Chapter 30 3. The impact of the bursting of the consumption bubble in the United States

After the financial crisis in 2008, Americans' spending power and consumer confidence were hit hard.Americans regard November and December as the traditional holiday shopping season.In previous years, the more than one month from Thanksgiving to Christmas was the most important shopping season in the United States, and about 65% of the annual consumption of American merchants came from this season.According to tradition, many merchants will conduct a big sell-off before Christmas. In previous years, Christmas often saw such a scene: many citizens camped at the entrance of the mall the night before, and once the mall opened, they flocked to it. It can be described as thrilling.In 2008, in the United States, although the banner of "clearance sale" was hung on the door of many stores more than a month ago, the scene of customers rushing to buy was no longer seen.

In the week leading up to Christmas, shopper traffic fell 27% year-over-year, while sales fell 8%, according to a survey of retail stores across the United States.And the survey shows that about 30% of Americans have gradually changed their high-debt consumption habits during the shopping season, and began to abandon credit cards and switch to cash consumption.So how to boost the sluggish consumer confidence of Americans?How will this change in consumption habits affect China? So what kind of impact will this kind of consumption bubble burst on us in China?I will follow Friedman's article and tell you why he thinks he should give us credit cards to spend, and what went wrong with us.

Many people, including many economists, say that due to the influence of traditional culture, we Chinese are a nation that likes to save rather than consume.Bullshit, it's not right.Let me take the 1990s as an example. In the 1990s, consumption accounted for as much as 60% of my country's GDP, but now, my country's consumption accounts for only 35% of GDP.The proportion of consumption dropped rapidly.This is definitely not because the culture makes Chinese people like to save and not like to consume, but because we implement two policies. The first policy is the infrastructure construction project that the local government stimulates GDP.The result of this is that the reinforced concrete economy accounts for 55% of GDP, while the proportion of consumption is compressed to 35%.

The second is to attract investment from local governments.When our local government attracts investment, it has given preferential treatment in taxation and land. At the same time, it has adopted a more tolerant attitude towards environmental pollution, resource destruction, or labor exploitation in the past few years.Under such favorable policies, my country's production capacity has expanded substantially.How far has China's production capacity expansion reached?China's production capacity expansion has accounted for nearly 70% of the entire GDP.But our consumption is only 35%.That's the problem this columnist sees.Today China will go to the next step, he thinks he is very pessimistic.He thinks our China is very difficult at present.Why?Consume too little.What's even more frightening is that we have 70% of production capacity, but we only have 35% of consumption.What is the remaining 35%?It's called excess capacity.

Through the example of CHIMERICA I mentioned earlier, because the Americans created a large amount of bubble consumption through debt, we expanded production, and then absorbed 35% of our excess production capacity through bubble consumption.Therefore, we did not have problems in the past, but let me tell you that there will be problems in the future. If the GDP of the United States falls in the fourth quarter, you can imagine how far their consumption bubble has burst.If the consumption bubble bursts, it will affect China's 35% excess production capacity.I repeat again, why this 35% excess capacity did not cause problems in the past, because it was absorbed by the consumption bubble, but the consumption bubble has burst in this financial crisis.And the direct result of the rupture is to directly affect 35% of China's GDP, that's all.Then let me tell you, if this is the truth, no matter how we do infrastructure construction, we will not be able to recover the 35% loss. Readers, please think about it, even if we invest 4 trillion yuan in one year, we will only be able to recover. It is equivalent to only 16% of GDP, not to mention that this investment will be carried out in several years.If it is divided into two years, it will only account for 8%. Even if all of them are invested, it will be difficult to make up for the loss of 35% of GDP.In addition to Friedman's article, there are many articles published internationally recently.They all put forward some suggestions for our 4 trillion RMB project.I think it's very good.Because China is so important, no one hopes that China will go downhill, everyone hopes that China's 4 trillion yuan investment will be effective.So I can tell you guys.The overseas media I have seen recently are very friendly to the Chinese government's 4 trillion yuan investment, and put forward very positive suggestions. Everyone hopes that the Chinese government will do a good job.If we fail again, the consequences for these countries will be unimaginable.However, even if we fully compress the 4 trillion yuan into the same year, it is only 16% of GDP.

Friedman's so-called reduction in consumption will affect China, which is 35%, which shows how serious the situation is.So he said, simply give the American credit cards to the Chinese, let the Chinese go into debt to consume, and then consume 35% of the excess capacity, otherwise China's economy will go downhill, this is his point of view, I I find this point of view interesting. Why does China's debt have potential?Please note that this way of debt consumption in the United States has made the debt ratio of American households as high as 95% of GDP.As for the Chinese, not only the income is low, but also the social security system in our country is not perfect. For example, what to do if your child is sick, what to do if your parents are sick, and what to do when the child goes to school. These will force you to save , so the ratio of our Chinese debt to GDP is only 13%, and that of Americans is 95%.

So he suggested that China should really avoid economic depression and stimulate economic development. He joked that he would give credit cards to the Chinese. In fact, he hoped that China would spend as much debt as possible, and absorb what could not be absorbed through exports. 35% of excess production capacity is absorbed through our own consumption.You must not think that what he said is unrealistic.Let me tell you another statistic. Our current consumption accounts for 35% of GDP. If we really rely on debt to consume, and we borrow 35% of the money for consumption, then it is 70% of consumption. Do you know? What is the standard for consumption that accounts for 70% of GDP?Let me tell you, this is a consumption that meets international standards.

●We Chinese's debt ratio is only 13%, while that of Americans is 95%. ●So can we have a whimsical plan.Take money directly to the people for consumption. Consumption only accounts for 35% of our current GDP, and our reinforced concrete accounts for 55%.This ratio is too abnormal.Comparing it with international standards, we can find that the proportion of consumption in GDP is 70% to 80% according to international standards.Reinforced cement only accounts for 10% to 20%.In other words, the proportion of consumption by international standards should be 70%, while that in China is only half.Therefore, China has potential to consume through high debt. Only 13% of our GDP is in debt, compared to 95% in the United States. We will increase consumption by dozens of percentage points through debt, so that our consumption can be reduced from the past 35%. % changed to 70%.After completely absorbing our excess capacity, the Chinese economy will not go downhill.

So the reason for throwing credit cards to the Chinese is to make the Chinese start to consume in debt.Personally, I think that the speeches I have seen from our scholars, including those from many foreign scholars, are quite sincere. On December 15, 2008, Chengdu issued consumer coupons to people living on minimum living allowances for the first time to encourage citizens to increase consumption.The State Council's 4 trillion yuan of funds to expand domestic demand is also to increase income and improve the consumption capacity of the Chinese people.at the same time.A series of policies to promote consumption have also been introduced one after another, but is there any other better way to increase consumption?Is it true that the Chinese can only solve the economic difficulties they are facing by taking over the credit cards of Americans and starting to spend in debt?

Except Friedman.There is one more person.Even the Nobel Prize winner Mundell also put forward his own point of view.Mundell was speaking in the United States. He called on the Chinese government to issue consumer vouchers and directly use the money for ordinary people to consume. Of course, he only suggested that each person be issued 100 yuan.But I am thinking that if our current 4 trillion yuan is distributed equally to every ordinary person.Each person costs more than 3,000 yuan. If we spend more than 3,000 yuan, it will immediately increase our consumption by 35%. Coupled with the multiplier effect, the proportion of consumption will be further expanded.So can we have a whimsical plan.If it is really what Mundell said, what should we do?We should distribute all the 4 trillion RMB to the common people, more than 3,000 RMB in coupons per person. Of course, we have to stipulate some technical details, stipulating that the coupons cannot be saved, and it will be over if you save it. You must be forced to spend it.

Taiwan has already issued consumer vouchers, so how can they force you to spend them?That is the measure of no change for the entire voucher, so you can’t use it to buy rice, you can’t get change for rice, you can only spend it once, so you are forced to post some more in addition to 3600 Taiwan dollars Money to buy a refrigerator, buy an air conditioner or something.Just use this method to force you to consume.So in this way, as Zhou Xiaochuan said, we can make great efforts in consumption, increase our consumption base, and consume the 35% excess capacity that Friedman is worried about.