In 2024, don't just focus on stimulating consumption and encouraging house purchases, "increasing income" is the best solution

Today's headline is by no means to pander to you, but rather a point I want to express from the bottom of my heart. To tell the truth, only by enriching the people can we strengthen the country, which is the basic logic inherent in economics.

If we want to make the country strong, we must first enrich the people, and this is the basic conclusion drawn from the experience and experience of China and the world's great powers over the past several thousand years. Looking at ancient and modern times, China and foreign countries, we cannot find a successful example of ignoring the prosperity of the people but achieving national prosperity and strength.

At the beginning of the article, you may be in a fog, and this is the next time I want to talk about it.

At the end of the year, commercial banks announced the third deposit interest rate cut, and the banks used actions to shout to the whole society: deposits are not welcome, especially long-term deposits. This means that the era of deposits not being able to make money, and even more so of resisting currency depreciation has really come. In other words, saving money is becoming less and less important.

Unexpectedly, the LPR did not move in December, and this data is to lock in the mortgage interest rate for the whole year next year, and now it is not even installed, and it is directly clumsy to eat the mortgage interest rate cut expenses for the whole year next year, which is equivalent to giving the bank a whole year to repair its balance sheet.

The essence of the deposit interest rate is that the bank is constantly subsidizing itself with the people's deposits - the interest expense saved by the deposit interest rate reduction is much higher than the cost of the loan interest rate cut, that is, the profit is false and the pump is real.

This matter has already been talked about, the same thing, why say it twice?

Because of this incident, it is a good reflection of the real status quo of Chinese people's consumption, loans, and savings, and it also exposes the core problem facing the current steady economic growth: the residential sector cannot increase leverage.

Even, the common people have long been desensitized to the policy, because everyone has recognized that the macro policy is "lip service but not reality".

Let's take a look at three sets of data: 1. In 2022, household deposits will increase by 17.84 trillion yuan, and in the first 11 months of this year, they will increase by 14.69 trillion yuan, which is equivalent to an extra 10,000 yuan per capita in the country.

This is the trend chart of household deposits in the past 15 years, in other words, we have once again practiced the concept of "Chinese love to save" in the past two years. As a result, the amount of money deposited in banks by the people of the whole country has reached an unprecedented 135.53 trillion yuan, that is, the per capita deposit exceeds 90,000 yuan.

Why are people so keen to save money in the past two years? This is a common topic, everyone has a scale in their hearts, but what has always changed is that the primary purpose of saving money is not to earn a small interest, but to prevent problems before they occur.

At the macro level, there is a reluctance to increase investment in people's livelihood and well-being, and hundreds of millions of ordinary people can only use traditional ways to save money to cope with unknown risks.

Especially for older migrant workers, as mentioned in the previous article, due to the impact of factory holidays and real estate winters, such people have become unemployed and have already become the norm to reduce their wages, and they have to return to their hometowns in advance, becoming more and more marginalized, and even becoming social scraps, no matter how hard they try, they cannot make more money.

Not to mention, they also have the pressure of mortgage, supporting the elderly, and raising children on their shoulders. Therefore, the only thing that can ensure that they can live their lives is stable and sufficient savings.

2. In the past year, household loans only increased by 5.09 trillion yuan, while time deposits increased by 16.63 trillion yuan. Among them, housing loans, the main source of profits of commercial banks, have decreased by 440 billion yuan in the past year, and in the final analysis, it is because the residential sector is repaying and replacing loans in advance.

Mortgage loans grew negatively, but the leverage ratio of the residential sector rose by 1.9% in the first three quarters of this year.

This is the first time that the "loan swap" has pushed up the debt ratio of the residential sector, and this is fundamentally different from the soaring debt ratio in previous years -- in the past, it was actively increasing leverage, but now it is taking the initiative to reduce debt.

3. No consumption, no house purchase, no loan, the result is that the CPI continues to run at a low level, and in November it fell by 0.5% year-on-year, a new low since September 2009, and the entire market is trembling in the haze of deflation.

In addition, according to the data released by the central bank, M2 increased by 10% year-on-year in November, and M1 increased by 1.3% year-on-year. The M1-M2 scissor spread hit its lowest level since January 2022.

As mentioned in the previous article, the difference between M1-M2 growth rate is declining, indicating that there is less living money in the market and more dead money, that is, enterprises and residents choose to deposit funds in banks on a regular basis, and the profitability of micro individuals is declining, and the investment opportunities available in the future are limited.

Reflected in the reality, everyone is reluctant to invest, and we all know that bank interest rates are very low, but it is better than blindly investing without any money - the top five wealth companies have been thundered, hundreds of thousands of high-net-worth individuals have been harvested, and in the year when the global stock market has skyrocketed, we have retreated in 2900...... All this, tossing around, found that lying down is the most reliable way to keep wealth.

In the past, it was "I don't manage money, and money doesn't care about me", but now it's "I don't manage money, and money doesn't leave me".

Looking back, the view that an expert said two years ago that "buying wealth management, buying funds, buying stocks, and even buying a house may make you return to poverty" was really prescient.

When it comes to the macro economy, the speed of money circulation slows down, the efficiency of economic operation decreases, and the vitality weakens. Among them, the sluggish real estate sales are one of the main reasons that cannot be ignored.

Based on these three naked realities, let's look at the move of commercial banks to reduce deposit interest rates, the reduction of operating pressure by banks is a superficial factor, and the deeper reason is actually that the invisible hand hopes to moderately reduce the savings rate, drive out the money lying in the bank, and go to the market to eat, drink, buy a house and buy a car.

As long as money flows and consumer transactions exist, economic growth can be stimulated, and this is the situation that the top management wants to see.

In retrospect, although the achievement of the 5% economic growth target in 2023 has been stable, it must be admitted that it has been achieved by accumulating debt, which is not destined to last: in the first three quarters of this year, macro leverage rose by 13.5%, and government debt grew by 12.5% year-on-year.

Speaking of which, it is all a last resort, because now the income is very unstable, whether it is inside the system or outside the system, life is very tight, but the expenditure is rigidly soaring, so there seems to be no other solution except for continuous debt.

Based on this, it is inevitable to cut interest rates and reserve requirements next year, that is, the LPR cut is a high probability event, but don't think that the loan interest rate will be much lower than the deposit rate, because banks have never been charities.

In the longer term, the mainland must have low interest rates, or even negative interest rates, because in order to achieve stable growth, everyone needs to borrow more. In the context of declining income growth, only by continuously reducing the cost of borrowing can we match low incomes so that everyone can bear the debt.

Low interest rates are often accompanied by economic inactivity, and its biggest feature is that it will become more and more difficult to make money. This is what we usually call the boom cycle, where everyone gets rich together, and the downward cycle, where the gap between the rich and the poor intensifies.

In addition, from the perspective of historical laws, in the era of low interest rates, everyone should be more vigilant against anything with high yields, because many seemingly beautiful things are actually hidden in darkness: you want its income, it wants your principal.

I don't want to pour cold water on it, but I still want to ask, if the deposit is really zero interest rate, and there are still people who are keen to save money, how can they be broken?

There is a discussion on the Internet about "where to go for the extra money", but in fact, for most people, "where is the extra money" is probably the main problem.

This also involves a very important question, are the deposits in the bank the majority or the minority?

The truth is actually quite cruel, in reality, less than 2% of people hold 80% of the wealth.

Therefore, even if we continue to increase efforts to stimulate consumption in 2024 and continue to reduce down payments and interest rates to encourage house purchases, it will probably be useless, because those who really need it have no money, and the rich have no shortage of houses and cars. Krypton games can be consumed, but now even recharge has to be capped, and the rich have fewer channels to spend money.

To sum up, enterprises have borrowed money and produced, but the income of the residential sector has declined, and it has not formed consumer orders, but has deposited a small amount of money in the bank, which is the reason why domestic demand cannot rise.

In other words, the decline in residents' incomes → reduced consumption→ the reduction of corporate orders→ the contraction of profits→ the lack of money to pay wages→ the reduction of residents' income→ continued to reduce consumption, forming a closed loop.

Increasing income is the point where the current economic cycle needs to be opened urgently.

How can I fix this?

What is the matter now? While lending heavily to production-end companies.

In the past year, loans to non-financial enterprises increased by 18.34 trillion yuan, but demand deposits decreased by 0.76 trillion yuan. On the other hand, corporate profits fell 7.8% year-on-year in the first 10 months.

The facts are in front of us, desperate blood transfusions can only give companies a life, but not make them profitable. Especially for small and medium-sized enterprises, the current situation is very embarrassing, and they have to rely on loans and blood transfusions without profit margins.

On the other hand, the government has stepped up fiscal stimulus. There are two most representative measures: one is to issue part of the new local government bond quota for 2024 ahead of schedule, and the other is to raise the national fiscal deficit rate from 3% to about 3.8%, and issue an additional 1 trillion yuan of special treasury bonds.

As we all know, the demand comes from three sectors: residents, government and enterprises, and it is now barely supported by more government investment.

So what other means are available in 2024?

The root of income is distribution, and it is inappropriate and sensitive to talk about distribution now.

Some people say that it is not impossible to learn Xi the United States to send money directly, but the cost of inflation may be even greater, because we cannot make the world pay for it by raising interest rates.

It is impractical to send money, but it seems inevitable that other ways of releasing water will be inevitable. Theoretically, as long as the spread does not invert, the reversal operation to reduce the long-term and short-term interest rate spread can continue until saving money is unprofitable, aiming to force everyone to save as little as possible.

Of course, there is a cost to releasing water, which will raise inflation and raise the boundary line of living costs. In the case of the disappearance of technological dividends and the economic downturn, the only way to do the lesser of two rights is to pay wages first.

Facts have proved that this is the quickest way to make the people rich, but the problem is that it is very difficult to force the people through these two ways, one is that the house cannot be demolished, and the side effects are great. Second, although the stock market has obvious bottom signals and frequent regulatory actions, most people's confidence has been smashed by this year's deep bear market (today (12.26) the index fell below 2900, hitting the lowest closing price in 2023). If you want to have immediate results, unless you break the reinvention and change the system at the source, this is tantamount to fantasy.

However, I have noticed that in the past few days, many people have said that real estate stocks will usher in a sharp rebound in 2024, and I am noncommittal, but hopefully, this dilemma will be solved.

Finally, a few more words, the fundamental problem of the current economic cycle is the lack of residents' income, which comes from full employment and enterprise performance, which requires sufficient domestic and foreign orders to support.

However, foreign orders are shrinking, and domestic orders cannot make up for the gap in the short term.

At the macro level, we should deeply reflect on the simple and crude control, killing chickens and eggs and cutting leeks, and the high concentration and inefficiency of resources in the past few years, so as not to repeat the mistakes of the past.

If you ask me how to fight against the general trend as an individual, I am actually very confused. But there are two points to say, first, I want to say a correct nonsense, there is no point in complaining, it is more important to recognize the reality, and now I have practiced extremely strong personal ability, and I have a stunt of eating, which is better than anything else. Second, do not toss, respect the objective law, and be ready to meet the dawn.