* * * Original by Liu Jiaolian * * *
Among all macroeconomic indicators, debt size and growth rate are top priorities. For China and the United States, the world's two largest economies, their concerns are different. People are concerned about the U.S. national debt and worry that it is growing too fast and repeatedly breaking through limits. People are concerned about China's social financing (social financing) and are worried about its declining growth rate and sluggishness.
The legal currency system in today's world has long since shifted from being anchored by hard currency like gold to being backed by debt. This is the credit-debt currency system. Debt is credit, and credit is debt. In other words, you must have credit to be eligible for debt. On the other hand, your successful debt shows that your credit is recognized by society.
Don't use it if you have a letter, it will become invalid after it expires. All games start from here.
In the credit-debt currency system, the principle of money printing (currency issuance) is to find a subject with social credit and let him incur debts. For every 1 yuan of debt he owes, 1 yuan can be issued accordingly. of banknotes come out. In the same way, when he repays the debt of 1 yuan, he must eliminate 1 yuan of currency at the same time in order to maintain the balance of the balance sheet.
The principles are the same, but the mechanisms are different. Money printing in the United States means that the U.S. government, as the credit subject, issues national debt, and the U.S. central bank, the Federal Reserve, prints a certain amount of U.S. dollars to correspond to these debts. This is a simplified model. In fact, there is a market between the U.S. government (Treasury Department) and the Federal Reserve, and the operations at both ends are staggered and not synchronized, so we will see that Yellen is issuing bonds recently, while Powell is shrinking her balance sheet. In China's money printing, the residential sector serves as the credit subject and takes out a loan to buy a house. The commercial banks then print a certain amount of RMB to correspond to the loan (liability) after evaluating the credit limit. Here we only examine one of the largest sources of debt money, the real estate sector. For the above two models, we did not introduce too many details of the balance sheet of the banking system, and ignored other liability methods and entities, so they are not complete. Please note.
In the American model, government debt and financing are used for government expenditures (mainly interest repayments, foreign military aid, social welfare payments, etc.). In the Chinese model, home buyers take on debt and the financing money is given to real estate developers for consumption and business expansion (reinvestment).
In the United States, the Federal Reserve is the money printing machine. In China, every real estate company is a money printing machine. This is the Zhao family's money printing machine, that is the Li family's money printing machine, this is the Yang family's money printing machine, that is the Xu family's money printing machine...
Borrowing money to increase debt is called leveraging, and more money will circulate throughout society. Currency inflation, in severe cases, is called liquidity flooding. Paying back money to reduce debt is deleveraging, which will reduce the amount of money circulating in the entire society and lead to currency deflation. In severe cases, it is called a liquidity crisis.
The symptoms of excessive liquidity are easy to cure, as long as policies are introduced to suppress borrowing behavior. What is difficult to deal with is the liquidity crisis. People are unwilling to take on debt and have to repay loans in advance if they have extra money. That would be bad - at least for the financial industry, because there are no geese that cannot be plucked.
Deflation is also bad because one person's spending is another person's income. If people stop spending due to lack of money, many people will not be able to eat. For this principle, you can take a look at the video popularization of Bridgewater Fund Dalio introduced in the 2023.8.23 article " China Deleveraging ".
For the American model, social deflation, the Federal Reserve can print money to fill this liquidity gap. Regarding the Chinese model, when social financing is sluggish, the central bank cannot print money to fill the gap like the Federal Reserve does - because the central bank does not control the money printing machine.
As mentioned in the article " Artificial Prosperity: The Great Transfer of Wealth " on Jiaolian on August 21, 2023 , the operation of the American model transfers the liabilities of the residential sector through the three links of "the Federal Reserve printing money - the Treasury issuance of bonds - the government issuance of money". It comes to the federal government, and it cooperates with the federal government to instigate geopolitical conflicts abroad to plunder overseas wealth, thus completing the wealth transfer process of "overseas wealth - American wealth - American residents' income", creating "a world economic depression, and the United States has unique scenery." of economic prosperity and prosperity.
The Xu family's money printing machine is not as good as the Federal Reserve's money printing machine. The Xu family's money printing machine consumes local human flesh dry batteries. If the fuel runs out, the money printing machine will go crazy and it will not be able to print money. If there is an opportunity, the wealth will be secretly transported overseas, and the oil will leak while refueling, which is very inefficient. The Federal Reserve's money printing machine relies on the U.S. military and Wall Street to collect dry batteries from around the world and move overseas wealth to the United States. As long as it can catch the fat guy, it will be enough to feed it. This time it will eat leeks from the east, and next time it will eat leeks from the south. This gives the leeks in other plots sufficient time and space to recuperate and grow vigorously.
Those who are covered with silkworms are not silkworm farmers.
* * * Original by Liu Jiaolian * * *
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(Public account: Liu Jiaolian. Knowledge Planet: The public account replies "Planet")
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