Niu Wenxin Wants More Money Printing

Niu Wenxin, who famously called Alibaba's Yu E Bao a vampire, has a new article out blaming high real estate prices on policy, rather than money printing. He criticizes the rising RMB policy, showing how it hasn't reduced China's trade gap with the United States, as this chart shows.

He says high interest rates are choking industry, which is why Chinese companies are now fleeing to America to help with its re-industrialization (see Ni Hao Y'all). While these industrialists flow out, hot money flows in to chase the high interest rates. The U.S. forces the renminbi higher, but it doesn't help close the trade gap, it only helps hijack wealth (presumably via the hot money flows). Debt levels are also at an extreme and the country cannot continue adding more debt at these rates to finance growth. So, isn't the right policy to have a counter-cyclical cut in the RRR and lower interest rates?

He then discusses a theory that the housing bubble in the U.S. was not caused by low interest rates, but by financial innovation. In China, he says land finance caused the system to push prices higher, not inflation. He closes by calling on the central bank to clearly state its monetary policy.

Niu Wenxin is the managing editor of CCTV's stock information channel and a popular commentator.

He makes some interesting points, but inflation of money and credit is the cause of the housing bubbles in China and the U.S. Inflation isn't spread evenly across the economy. Where it flows is based on the economic conditions at the time and the underlying system. If it wasn't housing, it would have been something else, but in the case of the U.S. and China, it ended up being housing.

钮文新:高房价因货币超发论忽悠百姓 绑架政府
This year, the central bank twice directed down accurate, current economic opinion is full of strange sounds, they are the "RRR" simply interpreted as a "rescue", even Jinglian Mr. Gangster level characters are so clear, the reasons for rising prices that money over. For a time, public opinion atmosphere like in 2010 four years before. At that time, the currency 4000000000000 formed government investment will lead to massive inflation over hair, negative interest rates on bank deposits, so a series of monetary tightening to curb price argument, see now, in the end what are the objectives? I believe that these allegations are nothing more than people to kidnap government by Fudge, in order to achieve monetary tightening, promote appreciation of the renminbi Bale.

We look at these economic phenomena is not true?

First, the high level of interest rates has made China the real economy asphyxia, resulting in a large number of recent industrial capital flight, as the United States, "re-industrialization" service. If the Chinese government does not allow drive down interest rates mean that China further flight of capital and wealth?

Second, high interest rates resulting in a large arbitrage "hot money" flowing into China, these arbitrage "hot money" is not supported by Chinese production, does not support the Chinese consumer, there is no contribution to wealth creation in China, but they are set to go, but the huge Chinese wealth. Because they can fully zoom lever outside, to China arbitrage.

Third, the U.S. forced appreciation of the renminbi, the implication is to Chinese monetary tightening, the purpose is to achieve the above wealth hijacking, but not for the U.S. trade balance. By 2006 and 2013 China Import and Export Trade and the RMB exchange rate movements can be seen, the RMB appreciation can not change the Sino-US trade imbalance.

Fourth, the Chinese economy is facing a "financial shock" dilemma. From the perspective of debt financing, whether it is business or local government, the scale of Chinese debt and debt ratio have reached the extreme, prices also have reached the extreme, continue to rely on debt to expand promote China's economic restructuring, upgrading, innovation is not only ineffective, but will the Chinese economy instantly into crisis; From the perspective of equity financing, high interest rates have devastated the Chinese equity capital pricing, stock market slump, seriously affecting corporate equity financing is an example. If the two paths of all the financial blockage, that the fate of the Chinese economy will be what?

Under the combined effect of the above factors, the Chinese economy is not constantly showing downward pressure? Is not the initiative, more endogenous economic growth momentum weak? If this is true, then the central bank through "RRR" and other means of macroeconomic implementation of the "counter-cyclical" adjustment right? I believe that of course is not only understandable, but also had some late, some passive.

Monetary tightening will lead to the loss of the Chinese people of wealth

Tight money, RMB appreciation, but prices rose ever stopped? Ever stopped rising prices? Not only crunch "in the name of the target," not achieved, and in turn to see the "big four economic phenomenon" is not described in this article are based on the opening of monetary tightening and the emergence of deadly economic problem? China has so many people can realize capital flight, arbitrage is actually flourishing wealth of the Chinese people lost? We must understand one truth: the current Chinese prices are rising, it is the loss of wealth in China, and people looted the specific representation.

There are two reasons: First, capital fled the bank is bound to leave behind bad debt, many private owners of reform and opening up 30 years of nurturing, when high interest rates make it unsustainable operations, the companies pledged to the bank, after the name of the variety of cash exports to foreign capital, while domestic banks lost control of its capital flows, which is not bad debts? If yes, who is going to bear the bad debt? Will ultimately bear to stay in the country by all citizens. How bear? Prices. Second, a lot of money in arbitrage between banks and enterprises, financial costs arising from higher interest rates eventually will become the loan production costs, the costs eventually will be transmitted to people's daily necessities, it is inevitable that economic laws .

Therefore, China's inflation should not be called inflation, but the phenomenon has been developed economies after the robbery. If it is a typical inflation, and that China's domestic economy should be very prosperous, people have plenty of money for investment and consumption, but the domestic economic scene is this it? Obviously not, but just the opposite.

High prices roots in the real estate policy, rather than monetary policy

Prices are the same. Recent led by China's central bank, Ba Mr. hosted translated a book - "financial nature." The book order is made ​​according to former Federal Reserve Chairman Ben Bernanke's first lecture recordings. The book, with plenty of proven Bernanke, U.S. housing estate bubble is not primarily the result of low interest rate monetary policy. He said that many people think that after the Internet bubble burst, the Fed's low interest rate policy adopted is the main cause of the housing bubble, but not in his view it. Mainly from the U.S. housing bubble and the financial supervision of financial self-serious vulnerabilities. After 2000, financial institutions, real estate credit based on excessive "innovation", while at the same time continue to relax financial regulation, with the U.S. government and want to solve the housing problem in the context of the Americans. During this period, a lot of people get far with loan conditions of the housing loans, and these bad assets has been "innovative" out of the insurance package colors, making lenders more regardless of the mortgage asset quality, while creating a vicious cycle. Eventually formed a huge bubble.

Bernanke believes that the level of interest rates, the central bank should mainly consider two factors: economic stability and financial stability. After the Internet bubble burst, the Fed's low interest rate policy is mainly based on economic stability considerations, and certainly not for the real estate. So, to solve the problem of the real estate bubble also from the direction of the real estate market and financial regulation to start, but by no means the monetary policy. Because the total amount of monetary policy as it is for the whole economy, but real estate is only part of the economy. If the interest rate with the means to solve the real estate problem, is bound to make the entire economy was depressed, this is not the right choice of monetary policy.

Bernanke's words should not provoke us to rethink the real estate question? In fact, the key to China's real estate problem lie? Land finance local governments. The answer can basically get a national consensus. We have repeatedly stressed that the Chinese prices are too high, the local government land auction for "both cis and expensive" and tolerate or deliberately by the inevitable result. So the root of the real estate policy rather than monetary policy. At least not primarily caused by super-currency.

Back to these strange economic opinion. Now, shouting "water", is "inflation", prices people want to continue to tie the hands of China's monetary policy? Do you want to prevent the central bank "counter-cyclical" and let the Chinese economy to adjust hopeless? Its intentions are "good" or "evil"? Please judge for themselves. At least I believe that the current Chinese economy, the market is far from normal speech - the right policy can not get the correct interpretation.

The author hopes that the agency unequivocally, came forward to speak, in order to set the record straight. Bernanke told us that whenever the introduction of monetary policy decisions, he told his colleagues, "I have to explain the Fed's policy," the purpose is to communicate and market effectively to avoid misunderstanding. Bernanke can, why can not we? We need positive solutions while suppressing noise, but the central bank to the market needs to correct expectations.

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