Chapter 11 Section 3 The Trilogy of American Market Rescue (Part 1): Self-protection

The above two sections gave a brief introduction to China's policy logic. Now, let's take the United States as an example to see what its thinking and logic are for leading the economic recovery—these are very important. Only by understanding this major premise can we Gain a clearer understanding of the cause and effect of the trends I describe. There are differences between Chinese and Western medicine in the treatment of human illness.Traditional Chinese medicine generally has a slow curative effect, but has few side effects and eliminates the root cause.Some treatments in Western medicine, such as antibiotics, have quick curative effects, but in many cases, they only treat the symptoms but not the root cause, and they have serious side effects.Therefore, in many Western countries, the management of antibiotics is stricter than that of guns and ammunition. In China, antibiotics are the favorite of doctors, and the effect is immediate, which is very easy to show the "level" of doctors.However, the widespread use of antibiotics has not only led to the decline of many people's immunity and resistance, but also planted a series of disasters that damage human health.

Doing economics is so similar to this comparison! From the previous analysis, we know that China took the lead in recovering from the subprime mortgage crisis, and it took a huge risk, because China failed to establish a social security mechanism as soon as possible in the crisis, and China's growth force is largely It stems from the concentrated consumption of existing wealth.Once it fails, the consequences will be disastrous.Because what China wants to solve is a deadlock: a deadlock in which the troikas are stagnant at the same time. China's weaknesses are still very obvious. So how did the US save its economy?

Recognizing this will not only allow us to clearly know what happened in the past, but also understand some inevitability in the future chess game arrangement. When a country faces an economic crisis, it has three options: self-preservation, passing on the crisis, and finding a new economic growth point—this new economic growth point should be endogenous and create new wealth. When an economic crisis occurs, self-protection is the most important thing.Throughout all previous wars, games or crises, Americans have always put self-protection first.Those who are good at protecting themselves are truly wise and strong.Whether it is Bush Jr. or Obama in power, the grand strategic thinking of the United States has always been continued.

In the previous currency wars, the reason why the United States has repeatedly won many battles is not unrelated to its meticulous, rigorous, comprehensive and systematic self-protection mechanism. What I need to emphasize again is that grand strategy and small conspiracy are two completely different concepts.The reason why a country can become a powerful country is definitely not whether it can play tricks. Small tricks can only be useful at a certain stage.The establishment of a powerful country is definitely not based on conspiracy, but on the cohesion, innovation and vigorous vitality built on the basis of common values, beliefs, morality, and ethics.Under this premise, all its plans and strategies are public.This must be emphasized.In the game of great powers, positions and strategies are open, and any side has the possibility of winning.

I also need to emphasize that we should not simply hate our opponents.Hatred is a depreciation of the self, a low profile.People are often full of hatred when they cannot defeat their opponents, and use hatred to escape from themselves.Hatred means nothing, it only conceals the real enemy.Only by learning from the strong can we improve the winning rate in the game and become a real strong.Furthermore, only those who know how to appreciate and learn from the enemy's strengths can truly defeat the enemy!As Bismarck, the prime minister of Germany, said: "I don't care about the enemy's intentions, I only care about their strength." In China's state of rebelling against the United States, we can't even see the advantages of the other party, let alone be open-minded to it. study!Instead, the opponent learns from other countries in the world (including China), constantly revises and improves itself, continuously enhances its own strength, and becomes a unique superpower.

The core of self-protection is to first strengthen social security.In fact, the more mature social mechanisms now originate from crises. After the world economic crisis from 1878 to 1879, on November 17, 1881, Bismarck suggested that German Emperor Wilhelm I promulgated the "Emperor's Edict for the Establishment of Perfect Social Insurance": Workers in the event of illness, accident, disability and old age economic difficulties workers should be protected, they have the right to claim relief, and workers' protection should be administered by the workers themselves. From 1929 to 1932, the worldwide economic crisis became the first peak for developed countries to establish social security systems, and the Second World War became the second peak.

After the subprime mortgage crisis, the United States first focused on self-protection, expanding the scope of relief and prolonging the relief period. On November 20, 2008, the U.S. Senate passed a motion to extend the period of receiving unemployment benefits, which will extend the period of receiving unemployment insurance by 7 weeks, and for states with an unemployment rate exceeding 6%, the period of receiving unemployment insurance will be extended by 13 weeks.In the past, the unemployed in the United States could receive unemployment benefits of US$300 per week per capita for a period of 26 weeks.The measure of the new bill has benefited millions of people, but as the economic crisis deepens, the financial burden on the federal and state governments has become heavier and heavier.

In order to better improve social security, US President Barack Obama has spent so much in this area, it is amazing!Among the federal, state and local government expenditures in the United States in 2009, pensions, social welfare and medical security expenditures accounted for as high as 56% of the total expenditures! It is necessary to mention that in the United States, social medical security expenditures and medical expenditures are two different concepts. The former refers only to medical relief and security expenditures, which generally account for about 16% of US fiscal expenditures in recent years, while the latter refers to The cost of medical care for the whole society is as high as 2 trillion U.S. dollars every year, which generally accounts for about 17% of the U.S. GDP.

Subsequently, Obama proposed a health care reform plan.The goal is not only to expand the population covered by insurance, but also to expand the medical items covered by insurance. At the same time, it is also necessary to control the spiraling cost of the overall medical system in the United States through information technology and other means.Obama pointed out that the reform will establish a new medical system, provide a good professional environment for doctors, and provide the best medical services for all Americans at the lowest cost.Such a system would relieve pressure on businesses, unleash economic dynamism, create jobs, increase real wages, and bring tens of billions of dollars in additional growth to the U.S. economy each year, making the health care system and the economy stronger.

Another important measure for the United States to protect itself is tax cuts. Large-scale tax cuts must be done in the self-protection stage.Keynes believed that ensuring the growth of employment is the most important link to deal with the economic crisis, and tax cuts are undoubtedly the best choice to achieve this goal: reduce taxes for enterprises, improve their viability, and make them have the motivation to continue investing and providing jobs; Tax cuts for individuals can save the declining trend of consumption and improve the people's ability to resist crises. And the tax cut has an important benefit: It makes it more attractive to companies investing abroad, which shift profits to the United States rather than in the country where they do business.This would actually increase US income.Many foreign-funded enterprises in China have very large transaction volume, but pay very little tax, because they have transferred away the tax that should have been handed over to China through accounting techniques-this is what the United States must do whenever it encounters a crisis. One of the important reasons for tax cuts first.

In 2007, a research group of the National Bureau of Statistics completed a research report on foreign investment, stating that among the loss-making foreign-invested enterprises investigated, the tax losses caused to my country through "transfer pricing" tax avoidance amounted to 30 billion yuan.The tax evasion tricks of foreign companies are not mysterious. Their main method of evasion is to use related party transactions and adopt transfer pricing.According to statistics, this method accounts for more than 60% of the amount of tax evasion.Adopting "transfer pricing" is commonly referred to as "high entry and low exit", so that foreign companies can easily form losses on their books, and their profits will be transferred to countries and regions with low tax burdens.As for the Chinese party that conducts joint ventures or cooperation with foreign companies, transfer pricing will directly infringe upon its own interests.For example, a pharmaceutical company in Shandong set the unit price of export products 40 yuan lower than the average price of similar domestic products through direct pricing by its overseas parent company, so as to reduce sales revenue and transfer actual profits out of the country in disguise.The above behaviors of enterprises will not only become a channel for capital flight, resulting in the loss of national tax revenue, but also become one of the excuses for foreign countries to accuse my country of low-price dumping. The scale of tax cuts in the United States is very large and generous. Responding to the crisis through tax cuts is an inevitable choice for the US government in recent years. From the second half of 2000 to 2001, the US high-tech industry and the Internet industry bubble burst, and the US economy showed signs of recession.President Bush, who just took office in January 2001, immediately advocated the passage of the Economic Growth and Tax Reduction Coordination Act of 2001, encouraging people to work hard to obtain more fruits of labor. Bush's tax cut policy prevented the economy from falling into a larger-scale recession, and to a certain extent resolved the adverse effects of the "9·11" incident. In 2002, the Bush administration introduced the "2002 Employment Growth and Worker Assistance Act", and in 2003 the "2003 Employment Growth and Tax Reduction Coordination Act", which advanced the tax reduction target to be realized in 2006 to 2003. Tax cuts have reduced the number of unemployed Americans year by year.The Republican Party pointed out that since Bush launched the tax cut plan in August 2003, by the beginning of 2006, a total of 5.2 million job opportunities had been created.The tax cuts spurred economic growth, putting at least $880 billion in taxpayer pockets over the past five years. It is the consistent thinking mode of the US government (no matter who is in power) to cut taxes first in case of crisis. On May 17, 2006, Bush signed the new tax cut bill again, deciding to cut taxes by 70 billion US dollars in the next five years. After the subprime mortgage crisis broke out, former US President Bush once again resorted to the magic weapon of tax cuts. On January 18, 2008, Bush called for the implementation of a tax cut package amounting to US$145 billion to stimulate economic growth and avoid economic recession.Bush said at a news conference that day that in order to maintain economic growth and create job opportunities, Congress and the government need to make a decision on tax cuts as soon as possible.Tax cuts can increase consumer spending."The tax cuts must be large enough to cause a change in economic conditions; they must be broad-based tax cuts; they must be immediate, but temporary; and they must not include any tax increases," Bush said. In the second half of 2008, the subprime mortgage crisis showed obvious signs of accelerating deterioration. On October 4, Bush signed a revised new version of the $700 billion financial rescue plan, which is the largest economic intervention in the history of the US government.The new bill adds a series of 10-year, $152 billion individual and corporate tax cuts, extends the long-awaited research and development tax credits for renewable energy companies, high-tech companies and pharmaceutical companies, and promotes cleanliness. Energy's $18 billion plan to allow companies to subsidize employees who bike to work. I have noticed a very strange phenomenon. Whenever the United States cuts taxes, the relevant comments in our media always say that their purpose of doing so is to please voters.What's wrong with policies that please voters?Why always speculate from this strange motive instead of paying attention to the beneficiaries of their tax cuts and the results of tax cuts?This kind of mentality makes it easy for us to ignore the strengths of our opponents, and lose the opportunity to learn and discover our own problems and fix them in time. Looking at the tax cut policy of the Bush administration, although many people commented that the Bush tax cut policy is a gift for the rich, this is largely due to the confusion of the concepts of total tax rate and marginal tax rate, or, out of awareness Comments that pursue political and positional correctness in different forms.In fact, the Bush administration's tax cuts have benefited the most from America's middle class.When we look at problems and do research, we must adhere to a certain position, but we must pay attention to getting out of the limitations brought by the position itself, and make a more objective and calm analysis. The strategy of tax cuts to deal with the crisis continued after Obama took office.Moreover, the group that benefits the most is still the middle class - although this is far from enough to make up for the losses suffered by the middle class in the subprime mortgage crisis, it has created conditions for their recovery.As Stephanie Carter, a spokeswoman for Obama's transition team, put it: "The tax cut plan follows a simple principle, which is to maximize private-sector employment and improve conditions for the middle class." Obama tried his best to persuade Congress to pass his bailout plan to deal with rapidly rising unemployment. In January 2009, the new U.S. President Barack Obama proposed a bailout plan worth nearly 850 billion U.S. dollars, of which the tax cuts were as high as 300 billion to 325 billion U.S. dollars.After intense discussions, on January 28, 2009, the U.S. House of Representatives passed an economic stimulus plan totaling $819 billion.The plan pays more attention to unemployment assistance, medical security, and food relief for the unemployed and the poor, in order to weaken the damage of the economic crisis to the socially vulnerable groups.In terms of tax cuts, the tax cut plan first targets the ordinary middle class. On September 8, 2010, Obama announced a corporate tax cut plan totaling approximately $200 billion.New investments made by American companies in 2011 will be 100% tax-free.This will help companies save $200 billion over two years, making them more cash-rich.White House officials said that although tax cuts mean that the government's fiscal revenue will decrease, this will be made up by means of economic growth. The main beneficiary of this tax cut is the middle class in the United States.Under Obama's plan, 80 percent of the 2011 taxes would be borne by families earning more than $1 million a year.The tax policy of the United States is: millionaires who account for about 2% of the total population of the United States and whose annual income exceeds US$1 million pay taxes, and 98% of low- and middle-income earners, including the middle class, are exempted from taxes, so as to narrow the rich and poor in the United States gap. While proposing permanent tax cuts for the American middle class, Obama announced that he would not extend tax cuts for the wealthy.In his speech on September 8, 2010, Obama said that the process of economic recovery in the United States was painful and slow, and 8 million Americans lost their jobs because of the financial crisis.The United States should permanently cut taxes for the middle class earning less than $250,000 a year.The boundaries of the middle class defined by Obama are: annual income below $250,000 and monthly income below $20,000.The personal income tax threshold set by China is: 2,000 yuan per month.The latest figure of my country's annual per capita income level is US$3,266 per year and US$272 per month.The difference between the two is close to 100 times!But Chinese taxation experts actually say that this idea was introduced from the West. Although the unemployment rate in the United States is still rising for a certain period of time with the tax cut plan, when I do the analysis, I take into account the lag of the positive response of the tax cut policy, and then combine all kinds of information to judge, and conclude that: the U.S. economy Will start to recover from November 2010. In fact, after November 2010, most of the economic data of the US economy began to improve significantly.The reason is simple. The cause of the US economic policy has come to bear fruit. On December 17, 2010, U.S. President Barack Obama signed the tax cut extension compromise bill in Washington, D.C. On December 17, 2010, Obama officially signed the $858 billion tax cut bill -- known as "the most comprehensive tax bill in the United States in the past ten years."Obama said at the signing ceremony: "This is a good thing for the American people. More money will go into household consumption plans and help businesses grow. This is what we will do in the new year to stimulate demand and promote jobs and strengthen the American economy." This tax cut bill postpones the national tax cut policy under the Bush administration, which will expire at the end of December 2010, for two years; In 2011, the corporate tax rate was cut by 2 percentage points.Many economists believe that the tax cut bill passed this time is equivalent to the "second round of economic stimulus plan". From Bush to Obama, experienced many crises such as the bursting of the new economic bubble, "9.11", and the subprime mortgage crisis, but tax cuts helped the United States resist the crisis.This point is a reference for China!What needs to be emphasized is that the recovery under the tax cut is benign and endogenous, and it is a sustainable recovery based on the gradual recovery of the consumption capacity of the people and the expansion and reproduction capacity of enterprises.And, the aftereffects of this recovery are minimal -- especially given the status quo in the United States. The large-scale tax cuts in the United States may be the envy of domestic companies whose actual tax burdens have increased after the subprime mortgage crisis. In addition to the relief for the public, the United States has put the rescue of financial institutions and the rescue of the virtual economy in an important position. Although, the biggest harm of the subprime mortgage crisis is not limited to the collapse of one or two financial institutions, but the lack of market liquidity. , however, the liquidity of the virtual economy is closely related to confidence.Once the "big mac" that is enough to shake the market foundation is dumped, it will severely dampen market confidence, which in turn will cause a lack of liquidity, leading to a further decline in consumer and investor confidence, and leading the macro economy into recession in a vicious circle. Therefore, although many of these financial institutions were the initiators of the subprime mortgage crisis, the United States must do its best to maintain its status as a financial power in order to maintain its international leadership and dominance. On September 7, 2008, the U.S. government announced that it would immediately take over the two troubled U.S. housing mortgage financing institutions - Fannie Mae and Freddie Mac.Relevant measures have broken the precedent of the US government never interfering in market-oriented operations in the commercial sector, and are regarded by the industry as the largest market rescue in US history. According to the takeover plan, the U.S. Department of the Treasury will inject capital into Fannie Mae and Freddie Mac and acquire related preferred shares; at the same time, the CEOs of the two institutions will be ordered to resign, and relevant government regulatory agencies will take over the daily operations of the two institutions. Appoint new leaders.Affected by the subprime mortgage crisis, Fannie Mae and Freddie Mac lost more than 14 billion US dollars within one year, and their stock prices shrank by nearly 90%. Why save the "two rooms"? Not only because they hold or guarantee as much as $5.2 trillion in residential mortgage loans, accounting for 44% of all residential mortgage loans of about $12 trillion, which is equivalent to almost 40% of the GDP of the United States in 2007; more importantly, if If the public's confidence in the "two rooms" cannot be completely restored, no one will be willing to buy new bonds, and the "two rooms" crisis will erupt immediately.If the masses of ordinary investors refuse to buy new bonds, then the US Treasury will either be forced to buy all new bonds or guarantee them, in either case, then the cost will be very heavy, far exceeding the $ 200 billion capital injection at that time . Moreover, the historical experience of the United States shows that whether the housing market can get out of the predicament after a crisis occurs, in the final analysis, it depends on whether home buyers can obtain sufficient and low-cost loan financing. The importance of "Two Fannies" lies not only in its large scale, but also in its irreplaceable role in the US housing finance market. The crisis in the "two houses" is actually because they paid the bill for the government before. The government can't sit idly by and has to pay the bill.More importantly, if the "F&F" has been under the shadow of bankruptcy risk, the secondary market for housing loans will shrink, the bottoming out of falling housing prices will be out of reach, and a broad economic recovery will be even less likely. Subsequently, on the evening of September 16, 2008, the Federal Reserve announced that it would provide US$85 billion in emergency loans to American International Group (AIG), which was on the verge of bankruptcy.Save AIG also because it is too important (AIG ranked 18th in the world in the list of the world's 2000 largest multinational companies selected by Forbes magazine in 2008), if it goes bankrupt, the CDS (credit default swap) of US$400 billion ) will not only bring a huge blow to the market, but also may endanger the entire financial system. These rescue measures have played a great role in preventing the spread of the crisis and preventing the entire financial system from being destroyed.The United States' strong self-protection ability and efficient government operation in times of crisis are worthy of our deep thinking. It cannot be denied that Obama is a very wise leader.At the beginning of his tenure, the many problems under the subprime mortgage crisis can be described as "thundered". Many enterprises and institutions are waiting for the government to rescue them. This difficult situation is very difficult to deal with. But Obama is good at adapting.At that time, the media disclosed a big scandal: In 2008, employees of Wall Street financial companies received a total of 18.4 billion US dollars in high dividends, which was equivalent to the level of the financial industry's heyday in 2004.Since Wall Street was the instigator of the financial crisis and eventually forced the government to inject large sums of money to rescue the market, news of high dividends was widely condemned by all walks of life in the United States. Obama resolutely seized this opportunity and announced on February 4, 2009 that the annual salary of senior executives of any enterprise receiving a large amount of financial aid from the federal government shall not exceed US$500,000.This regulation applies to financial companies such as Citibank, Bank of America, and American International Group that have been rescued by the U.S. government, and also applies to other companies that need government assistance in the future.If a company gives stock awards to executives in excess of $500,000 in annual salary, those shares must also be cashed out after the company pays off the government loan.In addition, the government will also require the recipient companies to strengthen the management of the use of business aircraft and hospitality expenses."This is America. We don't envy wealth, we don't envy anyone being rewarded for success, but people are disturbed and should be disturbed that executives are rewarded for failure, especially when those rewards come from American taxpayers," Obama said. When funded." On the one hand, Obama’s move immediately won the support of public opinion, on the other hand, it shielded many companies from asking for help. The selfishness of human nature determines that many executives try their best to save themselves in order to make their annual salary not less than 500,000 US dollars. Not turning to the government.While Obama's pressure was suddenly reduced, he indirectly activated the motivation of many enterprises to save themselves. What a wise move! Looking at the world today, apart from China, there are four leaders that I admire the most: Merkel, Medvedev, Putin, and Obama.The countries they lead are moving forward at a fast pace. It is also worth mentioning that in the process of self-protection, the United States did not save house prices, but allowed them to continue to fall.Doing so is tantamount to helping the United States to "sterilize"—to squeeze out the bubbles in the real estate, so that housing prices can find a landing point and support during the fall from the high altitude filled with bubbles.After this seemingly indifferent process, the real estate industry in the United States has regained its foundation and ushered in a new life.This is critical to the future of the US real economy.Without this crash-like squeeze process, the American people would not be able to buy houses at cheap prices now.When the speculators left painfully, the public benefited deeply - and this means that it laid a beautiful foreshadowing for the reactivation of consumption in the US real estate industry. Moreover, while countries such as Canada and Australia have raised immigration thresholds one after another, the United States has continued to lower the threshold policy. In June 2010, the Canadian government temporarily froze the application for investment immigration. From December 1, 2010, a new investment immigration plan will be implemented: investment immigration applicants need to have personal net assets of 1.6 million Canadian dollars, which is 800,000 Canadian dollars higher than the original one. The standard of 400,000 Canadian dollars will be doubled; at the same time, the original investment amount of 400,000 Canadian dollars will be increased to 800,000 Canadian dollars. The asset requirements for Australian investment immigrants have also been greatly increased. For example, the family net assets have increased from 250,000 Australian dollars to 500,000 Australian dollars. The United States has relaxed immigration thresholds. On October 29, 2009, Obama signed and passed the "3-year extension of the EB-5 special economic zone project" bill. October 30, 2012.In the investment immigration EB-5 special economic zone project, the investment amount has dropped from US$1 million to US$500,000.This means that in the next three years, applicants who invest $500,000 in relatively poor and backward "special zones" in the United States and can create 10 job opportunities can immigrate without being restricted by language, education or management experience. United States.This policy, which started with former President Bush, was continued by Obama, and did not take inflation into consideration to raise the standard like Canada and Australia did.Moreover, the USCIS is speeding up its processing of investment immigration to reduce the backlog of immigration cases and encourage legal immigration to increase the absorption of foreign funds. This means that compared with countries such as Canada and Australia, the United States is much more attractive to investment immigrants.This not only brought a large amount of investment funds to the United States, but also created more job opportunities. More importantly, the United States is a consumption-driven economy. A large number of rich people with consumption power immigrated to the United States, which will restart American consumption. The brilliance of the times has allowed the United States to emerge from the haze of the crisis and become the locomotive leading the world economic development again.As for the real estate in the United States, it will also slowly move towards a benign recovery.Obama's curve to save the market cannot be said to be unwise.