Translated from the Headlines （Toutiao 头条新闻）
Author: Liu Ye A Dan（六爷阿旦）
The house has changed the investment beliefs of the Chinese people, and the U.S. stocks have changed the investment beliefs of the world. It is because U.S. stocks have only risen but not fallen. Now another view is becoming popular. The U.S. will never raise interest rates and the U.S. dollar will never have a crisis. If you want to say that, it is a bit superstitious. Marx had already fortuned capitalism, and the economic crisis cannot escape fate.
The economic crisis is dedicated to capitalism. This phenomenon, in previous textbooks, is not based on human will. We can’t think that the US dollar can live forever because it takes a long time to return. This is not in line with the law of historical development. Of course, we can’t say anything too hard, in case the laws of history are rewritten.
So in the following deduction, I will only talk about the first half of the US dollar crisis, “The last time the United States reaps the world, the three-stage roadmap deduction, who will fall first?” “, continue to make a deduction. What is the basis? It is the development of a capitalist economy that essentially uses human nature and desire as the driving force of the economy. The limitation of this driving force is that it will periodically encounter confidence bottlenecks, and then it can only be overturned.
So you have to ask, why is there still an economic crisis in the United States? I can only tell you a little secret that most people don’t know because dogs can’t change eating shit.
The common denominator of the past economic crises in the U.S.
When we analyze the past economic crises in the United States, we can see that on the surface, there are at least two points in common, while the deeper ones correspond to the other two points. I will discuss the reasons in depth later. These two superficial similarities can be used as a reference for us to see how the dollar crisis will proceed in the future.
The first thing in common is the time period, which will happen roughly once every ten years. The reasons for each crisis are various, but the fate of the crisis cannot be escaped. The main difference lies in the large and the small. The last crisis was in 2008, and it has been 13 years. Some people say that this epidemic is already a large-scale economic crisis. I think this makes sense.
What makes no sense is that as an economic crisis brought about by the epidemic, its impact on the US economy is still too small. This involves another issue. The impact of this crisis is indeed an infinite release by the United States, which has been artificially delayed. Because the causes of the crisis have not been resolved at all, you can never say that if you release some water, society will be complete.
So it’s like the tsunami has come. The Fed has built a dam. It first supports it, and then arranges various transfer adjustments. When it is withdrawn, whatever it should come will have to come. After all, the Fed is also governed by laws, and it cannot control laws.
The second common point is the process. Every crisis basically starts with a stock market crash, then triggers a financial crisis, then leads to a full-scale economic crisis, and then a debt crisis.
Crisis crises are organic when there is danger. Each crisis in it actually corresponds to a corresponding opportunity. Most people in the world see dangers, but the United States always sees opportunities in the past. Internally, there are opportunities for capital mergers and reorganizations. On the outside, such as the Latin American crisis, the Southeast Asian crisis, and the Japanese economic crisis, it is because they merged with others.
How did the U.S. deal with black hands in the past? Generally speaking, it is to avoid dangerous parts that are difficult for people to control as much as possible, and focus on the parts that grasp opportunities.
Today, our second half of the game will follow this process.
The underlying cause of the crisis
In the first half of the dollar crisis, I mainly gave three observation indicators, the first is the US dollar index, the second is the U.S. bond yield, and the third is the U.S. stocks. It should be said that there is a strong logic in this because this sequence represents the direction of the flow of US dollar funds.
We say that water flows to low places. In fact, the same is true for money. It will flow to places with low risks and high returns. And whether this money is sufficient in one place, it means that there is insufficient liquidity in a place. If liquidity is sufficient, it can be waved by a gust of wind, and if liquidity is insufficient, a gust of wind can cause a crisis.
Generally speaking, after industrialization has achieved sufficient material supplies, there are essentially only two kinds of economic crises in human history, one is the liquidity crisis and the other is the confidence crisis. They will influence each other. At first, a crisis may appear first, but once there is resonance in the later development, it will become an economic crisis.
What does this have to do with what we said above, the two common points of the crisis?
Let’s talk about the crisis of confidence first. The reason why crises have periodicity lies in people’s desires. From optimism to pessimism, there is always periodicity. Once you use your optimistic desire to promote economic development, it is always inevitable and you will usher in pessimism and despair in the future.
The main contradiction here, if it is more profound, is that people’s desires are unlimited, while the development speed of productive forces is limited. Once desire is limited, pessimism and despair will spread. This kind of confidence in people is often beyond the scope of macroeconomic regulation and control, so I count the crisis of confidence as a dangerous part that cannot be done by manpower.
These two passages are a bit convoluted, so you can understand it in terms of our Chinese unique words. Confidence is similar to popular sentiment, which is smooth and irreversible. This is the cycle.
The second is the liquidity crisis. In contrast, even the part can be controlled by manpower. The Fed has an ancestral secret book in the hands of the “Water Collection”. Every Fed chairman, as soon as he opened his post, he wrote such a poem at the beginning: Don’t panic in everything, let the water come to help. One trillion is not enough, but one trillion is not enough.
Liquidity can be controlled. Therefore, if you make good use of the confidence crisis and the liquidity crisis, you can do big things. Do they go the other way, cancel each other out, or go along and resonate? He understands the knowledge of the Federal Reserve.
For example, we are talking about the crisis in the United States. The epidemic has already caused a crisis. This is something that cannot be violated. However, at a critical moment, the Fed used the last trick at the bottom of the box: unlimited water release. This is to use unlimited liquidity to withstand the liquidity crisis that has already appeared in the US stock market.
This is Fu Building Yu Jiangqi.
Many people say that water will be released forever, rising forever, and there will never be a crisis. In essence, the Fed will always hold on like this, and then there will never be a crisis of confidence. This is obviously impossible.
The current price-to-earnings ratio of US stocks is around 40 times. Many people don’t understand that the higher the price, the longer-term maintenance, and the overall maintenance cost will become larger and larger. Large companies have been buying back at high levels, and that would be unbearable.
As the old saying goes, if you are full, the Fed must be full before it can continue. But how can you be full? As long as he doesn’t hold on, the crisis will happen naturally, and then there will be an opportunity to let the dollar capital fill the world to buy the bottom, and you can eat more. And when the Fed chooses not to hold on anymore, the grasp of this timing is an opportunity for him.
The fuse is the US stock market.
The course of the crisis
We start from the fuse, a complete crisis, the process can be divided into at least five steps.
In the first step, the U.S. stock market collapsed, triggering a liquidity crisis. The fuse of economic crises usually starts with the stock market crash. Why? In fact, the reason is very simple, because US stocks are the switch of the dollar’s credit and liquidity. Unlimited water release is to create liquidity, and the collapse of the US stock market is a liquidity crisis.
The total market value of the U.S. stock market now exceeds twice that of the U.S. GDP, which is about 42 trillion U.S. dollars.
We experienced a stock market crash in 2015. If the U.S. stock market fell rapidly, for example, if it fell by half, the market value at this time would be about 20 trillion yuan. At this time, it would be similar to what we experienced back then. The market value of the stock fell. If you pledge to finance or increase leverage through other means, you will have to liquidate your position.
The original billionaire has become a billionaire, and what is lost in the middle is the liquidity crisis.
The second step is the collapse of liquidity, triggering a financial crisis. The U.S. stock market is huge, and this time it was pushed up with the unlimited release. If something happens in the future, is there a bigger trick than an unlimited release? According to my limited imagination, I really can’t think of anything bigger than infinity.
The above data also shows that even if the U.S. stock market drops by only half, the evaporating market value will exceed the GDP of the entire United States. With such a huge amount of liquidity, if the Fed is actively tightening this time, he must be sitting on the sidelines. At that time, the first thing the entire financial system will do is to sell assets all over the world, and then remit the cash obtained from selling stocks, bonds, and all assets to the United States to replenish liquidity.
Obviously, this is a drop in the bucket, but it has to be done. At this time, whoever has more cash in hand, who has less debt, and who has low leverage, is the grandfather. On the other hand, those grandchildren will have to sell off all over the world, and the size of the world’s financial markets, added up, may not be able to plug the hole in the United States. At this time, it must be followed by a collapse.
This is the financial crisis sweeping the world.
The third step is the collapse of confidence, triggering an economic crisis. At this point, all fools know that they have to take the cash and prepare for the winter. No one in the market dares to lend, and no one thinks about expanding their business. The whole world is in panic. People’s confidence collapses and all consumption will shrink. This will cause instantaneous shrinkage of demand across the world.
In the current world, production capacity is all overcapacity, which means that the supply is sufficient and available on call. That’s why it is necessary to stimulate desire and stimulate consumption. In fact, it is to stimulate demand and to maintain stable supply by expanding demand. And if confidence collapses, it will lead to a severe shortage of demand, followed by a severe oversupply. When the contradiction between supply and demand breaks out, prices will plummet, and then, factories will go bankrupt and stop work, and workers will lose their jobs on a large scale.
Once this matter spreads, it is not stagflation, but an economic crisis, and a Great Depression.
The fourth step is the economic depression, which triggers a debt crisis. From the spread of the stock market to the financial market and then to the real economy, once a crisis occurs, there is no turning back. At the beginning of the crisis, it was very rapid. It can be said that most people are not immune. At this time, when the confidence was full, the financing, expansion, and leverage were finally left, which is a debt that may never be paid off.
This is true of individuals, companies, and countries. Especially when the US dollar has a zero interest rate, because the interest rate is low, in recent years, many companies and many countries will actively find ways to borrow US dollar debt to accelerate development, but the crisis is not a crisis, who knows such a major event.
So once it is sold, just like South Korea before, first use gold to repay the debt. If the country does not have it, it calls on the people to donate. If it is not enough, it will take out the high-quality assets under the box to repay the debt. Samsung has no controlling rights.
In the fifth step, asset prices collapse, and creditors come to buy the bottom. The opportunity of the crisis is mainly concentrated in this step. People have worked so hard for a long time to get to the debt crisis step by step, and follow the debt crisis.
It is bargain hunting.
Bargaining assets and control
In a complete crisis, the most important thing is this last step, bargaining. Many people understand the American routine a bit simple, thinking that he just wants to make money. In fact, compared to money, the gadget can be printed on its own. What he wants more is assets. Assets are real wealth. Only if you have assets, you can have control.
The assets are divided into tangible assets and intangible assets.
Tangible assets are easy to understand. Land, oil, minerals, railways, and company equity can all be used to repay debts during a debt crisis. There are also intangible assets, such as franchise rights, financial licenses, and currency issuance rights. These are intangible assets for a country. In particular, financial and currency-related businesses involve the integrity of sovereignty. Once this thing is opened, it may be grasped for a lifetime.
Therefore, after the debt crisis, American financial institutions generally engage intangible assets, while the International Monetary Fund and the World Bank, which are controlled by the United States and Europe respectively, will engage in intangible assets. A two-pronged approach, after some operations, your country still looks like you, but the core control has been usurped in the hands of others.
Are there any bugs in this model? Of course, there are. This routine has been played in the United States for so many years. In fact, the whole world knows what’s going on. There are two loopholes in it, but not everyone can use them.
The first loophole is only valid for Western-style democracies. This is very important, so make a point. Because when you come across a highly centralized country, you don’t care about your debts, and you just write off your debts. Russia has done this before. What can the United States do? You can only stare and say that people will not play with you in the future.
The United States must promote and use Western-style democracy together to play this game, and the effect will be good. The function of Western-style democracy is that it looks like someone is in charge, but no one is really responsible for the national interests. Then, the US dollar capital can just break through this gap. So when they promote this, they like to say that they put power in a cage.
Because a high degree of centralization means absolute power, absolute power. At this time, it is the absolute enemy of US dollar capital.
The second loophole is the fear of making wedding dresses for others. The United States also has to divide people into doing this. The most important thing is to have control after it is done. The United States deliberately dealt with us and failed. The details are here in “Thrilling 2015, the United States failed to harvest wealth in the financial war and became a turning point in the country’s operation.” One of the problems we are facing now is that we are afraid that we will copy him.
Since the harvest failed in 2015, it is equivalent to a showdown, and everyone has stopped pretending, so now one thing is to prevent risks, fire, and theft, and prevent the United States. The U.S. has nothing to do now. It doesn’t matter. He is also worried about another problem. After the debt crisis, U.S. capital originally went to buy the bottom. What if China cuts the hook?
In the past, I only ate alone, so I didn’t worry about it, but now it’s hard to say. This matter involves huge interests, so if you handle it well, the future will be a new world. If you don’t handle it well, it may also be another new world if it starts to fight.
Generally speaking, I believe that the United States is still very smart. Those who know the current affairs are outstanding, and the United States should have such wisdom. Because of the weak nature of capital, there is no need to fight for money. And this will be a good opportunity for the internationalization of the renminbi, using huge foreign exchange reserves to redeem a group of countries with US dollar capital from the debt crisis and convert their debts into renminbi debts. This will be the sphere of influence of the renminbi in the future.
Then, in the second half of the crisis, in addition to the stock market and finance, here, I believe everyone will also see a problem, that is the real core, a dollar crisis is likely to become, The beginning of everyone’s re-division of spheres of influence. This time the focus is on some resource countries. This operation requires too much space, so let’s talk about it in the next article.
You may ask, what happens after this?
You look back at our past preparations, internal circulation, expansion of imports, the One Belt One Road…… Isn’t this just connected? Still seamless.