Chapter 12 Section 4 The Trilogy of the U.S. Rescue Market (Part 2): Passing on the Crisis and Finding New Growth Points

Among the three components of self-preservation, passing on the crisis and finding new economic growth points, the United States must pass on the crisis to the world.Passing on the crisis includes several items: issuing additional U.S. dollars, fighting a trade war, fighting a currency war (exchange rate war), issuing bonds such as treasury bonds, etc. In fact, right after the subprime mortgage crisis broke out, the U.S. government concealed the truth to the greatest extent, which led European countries, Japan, China, etc. to bring a large amount of funds to the United States to buy bottoms. These funds were basically locked up, but it effectively slowed down the crisis in the United States. spread and worsen.Regarding these details, I have introduced them in detail in the book "What to Do in China - When the Subprime Mortgage Crisis Changes the World".

The core content of the U.S. economic stimulus plan is a huge tax cut plan. How can this be realized for the U.S. in crisis? The issuance of additional U.S. dollars is inevitable. On March 18, 2009, the Federal Reserve announced that it would purchase up to $300 billion in long-term U.S. Treasury bonds and another up to $750 billion in mortgage-backed securities.The Fed started printing money. On November 4, 2010, the Federal Reserve announced the launch of the second round of quantitative easing monetary policy: by the end of June 2011, it would purchase US$600 billion of long-term US treasury bonds to further stimulate the recovery of the US economy.

The US is also fighting a trade war. We know that the US subprime mortgage crisis originated from the bursting of the real estate bubble and the financial derivatives bubble. As long as the unemployment rate in the virtual economy does not drop sharply, Obama will be thankful. It is impossible to create new jobs. To increase employment, we must complete employment. The only reliable goal is the development of traditional industries, especially the manufacturing industry, to provide new employment opportunities, strengthen the foundation of the US real economy, and improve the ability to resist risks.Only when the real economy improves can the U.S. financial industry truly recover.

This order cannot be reversed. The development of the U.S. manufacturing industry is extremely important for repairing the fragile economic foundation of the U.S. due to the collapse of the virtual economy and promoting a healthy recovery of the U.S. economy.When the global economy is affected by the subprime mortgage crisis and presents a very clear recession, whoever can take the lead in obtaining sufficient funds and time support for his own recovery will be able to obtain more resources. The recovery continues.This is the reason why the United States does not hesitate to fight a trade war. Of course, it is also the root cause of China's determination to take the lead in realizing economic recovery at all risks.

Both lead to the same goal. Moreover, the United States is the engine of the world's economic development, and the improvement of its consumption capacity determines the recovery of the world economy. In other words, the whole world needs the consumption of the United States to pull them out of the quagmire of crisis.And this is where the United States has the confidence to fight the trade war. In February 2009, the "Buy American" clause drafted by the U.S. Congress once made Canada, the European Union and other countries outraged.In the "American Recovery and Reinvestment Plan" known as Obama's "New Deal", Article 1640 is related to "Buy American".Under the terms, public works using New Deal funds must use "domestic" steel and other manufactured goods "provided they do not violate America's international commitments."Before the United States, there was a "Buy American Act", which clearly stipulated that the steel used in the construction of highways, bridges, tunnels, schools and other infrastructure led by government investment must be "domestic".

According to the "Senate version" of the economic stimulus plan, the additional clauses on "Buy American" are more "radical", stipulating that in addition to steel products, all finished products required for cement and other projects must also be produced in the United States.The program also stipulates that any uniforms and textiles used by TSA must be 100 percent "Made in the USA." Later, even in the United States, the "Buy American" clause was considered too harsh.In this regard, it is not without lessons that the U.S. Congress passed the "Smoot-Hawley Tariff Act" in 1930, which greatly increased tariffs on more than 20,000 imported products, triggering a follow-up effect among countries.By 1932, world trade had fallen by 25% compared to 1929, and world industrial production had fallen by 30%.Each country tried to insulate itself from the external crisis, only to exacerbate the global contagion of the crisis.

However, although this kind of gamble is based on the premise of increasing the risk of the world economy, it is aimed at the recovery of its own economy.For the U.S., the risk is worth the risk—and that's why the U.S. is so determined to go its own way. It is definitely not a rational assumption to think of the U.S. as a fool, although it does do foolish things sometimes. The U.S. approach has aroused opposition from the world.EU Trade Commission spokesman Peter Bauer said: "If a bill banning the sale or purchase of European products on US soil is passed, we will never stand idly by."

In the end, the United States chose to compromise with the EU and other large economies, but strengthened trade barriers against China. Why is it necessary to fight a trade war against China with a clear banner? In fact, from the perspective of the United States and the European Union, the main targets of the trade war are almost all developing countries, especially China, which always bears the brunt of being the victim of the trade war.The reason is: due to the poverty of the people, China is a big exporter rather than a big consumer. After the economic crisis, consumption was more important than production. However, the problems faced at that time were overcapacity and product backlog. Only by starting consumption can the production capacity be digested.However, China's foreign trade dependence is too high, but domestic demand is insufficient, which weakens China's voice in the international arena.

It can be seen that the lack of domestic demand caused by China's poor people and the imperfect social security mechanism not only makes China's economic development lack an important support, but also becomes an important drag that weakens China's right to speak in the world economy.This is also one of the reasons why China goes abroad for large purchases as soon as the trade war hits-to make up for our shortcomings through centralized purchases! Therefore, the United States dares to fight a trade war with China but not the EU. A trade war with the EU is a lose-lose situation. A trade war with China can force China to purchase American products on a large scale, or force China to buy US treasury bonds, and the United States has indeed succeeded repeatedly.Can it not do that?

On September 9, 2009, the U.S. Department of Commerce stated that it had decided to impose preliminary tariffs on steel pipes imported from China worth US$2.6 billion for transporting oil, with tax rates ranging from 10.90% to 30.69%. On September 11, 2009, the Obama administration decided to impose punitive tariffs on all car and light truck tires imported from China for a period of three years. On November 5, the U.S. Department of Commerce announced the preliminary ruling of the dumping investigation on the anti-dumping and anti-subsidy case of oil well pipes exported to China to the United States, and decided to impose an anti-dumping duty of up to 99.14% on oil well pipes imported from my country. On November 6, the U.S. International Trade Commission made a preliminary ruling to impose "double reverse" tariffs on coated paper imported from China and Indonesia, and potassium pyrophosphate, potassium dihydrogen phosphate and dipotassium hydrogen phosphate imported from China.All this is only a week since China and the United States promised each other not to introduce new trade protection measures, and it is less than 10 days before Obama's state visit to China on November 15.According to the analysis of Liang Guoyong, an economic affairs officer of the United Nations Conference on Trade and Development, the U.S. government believes that the global economic imbalance (especially the U.S.-China trade imbalance) has a certain causal relationship with the crisis. This imbalance must be broken, and the U.S. will It does not hesitate to use trade protectionism to express its political determination to achieve this rebalancing.

These examples given are just the tip of the iceberg. Europe is even tougher than the United States in fighting a trade war with China. The reason is the same as the United States, and the result is the same as the United States-every time China goes to Europe for large-scale purchases, such as Airbus. In February 2009, the European Union began to impose a provisional anti-dumping duty of 24% on steel wire rods produced in China.Usually, the implementation period of temporary anti-dumping duties is half a year. On July 27, the EU foreign ministers' meeting passed a proposal without discussion, deciding to impose an anti-dumping duty of up to 24% on steel wire rods produced in China for a period of five years. On August 11, the European Commission announced in Brussels that the EU had launched an anti-dumping investigation on sodium gluconate imported from China. Before August 15, the European Commission plans to launch an anti-dumping investigation on Chinese aluminum alloy wheels. On September 16, 2010, the European Commission launched an anti-subsidy investigation on Chinese data cards, involving a total amount of US$4.1 billion. Trade remedy investigations.Anti-dumping has spread from traditional labor-intensive industries to high-tech and high value-added industries such as new energy and electronic information... These trade wars listed are again just a drop in the bucket. Not only developed economies such as the United States and the European Union focus their anti-dumping efforts on China, but even some developing countries follow the example of Europe and the United States and target China.The reason is similar to that of the United States and the European Union, and the result is similar. Later, China made large-scale purchases in countries such as India.For example, on December 15, 2010, Chinese and Indian companies signed 45 cooperation agreements worth US$20 billion, which made Indians happy. From the establishment of the World Trade Organization (WTO) in 1995 to 2010, China has been the country that has suffered the most anti-dumping investigations in the world for 16 consecutive years.According to the anti-dumping investigation report released by WTO on December 6, 2010, in the first half of 2010, 19 WTO members initiated 69 anti-dumping investigations, and China was the "hardest-hit area" of anti-dumping investigations, with 29 cases being the subject of anti-dumping investigations. "The object of care".China's export commodities (mainly metals, chemicals and plastics) are also the most investigated commodities, accounting for 1/3 of the total anti-dumping investigations. In addition to raising trade barriers, the United States borrowed from the world, and then diluted these debts with a weak dollar policy. For large-scale tax cuts, there must be someone who pays the bill. The U.S. government has been running deficits year after year, and it simply cannot afford it. The US federal deficit reached a staggering $1.416 trillion in fiscal year 2009 and $1.294 trillion in fiscal year 2010. On January 26, 2011, the U.S. Congressional Budget Office released a forecast that the fiscal deficit of the U.S. federal government in 2011 will reach about 1.5 trillion U.S. dollars.The persistently high fiscal deficit has become a major hidden danger for the future of the US economy. In this case, the only option for the United States is to borrow money from the world. In January 2005, when Bush Jr. was re-elected as President of the United States, the total national debt of the United States was 7.6 trillion US dollars. When Obama took office in 2009, it rose to $10.6 trillion.According to data from the Federal Reserve, the scale of US national debt expanded by 24.2% and 22.7% in 2008 and 2009, respectively. For bond investors, it doesn't look like the market actually offers many good options right now, other than U.S. Treasuries.This also prompted the Obama administration to borrow heavily at the "lowest price in history".This has been called a low-cost "game". China is a big buyer of US Treasuries.Since September 2008, China has surpassed Japan to become the world's largest holder of US Treasury bonds. At the end of 2009, China held US$894.8 billion in US treasury bonds, accounting for about 37% of China's foreign exchange reserves during the same period and 18% of China's GDP in 2009. At the end of 2010, the balance of China's foreign exchange reserves has reached 2.8473 trillion US dollars.Meanwhile, China continued to increase its holdings of US treasury bonds. As of November 2010, China held 896 billion US dollars of US treasury bonds, accounting for about 32% of China's foreign exchange reserves.In addition, China also holds US long-term agency bonds, long-term corporate bonds, and stocks totaling more than 600 billion U.S. dollars. It is becoming more and more difficult to manage the huge foreign exchange reserves. In December 2009, a report "SAFE Selected Wall Street Experts to Manage 2.3 Trillion Foreign Reserves" was quite eye-catching: US PIMCO (Pacific Investment Management Corporation) Chief Investment Officer Gross and CEO Elian During the interview, Zhu Changhong, the hedge fund manager of PIMCO, will return to China in February 2010 to serve as the chief investment officer of the reserve management department of the State Administration of Foreign Exchange of China. SAFE’s recruitment on Wall Street also reveals to a certain extent the shortage of talents and the increased sense of urgency. I think that what China lacks the most is strategic talents who understand finance, not just those who are proficient in financial tools.For strategic talents, he can clearly know what purpose should be achieved through financial tools. As for the tools to achieve this purpose, even ordinary financial talents who are not experts can often do it. In fact, the rapid increase in U.S. debt is exacerbating people's concerns about future national debt risks. Under such circumstances, the Federal Reserve has increased its purchases of U.S. national debt.According to reports, on February 2, 2011, the Federal Reserve (FED) replaced China as the largest holder of U.S. treasury bonds - the New York Fed (the Fed buys and sells treasury bonds through the New York Fed) held in its open market operation account The total national debt of the United States is 1.108 trillion US dollars, including short-term, medium-term and long-term treasury bonds and inflation-protected treasury bonds. However, on February 28, 2011, the U.S. Department of the Treasury also stated that due to adjustments in statistical methods, the scale of U.S. Treasury bonds held by China as of December 2010 was revised upwards to 1.16 trillion U.S. dollars, compared with the 891.6 billion U.S. dollars announced on February 15. The dollar increased by 30%.Based on this calculation, China is still the largest creditor country of the United States. A developing country turned out to be the biggest creditor of a rich country. This is very sad. The latest data released by the US Department of the Treasury shows that the total US national debt has hit a new high of US$14.056 trillion, which accounts for 96.5% of the US GDP of US$14.5 trillion in fiscal year 2010.The current statutory national debt limit of the United States is 14.3 trillion US dollars, and the industry predicts that the limit may be approached by the end of March at the earliest.Some analysts predict that the United States is likely to continue to raise the statutory national debt limit. By the end of 2011, the total debt of the United States will exceed 16 trillion US dollars, which will exceed GDP for the first time. If this kind of debt situation is placed in other countries, the rating agency has already downgraded the rating, causing panic in the market, and even detonating an economic crisis. However, the U.S. economy has a strong military, resources, energy, technology and other support, which is still unmatched in today's world.What's more, it also holds the right to speak in ratings. The international rating agency Standard & Poor's stated on January 19, 2011 that the possibility of a U.S. treasury default is not great, and it still maintains the U.S. "AAA" sovereign credit rating and "stable" rating outlook -- looking back at 2010, Standard Poole's resoluteness in downgrading the sovereign credit ratings of Greece, Ireland, Spain and other countries, as well as the turbulent crisis waves caused by it, and the "tolerance" of rating agencies deeply influenced by the United States have allowed the United States to take advantage of it. Self-protection and passing on the crisis are more like short-term emergency measures. To truly generate endogenous power in the economy and make the economy truly get rid of the crisis and enter a virtuous circle, it is necessary to find new economic growth points. The policy of the U.S. government in this regard is very clear—that is, to make the U.S. a leader in new energy technologies by vigorously developing new energy sources and increasing investment in research and development.Obama's policy support and financial investment in new energy R&D and promotion are unprecedented. On this point, I will also make a specific discussion. Here I will first talk about a grand strategy of the United States that has not yet been mentioned: any currency must have an anchor if it wants to gain a dominant position.We know that the U.S. dollar was first linked to gold, and gold is the anchor of the U.S. dollar. In 1971, the United States unilaterally abandoned the gold standard.How to maintain the strength of the dollar after abandoning the gold standard?The United States has found another anchor, which is oil. The United States has linked the dollar to the price of oil to form a "petrodollar" system, ensuring the hegemony of the dollar. American researchers Bulent Gekaj and Darrell Whitman expressed this specific process as follows: The United States and Saudi Arabia reached a series of agreements between 1972 and 1974 through diplomatic means to link oil sales to the U.S. dollar. This is the so-called "petrodollar system" and finally formally established the U.S.-Saudi Arabia Joint Economic Council.On the economic level, the agreement stipulates that OPEC's oil sales can only be denominated in US dollars.This regulation artificially created demand for dollars in the OPEC oil market, allowing the United States to dominate the oil market.Since the signing of these agreements, Saudi Arabia, which has always been the top oil producer in the world, has become the most reliable ally of the United States. It enjoys privileges within OPEC and is not bound by production quotas as an agent of the United States. After the mid-1970s, Saudi Arabia took advantage of its status as OPEC's "production regulator" to increase or decrease oil production and create oil scarcity or excess by "managing" oil prices to satisfy the interests of the United States. Under the agreement between the US and Saudi Arabia, the global system of the petrodollar economy was quietly established, not only setting a floor price for the dollar, but also allowing the US to once again manipulate international trade and attack competitors - Europe and Japan.The petrodollar actually replaced the gold dollar standard before 1971, guaranteed the demand for the dollar, and pegged the value of the dollar to oil through OPEC's trading rules and actual operations.According to the design, all industrially developed countries in the Bretton Woods system must purchase oil from OPEC or smaller oil producers in U.S. dollars, and oil purchases can only be made in U.S. dollars.In this way, the U.S. dollar has become an essential reserve currency, and the dominance of the U.S. dollar has been restored.The demand for dollars is artificially inflated.When oil prices started to rise after the Arab-Israeli war in 1973, demand for dollars increased and the value of the dollar rose further, again subsidizing US domestic and military spending.However, the current account deficit of the United States continued to climb, which eventually affected the stability of the Bretton Woods system. The establishment of the petrodollar system once again provided the United States with a double advantage: on the one hand, the United States could set the terms of international oil trade; on the other hand, the value of the dollar rose and it was not constrained by domestic monetary and economic policies.The petrodollar system creates demand for dollars, and demand determines the value of dollars, so the United States does not have to give up other goods and services, just print dollars to buy oil.But the petrodollar economy also has a yin and yang.While the United States is benefiting, it exports its own economic problems to other countries, forcing up the costs of other capitalist economies, and post-colonial countries suffer the most. We know that traditional oil and other energy sources are gradually drying up, and the United States must be ready to create a new anchor, which is new energy.From the perspective of currency strategy, Obama's vigorous development of new energy is also to ensure that the hegemony of the US dollar will not be shaken.With the premise of a dominant currency, the United States can better achieve its strategic goals. The development of new energy in the United States is really killing multiple birds with one stone. This kind of grand strategy is far beyond the comprehension of small plotters (about the aspect of new energy, it will be further analyzed in Section 3 of Chapter 6 of this book, because its impact on future trends is crucial). From the point of view of the policy thinking of the United States, the United States pays attention to the endogenous and sustainable wealth, and pays attention to the benign recovery of the economy. This kind of thinking is completely different from the gamble-style thinking, and the consequences are of course completely different. . The reason why I patiently analyze this point is mainly to learn the way of thinking and style of doing things from superpowers.Only those who can humbly learn from their opponents can become strong.The reason why the United States exists as the only superpower in the world must have a reason for its existence.From an economic point of view and from the point of view of dealing with the crisis, they do have a lot of uniqueness.This is also determined by their system design. Different rescue methods will inevitably lead to different results. Of course, the above is not all. In order to get out of the crisis in an all-round way, the United States must launch a sniper attack!