2003 was higher than that in 2002, and at the same time, the Fed's interest rate went towards 1%. That is, if you hold US dollars, there will be a problem of deterioration in the current account, and the 2% interest rate is not enough to eliminate this risk, so the US dollar index fell from 100 at the beginning of 2003 to 86 at the end of 2003. Therefore, in the article "Australian Dollar Outlook is Positive" in Shanghai Economic News on April 22, 2003, I pointed out that the Australian dollar will appreciate by 30% against the US dollar in 2003 (the Australian dollar appreciated by 33% in 2003). Today in 2005, Bush's budget deficit is $500 billion, higher than in 2004. Therefore, the US current account deficit will further set a record. The US federal funds rate is now 2.75%, and the core inflation rate has grown at a rate of 1 times in the past year. It is expected that the US interest rate will be below 4% at the end of this year. According to the international open interest rate parity principle, China is 5%, Japan is 4%, and Europe is 2%. What does this mean? Because the yen, renminbi, and euro all have appreciation expectations, in order to compensate for this expectation, the US-Japan interest rate gap will expand by more than 4%, and asset holders will take on US dollar risks. This is why the People's Bank of China raised interest rates by 27 basis points to 2.25% in October 2004, narrowing the interest rate gap between China and the United States, which subsequently caused further increases in housing prices, prices, and global basic commodities. The interest rate gap between China and the United States can only expand to more than 5%. Only asset holders will take on the risk of the US dollar. This point was clearly pointed out by the author in early 2003. The United States used low interest rates to suppress and force the People's Bank of China to tighten its currency, resulting in a "zero game" between bonds and reserves. Therefore, after October 2004, foreign exchange reserves surged by 100 billion US dollars, and China's currency increased by 2 trillion yuan. Why did the United States force China's currency to increase? Looking at the "exchange rate retaliation bill" recently introduced by the US Congress, sober Chinese people naturally understand that Bush and Greenspan will jointly drive up China's housing prices in the second half of the year. If the People's Bank of China resolutely raises interest rates again this year, then the surge in China's bond market and housing prices in the second half of this year will be incomprehensible even to the Japanese. Therefore, Bush and Greenspan are very clear about China's housing prices in the second half of this year. 　　Greenspan, Asian central banks and the modern version of the emperor's new clothes 　　I have been talking about this issue for several years. The biggest black humor in Asia is: Greenspan says whether it is beautiful or not on the stage, and Asian bankers and economists in the audience say: beautiful. Now Asia's foreign exchange reserves are 2.4 trillion US dollars, 80% of which are US dollar assets. This is nothing more than asking Greenspan to flip a coin, earning $5,000 on heads and $3,000 on tails. Therefore, the exchange rate of the US dollar against the Japanese yen was 80 in 1995, 147 in 1998, 100 in 1999, 135 in 2002, and 100 in 2005. In 10 years, the exchange rate of the US dollar against the Japanese yen fluctuated by more than 35% four times. This inevitably led to four decisions by Japanese export companies to expand and reduce production. Therefore, Japan's fiscal deficit is as high as 200% of GDP. What is the difference between this and a liver cancer patient? China has a fixed exchange rate with the US dollar. The US dollar index was 80 in 1995, 120 in 2001, and 85 in 2005. Therefore, the Chinese economy can only go from inflation to deflation and then to inflation. On July 6, 2001, the author pointed out in "Economic Forecast? Internal Report Edition Weekly" "Economic Development Cannot Tolerate Hidden Dangers". At the same time, it pointed out that the foreign exchange reserves should "at least set the gold ratio above 60%" to counter the depreciation of the US dollar. Asian central banks must have a sense of risk building, that is, Graham tosses a coin, earns $5,000 on the front side and loses $3,000 on the tail side. If China absorbs $200 billion in gold reserves from the 2001 gold price of $260 per ounce, the cost will not exceed $330 per ounce. Today's surplus will be $60 billion. Today, the US Congress launched a "currency retaliation case" that will inevitably lead to a new wave of dollar depreciation. So will US politicians let China's gold surplus soar, or will China's housing prices soar? This is like the concept of hedging. On the contrary, if the yen appreciates now and Japan absorbs $200 billion in assets from the US stock market, how will the yen-dollar exchange rate be stable in the future? This theory is extremely simple in all industries around the world: risk opposition and price stability. 　　Graham and street stall business 　　Nowadays, Chinese merchants often pay to find some "shills" to help them do business. Ge Lao also has to rely on "shills" to help him do street stall business. Let's take a look at the performance of Japanese "shills". In 1990, the United States promoted Keynesianism to Japan, and pointed out that Japan needed to tighten money to make stock prices and land prices reasonable and maintain healthy economic growth. Japanese economists and institutions also published various reports, pointing out that Japan needs to expand public investment and expand domestic demand. Amid the cheers of this public opinion, the new president of the Bank of Japan, Yasushi Mieno, who was hailed as an "anti-price fighter", took office. The Japanese government also completed a public investment budget of 430 trillion yen within 10 years. In 1990, Japanese stock prices and land prices fell one after another. 15 years later, Japan's fiscal deficit has also risen to 700 trillion yen. So far, the Japanese economy has not been reborn. Japanese economists can only say that this is: the limit of Keynesian policy. What shocked me was that the Keynesian policy, which had been declared dead by two American monetarist scholars, Friedman and Lucas, in the 1970s, could be successfully promoted to Japan, and Friedman also accurately predicted the great inflation in the 1970s caused by the frequent expansion of the Keynesian policy. Let's look at China's economic situation. In 1998, Greenspan praised China's public investment approach. In 2001, I pointed out that China's high investment and high consumption will encounter the same problems as the former Soviet Union and the ASEAN region. Today, there are more than 2,000 steel mills in China. Large core and professional monopoly steel mills cannot be formed. For this, a large amount of precious arable land must be sacrificed. The expansion of low-end trade surpluses makes it impossible for the market to pay for future expectations of housing prices. Greenspan's street stall business relies heavily on the introduction of American Keynesianism, Reagan supply-side, and cycle-smoothing into Asia. However, the deformation of the global gold exchange standard after 1971, the Asian dollar standard, the regional integration of the euro, as well as floating exchange rates, the expansion of derivatives, and other theories on the impact of financial innovations on the real economy are too lacking in the Chinese market. This reminds me of a picture in Casino Capitalism (Susan Strange), published in 1986. The date of the picture is 2000. People on Wall Street are drinking champagne, while people in other regions are struggling to make ends meet. In 2006, 　　the interest rate gap between the United States and Japan widened, and the second crisis enveloped Asia . 　　The current account deficit of the United States is now 60 billion US dollars per month, and capital injection is 80 billion US dollars per month. The neutral interest rate of the United States is 4%. The current policy of the United States is neutral currency + loose fiscal policy. The rise in the core inflation rate of the United States will make the interest rate of the Federal Reserve above 5%. That is, the US policy in the middle of next year will be a combination of tight currency + loose fiscal policy. This will lead to a further deterioration of the US current account deficit. This is because the tight currency of the United States will lead to a decrease in demand for US goods in other regions. Therefore, in order to make up for the current account deficit of the United States, the nominal and real interest rates of the United States will rise sharply in the second half of next year, and the long-term interest rate gap between the United States and Japan will also expand to more than 7%. The US dollar will also appreciate sharply in the foreign exchange market. Do Greenspan and Bush Jr. understand this? Therefore, the US dollar policy in the second half of this year will definitely push up China's housing prices, and the "exchange rate retaliation case" will also be launched in October. This can also explain why China surpassed Japan in 1998 to become the number one country with which the United States has a trade surplus. Eight years later, the US current account deficit has jumped to 7%. The financial battle between China and the United States began long ago, but today the United States has all the strategic initiative, and the final decisive battle will naturally begin this year. 　　If the capital inflows from the United States next year cannot make up for the US current account deficit, the US economy will have to decline sharply, and the international status of the US dollar will be completely lost. Therefore, the Federal Reserve will definitely gradually raise interest rates this year to suppress China's interest rates. At the same time, US lawmakers will definitely use the "exchange rate retaliation case" to widen the interest rate gap between the United States and China, create a depreciation of the US dollar, and cause a large amount of short-term capital to flow into the Chinese market to push up China's housing prices, bond markets and CPI. Next year, the sharp rise in interest rates and the sharp depreciation of the yen will be used to trigger China's housing prices and the Chinese banking system, causing the second Asian crisis to solve its own huge capital needs. 　　As long as Japanese and Chinese funds flow into the US market on a large scale next year, the spring of the US market will reappear next year. Is this real or illusory? Every Chinese must be able to analyze it. For several years, the author has been talking about the financial war between China and the United States. The cruelty of it is unimaginable to the Chinese. Look at the patients suffering from financial crises around China: the former Soviet Union, Japan, Southeast Asia, and Latin America, the backyard of the United States. Today, whether they have not recovered or have recovered, all of them are slaves of the free world's capital.

1234

Suddenly I remembered a sentence from Chairman Mao: When the Chinese people roar, the earth will shake three times! (Slightly modified)

gaoyanmei

Hehe, top

beh

Economic factors are too complicated. In fact, we don’t know much. For example, Keynes, who created macroeconomics, did not predict the 10-year economic depression in the United States after 1929. So you can consider it, but don’t trust your own inferences too much.

beh

Buffett also said that macroeconomics is witchcraft. I am a macroeconomics major, but I now deny the so-called scientific linear model of macroeconomics.

2345

In today's globalized economy, it is difficult to guarantee that a country will not hurt itself if it artificially creates a large-scale economic crisis. Therefore, I cannot agree with the original poster's point of view.

476700838

If the super-large bubble in the real estate market collapses due to loss of control, it will undoubtedly be an economic event.