Chapter 31 4. Sino-US cooperation stimulates consumption

I want to say something fairer, the US government is also helping us. On November 25, 2008, U.S. Treasury Secretary Henry Paulson held a press conference to talk about how China and the U.S. could cooperate.That's what Paulson said. He said that the previous bubble consumption can be restored with the help of the US government.How to recover?Let me give readers a simple example, how did the Bank of America help Americans with bubble consumption?The bank lends $1,000 to A to buy a car. After the purchase, the bank sells the $1,000 car debt to the investor to get back the dollar; then lends the same $1,000 to B to buy a refrigerator. The debt is sold to the investor; the bank gets back $1,000, and the bank lends the same dollar to C to buy a computer, and then sells the $1,000 debt on the computer to the investor to get back $1,000.

In other words, the role played by the Bank of America is to lend the investor's $3,000 to consumers through bank liabilities. This is the bubble consumption I have been talking about before.Because the $3,000 is all liabilities.Therefore, the consumption created by debt is called bubble consumption, because it cannot be bought with cash.What is going on right now that would make Brother Friedman so worried?As Paulson said, all consumption is frozen, that is to say, when the bank lends A $1,000 to buy a car and gets the $1,000 debt, the bank quits, and he does not sell the debt to A. At the same time, B and C stopped borrowing money from the bank, and the entire consumer market was frozen.In other words, what used to be a bubble consumption of $3,000 has now become an actual consumption of $1,000.And when did the consumption bubble of $3,000 become consumption of $1,000 start to burst? November 2008.This is why the number of orders received by China's export manufacturing companies has dropped sharply since November last year. At the same time, the fiscal and tax revenues of my country's local governments have also dropped sharply. The reason is that the consumption bubble of Americans began to burst at that time.So what does this columnist mean?That's $3,000 into $1,000.What about the $2,000?Let the Chinese spend.I hope that the Chinese will make up for the $2,000 of consumption through debt.China's economy has a chance.

If China does not do this, but only invests in infrastructure construction, it will be very troublesome, and China's 35% excess capacity will immediately expose problems.But what has the U.S. government decided to do about it?I think this is another best interpretation of CHIMERICA. What should the US government do?Paulson proposed at a press conference on November 25 that the U.S. government increased the bailout funds from US$700 billion to US$800 billion, and lent more than US$100 billion to investors (they are international financial capital or its pawn), what do you mean?It is to ask investors to take 1,000 U.S. dollars out of 100 billion U.S. dollars to buy auto debt from the bank, and then the bank will lend 1,000 U.S. dollars to B to buy a refrigerator, and then sell the U.S. dollar refrigerator debt to the investor; Give $1,000 of the $100 billion to the bank; the bank then lends the $1,000 to C to buy a computer, and then the bank sells the $1,000 computer debt to the investor, and the investor takes $1,000 of the $100 billion from the U.S. government A claim on the bank for the purchase of the computer.Through this funding from the US government, the consumer market was able to unfreeze.Prompt the bank to lend funds to A, B, and C, and let their bubble consumption start again from $1,000 to $3,000.This is the expectation of the US government.

Of course, I believe all readers will have questions, and this is what you are concerned about. The question is, Professor Lang, is this policy effective?I want to tell you, don't have illusions about the bailout policy of the US government.Paulson's position is completely different from that of our government. He has his own opinion. He has no idea whether the US government's move is effective, and even the US government does not know how to rescue the market. If this sentence is true, then we have more to worry about.What are you worried about?We have to worry more about the US bubble consumption falling from 3,000 yuan to 1,000 yuan, which will hit us by 35%.If our own consumption cannot be greatly increased as Zhou Xiaochuan said, our Chinese economy will be greatly affected. This cannot be brought back by infrastructure construction. At the same time, this major impact will cause a large number of people to lose their jobs.Therefore, although infrastructure can effectively employ labor.Increasing the employed population cannot withstand the impact of 35% excess capacity.