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With all that money being issued, why is there deflation all over the world

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2023-01-23 / 0 评论 / 2 点赞 / 4,739 阅读 / 14,341 字 / 正在检测是否收录...
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With all that money being issued, why is there deflation all over the world

Inflation has been the dominant theme of the past few decades. Many ordinary people take it for granted that the world will always be inflating and money will become less and less valuable. But in reality, deflation is where the world ends up, because everyone has a market economy.


A major feature of the market economy system is that producers will increase their production capacity endlessly until it reaches the limit of resources (land, population, energy) of the whole society.

But most of the time, we struggle to reach the resource limits, and the productive expansion of society is forced to stop because things can't be sold.

Without profits, business owners will, of course, stop expanding. But it's not because there's no demand, it's because there's something wrong with our distribution mechanism.

Human needs are endless, I not only need to drink milk, I also need to bathe in milk, I always have needs.

But during the Great Depression, farmers preferred to dump their milk into rivers rather than give it away for free.

This picture is familiar to all of you, because we studied it in books when we were very young.

At that time, we were hungry and had milk as a luxury. We couldn't understand why Americans did what they did. It could only be attributed to the evils of capitalism.

But in fact, this is not a problem of capitalism, but a problem of the market economy, as long as the market economy of the country, there will be overproduction.

The cinema would rather have empty seats than let you in for free.

I can produce milk for you, but you must give me money, and if you do not give me money, no matter how much you want, I cannot produce for you.

The problem is, consumers don't have money.

Here's a poignant joke about the economic crisis:

Son: Mom, we're freezing to death. Why don't we make a fire? Mother: We have no coal. Son: Can't you buy some coal? Mother: We have no money. Son: Why is there no money? Mother: Father lost his job because there was too much coal to sell!

According to Das Kapital, capitalists (business owners) are determined to exploit "surplus value", and if production is not profitable, they will immediately choose to shut down the factory.

But if the capitalists make a profit, the workers (consumers) must not have enough money to buy everything, and this is a dead end. When goods do not sell, the capitalists are forced to lower their prices, which affects profits, and when profits fall to a certain point, they close their factories and dismiss their workers.

Unemployed workers have no income, their spending power is further reduced, and an even more vicious cycle begins.

Accordingly, Das Kapital concludes that economic crises are the inevitable fate of capitalist countries. They must occur every once in a while. The productive capacity of a society must be destroyed before the country can grow again, and so on.

Therefore, Marx believed that capitalist countries appear to be developing, but in reality they are treading water.


Socialist countries see Capital, capitalist countries see it.

There is a consensus in all countries of the world that a pure market economy with no government involvement is undesirable.

Keynes then patched the market economy with inflation to solve the problem of monetary deficiency.

Keynes argued that governments should not stand by and watch the prices of goods fall when society's production is stretched to its limits, but should intervene to make them sell.

After all, the essence of the economy is that human beings produce milk for their own consumption, rather than pouring it into rivers. Money is needed to stimulate the economy. What will the government do if it has no money?

Simple, print money, proper inflation is good for the economy.

But it turns out that printing money is addictive, and once you start, you just can't stop, just like taking drugs.

Printing money, on the other hand, immediately causes real inflation, even hyperinflation.

During the Great Depression of the United States, Japan used to print money on a large scale to stimulate the economy, but soon became addicted to it. In 1936, the exchange rate between the yen and the US dollar was equal to one to one, but now one dollar can be exchanged for more than 100 yen.

And it turns out that money-printing inflation doesn't generate much real growth, and Japan's economic glory didn't come from printing money.

The communist government is the nationalist government, learn from Japan to print money, the result to print themselves dead. **

If printing money can stimulate the economy, then running the country is too easy, adding a zero to the end of the money can increase the country's GDP by 10 times?

If this really worked, people would simply add zeros to their bills with a pen. The more zeros a country has, the richer it will be.

But in fact, Zimbabwe added so many zeros that the country did not become strong, but was on the verge of collapse.

Printing money was so toxic and ineffective that governments around the world patched up Keynesian economics by allowing stimulus, but not printing money. **

Are you kidding me? Instead of printing money, you let the government use air to stimulate the economy. Economists have come up with a brilliant idea to solve this problem: use debt as a Midas touch.


Since the late 1980s, a new world economic order has been established: inflation, but no money printing.

No kidding. In 30 years, no one printed a dollar bill. You can only print as much money as you have gold.

How much money have I printed over the years? I don't know how it's possible not to print money.

In fact, it wasn't printed. ** Although I don't print money, but I can borrow money, it is not illegal to borrow money. **

I said this in my article "The Printing Press has stopped, negative interest rates are coming, and here's your chance to overtake on a corner." I'll say it again today.

If I decide to print another ¥1 million of base money and put it into the market to stimulate the economy, I can just print another ¥1 million to buy things.

Of course not, because I don't work, I only print money, if I do that, it will be stealing the wealth of the residents, which is what the Kuomintang did and then collapsed.

But if I give you a ¥ 1 million loan and you buy something, then it's okay, because you're working, and you promise to pay me back the ¥1 million in the future.

From a legal point of view, I lent you ¥ 1 million out of thin air, but you promised to pay me back ¥1 million. I didn't print money.

But the 1 million yuan of base money actually flowed into the market, and the purpose of stimulating the economy was achieved.

Therefore, once the commercial bank loan can not be put out, the mother will become very anxious.

What if people don't want to borrow? ** It doesn't matter, you see this house is not sweet, want to want to improve the living conditions? **

Debt is the main pillar supporting the new generation of Keynesianism, there is a new debt to have a new currency.

In 2018, the U.S. national debt reached ¥ 23 trillion, compared with a GDP of $20.5 trillion that year.

Take the annual GDP of the United States and you won't be able to pay off the debt. Every year, the United States pays $600 billion in interest alone on its national debt.

In 2019, the U.S. government is budgeted to take in ¥3.462 trillion in revenue and spend $4.447 trillion. Instead of paying back the money, it is borrowing another ¥1 trillion to run a deficit.

Because this debt is not payable, it's not just a debt, it represents a supply of dollars.

Historically, when times were good and the government ran a budget surplus, it cut taxes instead of paying them back.

With money in hand, the government would rather cut taxes than pay back the money **, because there is no way to return. If all the debts are paid off, the world s circulating dollars will disappear and the economy will collapse.

In 2017, the Fed tried to shrink its balance sheet, reduce the size of the national debt, and reduce the supply of dollars, but the economy began to dive and was halted.

Government debt, corporate debt and household debt are destined to grow and cannot be reduced.


With all that money out, is the world inflating?

No inflation! No inflation! No inflation!

Except for China, the whole world is deflating, and Japan has been deflating for almost 30 years even after falling into economic malaise.

Even in China, the reason there is moderate inflation is because the economy has been doing so well these years and people's incomes have been rising.

You will find that in all the commodities in China, the rising price is highly related to human power. All out of the factory, and manpower linked to very low prices are deflating.

Instant noodles, color TV sets, refrigerators, computers, air conditioners, cars, all have not increased for many years, and even the prices are falling.

On the other hand, the price of breakfast and barbershop at the gate rises year after year because it relies too much on manpower.

Take away the house, take away the human wage, this decade can increase things, really too little.

Because in a market economy, the capitalist will provide an endless supply of products until there is no profit at all.

This oversupply has kept prices from going up until the occasional surprise, such as the African swine fever in 2018.

Only science and technology is the only way to improve productivity. All kinds of economic means are just trying to maintain the order of social production. It is impossible to turn decadence into magic.


But here's the thing: there's a limit to how long the debt snowball can roll, and if the technology doesn't get upgraded, there's going to be a big problem.

You can't borrow money, but at least you have to pay the interest. If you don't pay the interest, what's the difference between printing money out of thin air? The whole social order will immediately collapse and cause real hyperinflation.

You borrow ¥ 1 million, if the currency depreciates by 10,000 times, you still pay back ¥ 1 million, which is equal to you only have to pay back ¥ 100.

Hyperinflation is defaulting on debts. After all the debts have been defaulted, everyone cleans up and starts playing again from the ashes.

Zimbabwe is like this, there is no play again for the time being can not see, a ruin is really.

Therefore, the debt must not be defaulted, if defaulted, equal to the destruction of the whole country.

Not bad. I believe you, too, but at least you have to pay the interest. What if you can't?

If you can't afford to pay, you can choose to reduce the interest rate, which can not only force the savings of the society out of the bank for consumption, but also reduce the interest expense, and let the debt snowball continue to roll.

In 1991, Japan's GDP was 464 trillion yen, in 2000 it was only 534 trillion yen, with an average annual growth rate of only 1.4%, Japan lost its first decade.

Since 2000, Japan's annual GDP growth rate has even been less than 1%, and Japan has lost its second decade. Today, Japan has lost almost 28 years. Over the past 28 years, Japan's economy has barely stood still, rapidly being overtaken by China.

Japan, which has been Mired in recession and deflation for the longest time, has the scariest debt problem, far more so than the United States.

Japan's national debt is close to $10 trillion, or 224% of GDP per year. If the interest rate on JGBS reaches 1%, the Japanese government will not be able to pay the interest on the debt every year. So, Japan has very, very low interest rates, zero interest rates since 1999.

** In 2016, Japan even issued bonds with negative interest rates, which means that if you take 100 yuan to buy JGBS, the Japanese government will pay you back 99.5 yuan ten years later. **

The Chinese would never buy such bonds, but the Japanese did, and were oversubscribed 3.2 times, and sold out. Because the Japanese put their money in the bank, and they pay a higher management fee than that.

A prolonged period of zero interest rates and deflation has left Japan's economy stagnant and its younger generation with low aspirations.

Why low desire, because tomorrow's goods will be cheaper than today, I invest things will not increase in price, then why do I rush to buy things, why want so high desire, save some money for emergency risk

? Lowering interest rates can stimulate consumption and stimulate the economy, but lowering interest rates to a certain point will have the opposite effect. Today, the Japanese government has gone to great lengths to stimulate the economy, but to no avail.

The case of Japan shows that there is a limit to borrowing money to stimulate the economy after a deep economic crisis, and that limit is zero or even negative interest rates.

Japan was the first to enter the era of zero interest rates, but it is not alone, because now a large number of countries in Europe and the United States have also entered the era.

With all that money printing, there is deflation all over the world.

The reason for this is that if we didn't print the money, we wouldn't have deflation. We would have a collapse in prices and a complete destruction of the order of production.

Would you like to see a doomsday scenario in which goods are sold at low prices, factories go bankrupt and workers go home without jobs?

Now it's just deflation, a slight drop in prices, which is pretty good, showing that social order is holding up pretty well.

The lower the interest rate, the worse the economy, or the worse the economy, the lower the interest rate.

The fact that China has kept interest rates high for so many years shows that its economy is growing much faster than other countries.

In 1997, the Asian financial crisis, China's export was blocked, there was a large number of interest rate cuts to stimulate the economy, you can also see the relationship between the interest rate and the rise and fall of the economy from this table.

Since the reform and opening up, ordinary Chinese have become accustomed to high economic growth and rising asset prices and wages, as they have been for 40 years.

But you can't take that for granted.

After all, the world has entered the era of zero or even negative interest rates, and everyone is suffering from deflation. China can stand alone, but it cannot do so for too long. Sooner or later, it will be dragged into the water by the major economies of Europe and the United States.


What are the characteristics of inflation?

1. Inflation is good for debtors and bad for creditors.

In an era of inflation, whoever borrows gets rich, and the bigger the leverage, the better, as I believe we've learned over the past decade.

On the other hand, if you go into a deflationary era, whoever borrows is going to suffer, and leverage is going to be as low as possible, and everybody's going to pay back everything they can.

2. Inflation is good for profit earners and bad for fixed income earners.

In an era of inflation, when goods are sold and bosses happily count profits, most of the money pouring into the market is taken by bosses, who start factories who get rich.

On the contrary, those who are paid death wages are very lonely, so inflation will increase the wealth gap.

Once you enter a deflationary era, it becomes very difficult to start a profitable factory, because the goods cannot be sold, it is difficult to start a business, you can lose money at any time, and those who are paid a dead salary, the mood is better.

Therefore, in the age of deflation, cautious entrepreneurship, the golden age of entrepreneurship must be in the era of excessive debt, or technology explosion of the new technology era.

3. Inflation favors owners of real assets over owners of monetary wealth.

This is a very good explanation, in the era of inflation, who buy a house who get rich, who hold the money in the hand who is stupid, this point I believe you have more profound experience, can be said to be profound.

But if you enter a deflationary era, the pattern will reverse.

After a long period of deflation, mortgage rates in Japan are now only 0.625%, which is practically free, with down payments of 2~ 30%, but Japanese people are still reluctant to buy homes.

And once the Japanese, so fanatical to buy a house, in contrast, really sad.

According to the Merrill Lynch clock economy theory, the economic development cycle is divided into four stages:

  1. Recovery stage: the economy goes up while inflation goes down;

  2. Boom stage: the economy goes up and inflation goes up;

  3. Stagflation stage: economic decline and inflation rise;

  4. Recession stage: The economy goes down and inflation goes down.

Falling inflation happens in both recessions and recoveries.

It is clear that the world is now entering a recession, and that falling inflation will be accompanied by both a recession and a recovery.

So the future of the global economy is likely to see low interest rates and low inflation for a long, long time.

It is only a matter of time before China enters an era of zero or even negative interest rates, accompanied by deflation. It is just a matter of how long it takes.

The later the revolution enters, on behalf of China's economy stronger, the brighter the prospect. I don't want China to enter an era of low interest rates, but we need to be prepared for that, just in case. **

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