The fourth "Great Inflation" is coming!

Since 1992, we have had three more pronounced periods of "Great Inflation".

The so-called "period of great inflation" is a period in which the growth rate of monetary aggregate M2 is relatively fast, the over-issuance of money leads to a rapid rise in prices and housing prices, and the purchasing power of money depreciates rapidly.

Although we look at the currency in the medium and long term, the rate of depreciation is relatively moderate most of the time.

Only in rare special periods will there be a "period of great inflation" with a relatively obvious rate of depreciation.

And the very few "Great Inflationary Periods" we have experienced three times.

The first time was after the outbreak of the Asian financial crisis in 1997, when we injected 2 trillion yuan to set up four major asset management companies to divest the "non-performing assets" of commercial banks.

This large-scale injection of capital into the market doubled the monetary aggregate M2 in a short period of time.

This is also the first time that there has been a "wave of price increases" in China's housing prices.

In fact, China's currency over-issuance tide began in 1998, and 1998 also happened to be the time of our first housing reform.

The over-issuance of currency, coupled with the launch of housing reform 1.0, has led to the take-off of housing prices.

The second time was after the outbreak of the subprime mortgage crisis in the United States in 2008, we had to launch the "4 trillion bailout" plan, which also doubled the monetary aggregate M2 again in the short term.

It is difficult to say how much money was invested in the 4 trillion bailout that year.

However, in terms of the total growth and growth rate of M2, it is very prominent, and the size of the currency has doubled in almost 3-4 years.

This is the second time that there has been a "wave of price increases" in China's housing prices.

The third is after the outbreak of the local debt crisis in 2014, coupled with the high inventory of real estate, there are already signs of systemic financial risks.

Therefore, since 2015, we have launched the "shed reform to destock", and the central bank has created the PSL, a sky-high monetary water release tool.

Driven by the "shed reform and destocking", from 2015 to 2020, we overissued nearly 100 trillion yuan of monetary increments.

This is the third time that China's housing prices have seen a "wave of price increases", and it is also the most violent.

Summarizing the characteristics of China's past three "great inflationary eras", we can almost see that every time there is a crisis, there will be an over-issuance of money, which will inevitably lead to an increase in housing prices.

The economic crisis, inflation and rising house prices, this is almost a "triplet" in economics.

The logic behind this is:

Every time there is an economic crisis, the government increases monetary stimulus, which leads to over-issuance of money and inflation.

In this process, in order to resist inflation, ordinary people have bought houses to invest in hedging, triggering a rise in housing prices.

And China's fourth "era of great inflation" may not be far off.

In the past 20 months, although our central bank has released close to 60 trillion yuan, because the money has been idling in commercial banks, the money has not really flowed into the market.

How can we get a lot of money flowing into the market from the banks to drive up inflation?

In other words, the money in the bank is temporarily immovable, and the central bank is allowed to print some extra money, so that the money can go directly into the market, and quickly raise inflation.

That's right, and the central bank has done that.

According to official media reports on January 4, the central bank has restarted the PSL, with a monthly scale of up to 350 billion.

For many ordinary people, it is difficult to understand what PSL is and why it is driving up inflation.

PSL is equivalent to the central bank printing a bunch of extra money, and then stuffing this money directly to local governments through policy banks, and then letting local governments use the money to carry out "large-scale demolitions".

This will inevitably lead to an increase in the total amount of money in the market.

If the PSL release is large enough, it will definitely lead to inflation.

Moreover, this PSL has a second effect, that is, it is equivalent to the central bank printing money directly into the real estate "flood", which is very easy to make housing prices rise.

The 2015-2016 "shed reform and destocking" used this PSL to make housing prices soar.

The re-emergence of PSL not only means that inflation is coming, but also means that housing prices are very likely to reverse.

But this time, in order to save the market, we are not just restarting the PSL.

On January 5, the central bank and the financial supervision headquarters also jointly issued a document: opinions on financial support for the development of the housing rental market.

This opinion can also be called a "big move to save the market".

In this policy, three major "breakthroughs" have been made:

The first "breakthrough" is the abolition of the restrictions on the purchase of residential properties by enterprises, and at the same time, the original restrictions on the purchase of residential properties by enterprises with loans have been lifted.

In Beijing, for example, companies can buy a house with no restrictions, but they can only buy it in full.

After this policy comes out, enterprises can take out a loan to buy a house: the loan term can reach up to 30 years, and the loan amount is 80%.

In fact, this has already sent a signal: since individuals are unwilling to buy a house, then let enterprises buy, not only loans, but also unlimited sets.

It is equivalent to letting go of all high-quality assets to the "rich".

The policy mentions that an enterprise loan to buy a house can only be used as rental housing, and the purpose of the housing lease cannot be changed during the loan duration.

To put it simply, this time enterprises are allowed to take out loans to buy houses, and they are not allowed to buy and sell in the short term, and they can only do rental houses.

If you want to sell in the future, you must repay the loan.

As long as the loan is repaid, these properties in the name of the enterprise can be freely transferred and bought and sold.

The second "breakthrough": as long as the developer agrees to "not sell the house", he can obtain a "housing rental operating loan".

One of the biggest problems in the current property market is the "large inventory of new homes".

Why is there such a large inventory of new homes? It is because the developer's cash flow is too tight, and they need to sell their houses quickly to recoup the cash flow.

All developers want to sell their homes quickly, and the market supply increases.

Now that the policy is out, as long as the developer converts the "commercial housing" into "rental housing", he can get a loan to solve the cash flow problem.

When the market is good in the future, developers can convert "rental housing" into "commercial housing" and continue to sell.

This is equivalent to asking the bank to send a sum of money directly to the developer, and then telling the developer that the house should not be sold for the time being, and the house should be rented out first.

In this way, it not only reduces the supply of commercial housing in the market, but also flows a lot of money from the bank into the market.

It's simply a "super rescue move", and I have to admire it.

The third "breakthrough": finally to pilot real estate investment trusts.

This time, it is clearly mentioned that "priority will be given to supporting Xiong'an New Area, Hainan, Shenzhen and large cities with a net inflow of population to carry out real estate investment trust pilot projects".

What is a Real Estate Investment Trust?

To put it simply, it means that after the enterprise takes out a loan to buy a house and uses it for rental operation, if the rental income is stable enough, it can package all these houses into an asset package.

Then use this asset package to issue a fund to go public, and finally get back all the costs from the people.

To sum up, whether our central bank restarts the PSL or allows enterprises to borrow money to buy houses, the essence is to destock and find ways to reduce the supply of new homes for commercial housing.

On the other hand, due to the need for a steady stream of money printing to support the process of destocking, it will inevitably create an "era of great inflation".

China is about to usher in the fourth "Great Inflation".