Chapter 40 The third chapter is about hundreds of millions of "economic illiterates"

First of all, a very ironic thing. For those ordinary people who just make fixed deposits and savings, the subprime mortgage crisis did not have any direct impact on them. The original subprime mortgages were housing loans for low-income earners, which turned investment bank loans into financial products in the form of MBS (mortgage-backed securitization). MBS itself has certain problems, but it doesn't cause any major problems, but combining it with cash-flowing securities for securitization creates complex CDOs (covered debt obligations), and then things change. got complicated. Bear Stearns was responsible for the development of the MBS program with subprime mortgages, and the sale of this securities also began only a few years ago.By the summer of 2007, with housing prices no longer rising and subprime loan deferrals rising sharply, people began to realize that there was going to be a crisis. Needless to say, everyone knew what happened after that.

In fact, the pure subprime loan part is only 30 trillion yen, but once it becomes a new real estate, it becomes a huge financial product worth 300 trillion yuan, which is the problem.Typical examples are Merrill Lynch, Morgan Stanley, Goldman Sachs, Lehman Brothers, etc. Even these "financial experts" have been infected with the virus of the subprime mortgage crisis one after another. In conclusion, the subprime mortgage crisis affected many aspects of the financial sector, but did not cause direct harm to ordinary (economically illiterate) people who only knew about time deposits and savings.

But please don't forget that these financial institutions where Japanese people save are suffering huge losses due to the creditor's rights of subprime loans. What I want to say here is that it is not "it is better not to know", "don't act rashly, and hurt less". I hope that everyone can often think about the world's economic situation in normal times, and have a correct grasp of it. When such a major event occurs, they can understand its ins and outs.Be aware that even if money is stored in a safe place, the money may not necessarily be used safely.It is because of too much trust in American financial institutions that they lost more than 100 billion yen in funds.

Here's a question that anyone with a little common sense can answer: For this question, I don't think anyone will answer to deposit money in a bank with an interest rate of 0.1%.However, there is one country in the world who is willing to do this, and that is the current Japanese. I don’t know how many times I have said about this contradiction, but it was in vain, and there has been no sign of improvement. I can only say that the Japanese have fallen into a state of not thinking about money. Why are the Japanese able to make choices that go against common sense so calmly? First, it is necessary to briefly review Japan's previous "zero interest rate policy".

Financial strategist Bit Tasca once published an article in "Newsweek", ridiculing Japan's zero interest rate policy implemented under the leadership of the government in disregard of market laws as "the first time since ancient Babylonian times". But such things exist, and we don't even have the right to be angry. When it comes to the zero interest rate policy, it is an abnormal phenomenon that has never happened in human history, and it has only happened in Japan.In a sense, it may be called a valuable experience. Due to the impact of the financial crisis in 2008, Switzerland and the United States seem to have to implement such a policy.

Let’s talk about the changes in the interest system in Japan, the founding country of the zero interest rate policy. In the 1980s, 90% of bank interest was returned to depositors.Since then, the interest rate has generally fluctuated within the range of the statutory interest rate. In the late 1980s and early 1990s, the interest rate began to rise, and once reached a level of 7% to 8%. However, as we all know, this began to change when the global economy entered a downturn. After 1992, interest rates dropped sharply; finally, in 1999, the government implemented a zero interest rate policy; in 2001, a certain degree of financial relaxation policy was implemented, until today.

In order to avoid a liquidity crisis such as the withdrawal of deposits, the Bank of Japan injected a large amount of funds into the demand deposits of various financial institutions, causing short-term interest rates to become zero.This is the so-called "zero interest rate policy". I think the government should have considered it in this way: through the zero interest rate policy, a large amount of financing will be provided to financial institutions, and finally the funds will be invested in the market, so as to improve the economic situation and get rid of the bad luck of deflation.

But such financial policies did not have any effect on economic recovery.These financings serve little purpose other than to slightly improve the performance of financial institutions overwhelmed by bad debt. In short, savers who save money are completely ignored, and all they can get is zero interest from the bank. Assuming that "the interest rate policy in 1991 has been implemented" as the basis, Mitsubishi Research Institute made an estimate: in 14 years, due to the implementation of the zero interest policy, ordinary depositors lost a total of 283 trillion yen in interest income.Conversely, the interest income of financial institutions has risen, and they themselves will reduce the interest burden of 264 trillion yen.

To put it bluntly, the function of the zero interest rate policy is to transfer the money in the hands of depositors to financial institutions and companies, which use the money to deal with financial institutions' non-performing securities and corporate excess debt. But people who have fallen into the state of "stop thinking" are being coaxed by former Prime Minister Koizumi's rhetoric, convinced that this is a measure to promote reform.This policy has indeed reduced a lot of bad debt, but at the cost of a decline in the quality of life of the people (that is, your quality of life).

In March 2006, the Bank of Japan issued a statement dismantling many of the financial mitigation policies.Since then, due to the judgment that the economic situation will continue to improve, the zero interest rate policy was finally abolished, and the interest rate began to increase slowly in stages.However, the good times did not last long. Under the influence of the financial crisis, the interest rate dropped again. By December 2008, the interest rate dropped to 0.1%, which was close to zero, which can be described as an ultra-low interest rate.Regrettably, however, this situation continues today.

In Japan, if you deposit money in the bank, not only will your money not increase, but it may also be seized by the bank due to the bank's usury and other policies.But despite this, more than 1/3 of Japanese personal deposits are still deposited in banks.

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