Island Jun said
The development of enterprises is very rational most of the time, because the operation of enterprises directly involves the vital interests of entrepreneurs themselves; but at some times, entrepreneurs will also make wrong judgments and show an irrational side.
The current situation of lack of money everywhere reflects the high debt, overdraft economic development model, and the need for self-repair after reaching the critical point.
Of course, the process is extremely painful, for everyone.
Author: Shi Hanbing
Photo: Visual China
Source: Kung Fu Finance
Money, there is already a lack of money in places like Leiyang, so that they cannot pay wages normally; many enterprises lack money and lack to the point that the capital chain is broken; and many families also feel the pain of lack of money because of repayment of housing loans and so on.
If you look at the data of the broad currency M2, it seems that there should be no shortage of money. China's M2 in 1990 was only 1.529 trillion yuan, which grew to 13.46 trillion yuan in 2000 and 72.59 trillion yuan by 2010, and as of the end of May this year, this data has reached 174.31 trillion yuan.
So, there's a very real question, where does the money go?
Over the years, China's economic achievements have attracted worldwide attention, and the reason why economic development is so fast is closely related to one factor, that is, debt. Debt maximizes the power of the elements of capital.
From the national point of view, large-scale capital construction requires a large amount of money investment, and in the balance sheet of the central bank, currency issuance is included in the liability.
Of course, unlike other indebted entities, the central bank has the right to issue money, so domestic debt has never been a problem for the country.
But local governments are different. In our case, because local governments bear the heavy responsibility of promoting economic development, in many cases, they actually assume the role of a part of the enterprise.
Because the promotion of cadres has long been linked to the performance of cadres, local officials are more willing to develop the economy through large-scale debt.
This reason is very simple, borrowing can do big projects, make big cakes, GDP increments will go up, and political achievements will come out. The problem is that when this is done in the long run, the debt will accumulate to an unbearable weight.
For example, when the debt reaches a certain level, the fiscal revenue of some local governments cannot repay the interest of the bank, which is actually on the verge of a debt crisis.
This is especially true for businesses. The development of enterprises is very rational most of the time, because the operation of enterprises directly involves the vital interests of entrepreneurs themselves, and entrepreneurs are mostly more cautious than local government officials. However, at some point, entrepreneurs can also make wrong judgments and take on an irrational side.
For example, after the introduction of the four trillion yuan plan in 2008, banks chased after enterprises to lend, and entrepreneurs also saw the attractive opportunities brought by huge government-led investment projects, so they rushed to the top and desperately became bigger;
But when the project really came to production, it was suddenly found that there was excess capacity, and it was a serious surplus, and the market demand was not so large.
In other words, the income of the enterprise can not keep up, and in the worse case, even the enterprise even has to struggle with the interest rate of the bank.
As for the continued rapid rise in the leverage ratio of residents (referring to the ratio of equity capital to total assets on the balance sheet), it is well known to be the result of paying for high house prices.
Housing was originally a basic necessity, but it is more and more like a luxury, the soaring house prices have made people pay more wealth, and the part that exceeds their financial affordability needs to rely on loans, and the faster house prices rise, the higher the debt burden.
When the tipping point is reached, the problem arises.
Local governments make big projects, and enterprises are encouraged by the four trillion yuan bailout plan to expand production, there is a limit, but beyond this limit, it is very close to the crisis. This crisis is the balance sheet recession.
Tips
Definition of balance sheet recession: When the national asset price bubble bursts, a large number of private sector (business and household) balance sheets are subsequently in a state of insolvency, and private sector economic activity changes from the pursuit of profit maximization to the pursuit of debt minimization, thereby curbing economic activity on a large scale, and the resulting continuous recession is called a balance sheet recession.
Now, broad money is still being released, the central bank is still cutting the RRR, why is money getting more and more tense? Because, everyone is in the trap of balance sheet recession.
The newly released currency, the newly issued loans, the newly released liquidity, from local governments to enterprises to individuals, are all doing the same thing, that is, repaying debts.
Renaissance "To Johor Bahru Allegorical Painting". The Latin meaning "the mountain of debt relief" at the bottom of the painting explains the main thrust of the painting; A group of people are trying to destroy the mountain that represents the national debt. The Johor Bahru Fund is one of the three government government agencies in Venice, and interestingly, the painting was commissioned by the fund's director.
Due to the excessive dependence on the input of money and credit in previous years to develop the economy, when the debt repayment period comes, everyone first has to take money to fill the bottomless pit of debt, rather than expand reproduction, because the production capacity has been excessive, the price is low, the risk of asset bubble bursting has increased, and the risk of production and operation activities continues to rise.
Therefore, in this case, there are fewer funds willing to do the real economy, but more to the real estate, virtual economy, in order to find ways to make quick money, to get out of the predicament.
And when more and more people do this, and even when there is a general consensus on the success of this choice, it will promote the further accumulation of asset bubbles until the moment of dissolution really happens.
Of course, when part of the funds flow to the virtual economy, and part of them go to fill the holes in the debt, it is naturally very short of money, especially the real economy.
The current situation of lack of money everywhere reflects the development of high debt and overdraft economic model, and the need for self-repair after reaching a critical point. Of course, this process is extremely painful, and it is often accompanied by the outbreak of economic crises. Debt is a bloody thread, no matter which country it is.