Running into the bubble economy

 Running into the bubble economy
(China Reform magazine article written for the column, not yet published, please do not reprint)
Earlier this year, in the same column, I've Tip: After the financial crisis, China and the world will enter a strange new world. In this new world among the 60 years after the war accumulated wisdom of the macro-management may be inadequate to cope. Six months later, this strange new world it seems to be gradually exposed face of Lushan. to China is concerned, we have seen, it is an increasingly clear picture of the bubble economy.
the global financial crisis, governments urgently printing money, special seal printed. The intention is that in the financial markets encounter liquidity dried up, the verge of collapse, the power of government to promote the market to re-run. China's situation is different, thanks to financial closure, (of course, the advantage to benefit from the so-called, have not had time to learn a variety of toxic products ), so Chiyuzhiyang from the global financial system, financial system intact. But the embarrassment is that China: Chinese real economy depends on the global market, but far better than other economies. external demand against the loss of their economies weight, also have drowned at risk. for this reason it is, China can only follow suit, crazy consumption of printing paper, special printing of the seal to compensate victims of external demand. irrelevant to this, the Chinese counting on strong financial ( figures show that the actual situation is far from reassuring), the government has to throw more money in various ways. Its generous, Hammer of the potential, not much. that was touted as the world's media policy efforts to stimulate the greatest. When this critical moment, in which opponents of the danger of even intuitive, but can not be strictly logical instructions, and can only mutter a few words later, shut up trouble.
positive fiscal and accommodative monetary policy, this is a modern macroeconomic management, conventional wisdom, is the successive economic crisis, the government will use the policy. the effect had never been confirmed before, but it looks like is that the case (so called as if), also has been accepted as a prescription off . In my view, such as economics and the like are deemed to have been scientific proof they had it is so-called macro-policy matter, the answer is far from unknown.
However, this moment was then also, the economic system today The complexity of the situation of the global economy has been far from the invention of these policies can be compared. The same macro policies to stimulate a very different economic and political consequences, then it is a lot of money was so unexpected. to China is concerned, in an unprecedented active fiscal and monetary policy implemented an unprecedented six months after the really stabilize the real economy is still unknown, but the asset market bubbles flying already. In other words, the bubble economy has been robbed before in the real economic recovery came running to me, etc.. If do not believe , look at the sites are frequent, the price soaring real estate market, look at the continued release of the amount of stock market trading days, people will be able to know one of the two. the Chinese real estate market, for example, after the freeze in 2008 Then, from the gradual recovery in early 2009, the year the level has reached almost ecstasy. even if they are recognized as the most frenzied real estate market in China in 2007, I am afraid that come anywhere close.
clever readers should know that I said, does not mean the so-called bubble economy in the asset market bubbles, but refers to such a situation, namely: to a certain stage of economic development, and thus the accumulation of wealth to a certain stage, due to investment opportunities in the real economy growing malaise, a lot, especially in the mainstream of the capital flocked to the asset markets in pursuit of higher profits in the stage of economic development.
evident in the history of the bubble economy is not new. Japan after the 1990s, and the United States after the 21st century, have emerged over a long duration of the bubble economy. the consequences are of Japan in the 1990s after the so-called because of the painful consequences of no longer occur. Alternatively, on a deep understanding of modern market economy, the United States and Japan would not be there this harming the bubble economy was profound. do not need the help of those confusing terms, with reduction method will be able to know that the bubble economy is actually hidden in human nature, not easy to eradicate. The basic cause is: Everyone wants something for nothing, everyone wants to do not work and fortune, and become super rich do not work . in the modern financial market is not developed before the dream that is rooted in human nature into the real economy only by how much or grab political profit realized. developed in the financial instruments, financial market depth and breadth of the former far more than the present, by entering raking in huge profits of financial markets is a feasible map. and if, the entity risk of a huge economic investment, political profits elusive, then boast of their access to financial markets for a wish, it is almost inevitable. can be observed is that, Japan and America's bubble economy is in fact the global expansion of the economy as occurred after hindered. The financial market bubble has the ability to self-realization, as long as there is a steady stream of capital supply, the financial market bubble to be more bigger and bigger, participants can be removed from them, having all the fun. The length of time will be far more than theoretical speculation wonks. It is also a lot of nerds in the financial markets often absurd reasons. In short, a long period of time, the bubble economy in the real economy can be completely independent of the formation of self-loop. more noteworthy is that the expansion of the financial bubble can even pull in a certain time and to some extent the real economy. This is not only the market ultimately depends on the physical assets economy constitute a kind of mock conventional wisdom, is also very easy to confuse the economic managers, that the real economy has been back on track, you can sit back and relax.
financial crisis, accompanied by serious overcapacity and the plight of industrial upgrading, the real economy to continue its rapid expansion of exports to only one purpose. This means that China has actually entered the eve of the bubble economy, the so-called everything is ready, only a strong wind carry on. until the night the financial crisis hit, the total collapse of foreign demand, the bubble economy is as ready to fly had made trend. When this case also, China's monetary authorities to pull the economy is not falling in, struggling to maintain 8% of the safe speed, began to turn on the water vigorously, inflation expectations also will be licking the air. money is the basis of the bubble, inflation is excuse the bubble, after the two-phase fit, three decades and continue to leverage the wealth of accumulated capital after, as the influx of mercury-like diarrhea in asset markets, financial markets finally merged into the torrent was. to early in the year, Premier Wen Jiabao Prime Minister also vowed somewhat uneasy, to push full-year loans to 5 trillion, but not more than half the time the loan has reached seven trillion of the spectrum. is followed, the Chinese real estate market in the pull of a to air after years of Sturm und Drang a sudden, the stock market also surged to double. It appears that we have not only greatly underestimated the ambitions and China's banking sector lending capacity, but also greatly underestimated the inertia of the bubble economy of China to enter, frankly said that, early in the year, I also thought that after years of reforms, China's banking sector has a number of health have the ability to self-restraint, half down, we may have to re-evaluate the results of the Bank of China Reform. However, the Department can worry about is not the bubble economy itself, but is the growth of the bubble economy created by illusion. For example, surge in real estate transactions, the price rise not only to stimulate the upper reaches of the real estate investment, for the fiscal tightening, the total inadequacy of local governments will also rain as drought (by the way, is too proud of real estate agent who is No. This quasi-economic roots, dare overestimated in the case of real estate to How many can play the power temporarily to stimulate consumption. so many, how many are able to form a stimulating effect on the real economy, and thus form a true impression: a bubble can generate growth. Although the bubble economy, governments are all known hazards, but countries Government initiative to burst the bubble who rarely, but when the downturn in the real economy, governments and even take the initiative to nurture the bubble, the answer side in this. To sum up, the bubble economy period, the asset market bubble has become the driving economic growth the main driving force. this period, monetary policy has rarely work on the real economy, and the main role of asset markets, creating a contrast with the usual stimulating circulation. This means that no growth without foam, no foam there is no profit, is the so-called bubble existence is also. more and more evidence and evidence we are convinced that China's economy is stepped swiftly into the risk of boom-bust period.
to years since China's economic managers to rare efforts to pursue active fiscal and loose monetary policy, do not know where interest is not. However, although the long-term relaxation in fear of inflation and bubbles, and bear the current recession is tightening of the insurance, is tantamount to political suicide. what light priorities are, it is clear. Today those in charge very high IQ people are the essence of the generation, how can we not discern one of the leading edge? Ever since, the great relief of the drainage of risk into the future will be the only option. Perhaps, the economy manager wants is to play: in the international market situation gradually improved, the real economy starts to determine the time of rapid exit loose monetary policy, so it goes, not only saved the moment of emergency, but also remove the risk of long-term, and ultimately out of the the road to recovery to a best of both worlds. However, in my view, both the short and medium term, the recovery in external demand, it is a small probability event, but potential to actually increase the so-called domestic demand is also exaggerated. this can not expect too much deep. In other words, we must continue to maintain 8% growth, and only to the cost of the bubble economy. that I said earlier, in the bubble growth in foam to survive. not very easy money, it is difficult to imagine that China will continue to maintain 8%, and once a little tightening, not only the bubble burst, and the real economy may be showing the prototype immediately. As an endangered person, when playing the shot in the arm, it seems business as usual, and once removed the arm, it is possible immediately die. I mean is: China's economic managers may be difficult to withdraw from the current super-body loose monetary policy. out of time, that is, on the occasion of China's economic stall.
victims of the bubble, people foes known. But in today's China, the growth has been the overriding task, in addition to growth, to any other goals can be any sort of change. What is structural adjustment, and what social, political reform, the crisis had already been Yifeng Chui. Growth has become the largest political.
Kam know this history, but the so-called knowledge, in fact, is nothing but a glimpse or two. However, this glimpse of the past one or two of knowledge, are woefully inadequate decision-making purposes, in the end fact, the lesson is no history. Thus, the important thing in the history of the place, decision makers often can not find his full, but only to the side bets. Mindful of this, the current situation, do they make life difficult for China's economic management, The situation can be original also. But as bystanders, we have to ask: what, after the bubble?
Frankly, so far, the performance of the Chinese economy juan mad, are not beyond our imagination beyond that, In imagination, there is nothing waiting for us? friends, this is the greatest uncertainty.