The country's economy entered a state of deflation.
Zhang Xiangshi is a financial and taxation expert who has served more than 1,500 enterprises in finance and taxation for 32 years.
Now the economy is really entering a state of deflation, that is, the purchase of raw materials is not in the decline, generally 3% inflation is normal, now 0.1% inflation has not begun to go down, but things are getting harder and harder to sell before the price is reduced, all prices have been reduced who still buy goods have declined, it is definitely that the economy will enter a state of decline and deflation.
First, deflation immediately goes to layoffs, layoffs will have no wages, no wage consumption and vicious circle, it will enter a continuous decline channel, so the country began to engage in currency evaporation, this money is actually idling.
It's like a lot of people see M2 add so much, but M2 isn't cash, it's just a credit. For example, to borrow so much money, I have a credit limit, but did you borrow this money? So many people do not understand, it is scary to say that M2 has increased, M2 is equivalent to giving you credit, do not borrow this money to go, it also comes out.
It's like the company authorized 10 million, but did I take 10 million? I didn't take it, but there are 10 million more in the market. What impact does this 10 million have on the market? No, it is not used for shopping, the money is idling, but when it is bookkeeping, there is an additional 10 million disposable income on the books.
So is the economy rebounding again this year? It's actually quite difficult. At the national level, international governments are still making a lot of investment and need a basic economy. However, private enterprises and ordinary people dare not invest or consume, and interest rates have been continuously reduced at the national level, and now the interest rate spread has dropped to only 1.9.
But such cheap money, just like Japan's government after 1990, was also borrowing a lot to reduce interest rates to extremely low or even zero interest rates. Again, no one borrows money, that is, no one has a loan on the account.
What is in large quantities on the market now? Prepayment. Why prepay? It is because the price of assets does not rise, and it is cost-effective to use leverage when the price of assets rises. Now that assets are depreciating, aren't you stupid to still use leverage? So now the asset is no longer appreciating, there is no new value-added channel, the money is better to pay back in advance, without increasing income I will stop the loss first, most of the people's thinking is like this.
What happened some time ago? Many people's houses have been repaid in advance, because of the use of mortgage loans, during this period of time the state strictly investigated mortgage loans, suddenly strangled the passage. In the past, mortgage loans were 5 points of interest, operating loans were 3 points of interest, there were two points of interest difference, many people repaid the loan in advance, felt that the spread was large, and now some mortgage loans are also falling, so the spread is narrowing.
Another is that the state is checking whether the business loan has real estate, so this piece is also blocked, so everyone does not borrow. You see that deposits are increasing now, what does it mean? Consumption has decreased, and money has become illiquid.
You said that you look at M2 is quite big, many M2 is actually bubble on it, that is, the money has not really entered the circulation system and has not been earned. This is very similar to Japan after 1990, when the balance sheet is in decline and everyone is repairing their balance sheet and minimizing liabilities. I don't make money now, so I have to reduce costs, reduce debt, and reduce my interest expenses.
Deflation actually hurts the economy much more than inflation. In 1929, the Great Recession in the United States was actually caused by deflation. How did deflation come about? At that time, the dollar and gold were linked, and the limited amount of gold led to insufficient money in the entire market, not only in the United States and Europe, the market has less money, asset prices will go down, and a large number of banks will fail.
After the collapse, everyone began to panic, let alone save money and dare not spend a lot of unemployment, so now it has entered such a dangerous stage, if not well controlled, the economy will really enter a state of deflation.