2 weeks ago

 "
 although Zhou de has declined, his destiny has not changed 
" is my overall view on the 2020 / 2021 economy. 

From the current situation, the literal "economic crisis" is inevitable. Because of the impact of the epidemic, all kinds of figures related to economic growth will decline, the unemployment rate will increase, many people will lose their jobs, and more people will suffer from income decline From now on, 
 it's time to prepare for a tight day. 

Epidemic disasters are different from other natural disasters. For example, an earthquake will cause local damage, but it has no fundamental impact on the economic activities of other places. On the contrary, it also destroys the stock of some wealth, which in a sense stimulates the development of related industries. But covid-19 is a direct impact on the speed of global economic turnover, rather than the destruction of local wealth. 

In fact, all kinds of economic activities are stagnant because of this, and the speed of money circulation is slow, which is one of the reasons why the central bank's interest rate adjustment has little effect on market stimulation - if I need to expand production scale, interest rate reduction is a kind of stimulation; now there is not much business to do in the upstream and downstream, and there are not many opportunities for entrepreneurship, so the channels of interest rate reduction to stimulate the economy are limited. 


 however, in terms of the range of digital changes, the decline in 2020 / 2021 can reach that of 1930, but people's lives will not be as miserable as they were at the beginning, which may be the difference between one piece of meat in the bowl or two pieces of meat. 


First of all, 
 the direct cause of any economic crisis is not natural disaster, but the strategic efforts made by people to avoid natural disaster risk 
. For example, in the subprime crisis of 2008, if all investors pretend to be deaf and dumb, completely ignore the risk of the subprime crisis, and insist on not changing their investment portfolio when there is the possibility of large-scale default, then there will be no subprime crisis. The crisis comes from the capital panic transfer after the risk is found, not the risk itself. 

The same is true for bank runs. When a bank loses money, if everyone insists on not running for a long time, the bank can often recover by itself, but once run, the bank will immediately enter bankruptcy proceedings. 

The current epidemic is global. Several international risk averse assets, such as the issuing countries of the US dollar, the euro and the Japanese yen, are plagued by the epidemic, and capital flight is inevitable - in a sense, it actually reduces the risk of economic crisis. 

Second, governments around the world are far more experienced than they were then. It was in the course of the last great depression that Keynesianism was valued. Governments are now well-trained. 


 What's the most perfect way to survive the epidemic? Generally speaking, it means pretending that nothing has happened. The year when the epidemic happened is not counted at all. Now the key question is how to "not count"? Workers want wages, bosses want to do business, tenants need to pay rent, landlords need to pay back loans But everything comes down to one source: the central bank. 

We imagine that if the government seeks loans from the central bank, and then gives workers money without discrimination, the workers pay rent and buy daily necessities, so the landlord gets the money, pays the mortgage, the boss has the workers' purchase, and there is business to do Is there no economic crisis? 

No. Because the money of the central bank is essentially the credit of the state, and the government can, in principle, produce as much as it wants - as long as everyone's confidence in the currency is still there, and confidence itself is a concept without a definite boundary. 


 so the key point to get through this global epidemic is to make the economy work as much as possible. If it can be really produced, it will be really produced. If it can't be really produced, it will be supported by the national finance for "idling" - for example, the hotel and aviation service industry will definitely be hit, but the hotel and airline bankruptcy is not because of the epidemic, but because of the employees Assets, real estate rental, maintenance costs, etc. If we can directly solve these problems for hotels and airlines through fiscal and monetary policies, so that these enterprises can maintain their balance of payments when they are completely idle, or push the loan to a long time later, then these enterprises will not go bankrupt because of the epidemic. 

In other words, 
 what we need now is bold and innovative fiscal and monetary policies, which can provide individualized support to various industries in detail 
. The central bank should be bold enough to take in many toxic assets (or, to put it more generally, bad debts) from industries affected by the epidemic. The good news - yes, it is good news that the epidemic is global. So if governments brush fiscal deficits and release large amounts of money, it is unlikely to have a large-scale international capital transfer. 

Thirdly, 
 before the outbreak, there was no sign of any structural crisis in the world. Although it has always been said that economic growth is weak, the economy does not say that there is a large-scale structural unemployment of the population - that is to say, the working skills of most people are still useful. For the majority of the employed population, the difference is not too big as long as the ability is needed in company a or company B. before the disaster, I need to move bricks on the construction site. After the disaster, I don't work. I go home to watch my own land and order vegetables for half a year. After the disaster, I still need construction workers, or I can come out to work. 

That's what I said - there is no structural crisis. If we all use AI robots to build automatically, and never need me to move bricks, that's the real crisis. 

Therefore, if there is an economic crisis in 2020, we need to calm down, prepare for wage reduction and phased unemployment, and increase systematic risks. We need to do more preventive savings. It's no big deal, because your skills are still needed by this society. This year should be wiped out from the calendar, and then the world will inevitably usher in huge rebound growth and prosperity.

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