Li Yang: We can't see more and more US debt, say that the United States is not good, and explore this "internal negotiation" relationship

Li Yang, member of the Faculty of the Chinese Academy of Social Sciences and chairman of the National Finance and Development Laboratory, said in Beijing on the 25th that rich countries are in debt, and more and more debts, can also use self-printed banknotes to repay debts, and the flood of debt runs parallel to ultra-low interest rates and negative interest rates, and the new characteristics of these debts will have a great impact on global development, especially on the economic development of developing countries, and must be paid enough attention.

At the release of the new book and high-level seminar of "China Financial Report 2020" on the 25th, Li Yang made a keynote speech on "Debt is the Great Enemy". He said the debt flood has been a long time ago, and today it has reached an uncontrollable level. Statistics show that by the end of 2020, the total global debt will exceed $281 trillion, reaching 355% of the world's gdp, 35% higher than in 2019. If you calculate the global population of 7.5 billion, the per capita debt is as high as 37,500 US dollars. Since the beginning of the 21st century, the issuance and repayment of debts have taken on some new characteristics, and the phenomenon of rich countries being in debt and indebtedness has become increasing. The debt of rich countries is illogical in itself, and the bigger problem is that these countries are all countries that hold the right to issue the world's reserve currency. Some countries can use their own printed money to pay off their debts and continue to operate, but what role will it play for the rest of the world and the world economy? The series of problems that arise or may be caused are worth analyzing and exploring and seeking countermeasures.

Li Yang gave a keynote speech on "Debt is the Great Enemy".

Li Yang said that today's global currency issuance can be described as a "terrible flood", but overall, the huge amount of liquidity has not had a positive and positive impact on the real economy. As a result of the economic downturn, most of the money actually entered the stock market, bond market and real estate market, which also led to an increase in the prices of major assets. Along with the flood of debt, there have been long-term ultra-low interest rates and negative interest rates, which raises the question of whether the debt can be sustainable. Fed Chair Janet Yellen argues that debt is sustainable if it pays interest on GDP less than the balance of government bonds as a share of GDP. Now that U.S. interest rates continue to fall and debt payments as a percentage of GDP hit a 30-year low, U.S. debt is sustainable, according to her.

"Obviously, the relationship between finance and the real economy has changed a lot today, and we can't see more and more US debt, just say it can't." Li Yang said that there are some laws that are not well understood and need to be explored, and perhaps the long-term ultra-low interest rate and the "internal consistency" relationship between negative low rates and debt flooding are an entrance to the puzzle. The United States released the dollar through the trade deficit, developing countries, including China, got the dollar surplus, to invest in dollar-priced assets, the most suitable investment target is the US debt, and the investment in US debt supports the US fiscal policy. "We should note that perhaps, the United States uses the dollar to pay interest on debt, the trade deficit, the dollar, and the U.S. debt form a self-reinforcing internal cycle, and the monopoly position of the United States in the global economic system and financial system is constantly strengthening."

Li Yang frankly stated that There are also many debt problems in China, and he is most concerned about two parts. One is the rise in resident debt, some people explain that this is more used by residents to consume, but his and his team's research data show that the main reason for the rise in resident debt is real estate debt, and resident consumption and short-term consumer credit are still in the negative growth range. The other is that in 2020, the leverage ratio of Chinese residents exceeds that of Germany and Japan, which is not very comparable, but Japan has considerable comparability, because Japan has increased the default rate of housing loans due to falling house prices, resulting in a long-term stagnation of the economy for 20 or 30 years. Now that the leverage ratio of Chinese residents exceeds that of Japan, it should be said that we should be vigilant.

When talking about the problem of local debt, Li Yang said that China's local finance is often linked to finance, and a large proportion of local debt is purchased by local financial institutions. This situation of fiscal risk and financial risk spillover is also a problem.

Column Editor-in-Chief: Fan Jianghong Text Editor: Fan Jianghong Caption Source: Figureworm Creative Image Editor: Yong Kai

Source: Author: Fan Jianghong