What is the good news?
Central Bank:
1. Reduce the deposit reserve ratio and policy interest rate, and drive the market benchmark interest rate down. The above means that the deposit reserve ratio will be lowered by 0.5% recently, providing 1 trillion yuan of long-term liquidity to the financial market!
2. Lower mortgage interest rates and unify the minimum down payment ratio for mortgages.
3. Create new policy tools to support the development of the stock market. Let me explain: lower interest rates mean more money is deposited in banks, and this stagnant money needs to be put into motion.
There is a lot of money from ordinary people here, and it is not easy to make this part of money active. There have been too many disturbances in recent years, and Chinese people are still used to saving money. How to make this part of money flow into the market? Look at the three policies above! There are mainly two markets that can carry a large amount of funds to flow:
Stock market and property market!
The stock market is not trusted, and there are too many risks in the property market. Therefore, the central bank has given specific guidance on specific issues, and money should be spent on the right things. It has lowered mortgage interest rates, and on the bank side, it has given discounts to people who want to buy houses.
Creating new policy tools to support the stock market means boosting the stock market and giving people hope of making money in the stock market so that more saved money can flow!
In addition, the central bank will lower the policy interest rate, and the 7-day reverse repo rate will be reduced by 0.2%, from 1.7% to 1.5%. It will also set up a special re-loan for stock repurchase and increase holdings to support listed companies and shareholders to repurchase and increase stock holdings. Looking back at 2013-2014, the policy objectives are the same.
We need to understand the intention, why such a policy is issued at this time! 1. From our own perspective: many people may not understand how our economic gameplay is constructed.
When I mentioned earlier that the game has entered the deep water zone, I was referring to the game between two parties. In fact, it is not that simple. Our game, if you dig deep, is actually a three-party game! Old-school capital + new-school capital + foreign capital!
When we had neither money nor technology, we released equity and markets, allowing foreign capital to come in with money and technology. This is a model. (Old-school capital formation and foreign capital making money together) The advantages of this model are: we accumulated technology and made money in the fastest time, and built the world's largest supply chain and market. The disadvantage of this model is: in global trade, we are always at the end of the industrial chain, that is, we do the most tiring work and make the least money! It's like the whole world is a big company, the West is the decision-maker, and we are the workers. The decision-makers make a lot of money, but we workers get a meager income.
The core reason is that they dominate the top of the technology core, so the pricing power is in their hands! New capital intervention: Old-school capital and foreign capital that make money together have formed a stable profit model, but new-school capital has no room for control, so I said before that they have the gun barrel, but the purse is not in their hands!
Therefore, if we do not have absolute strength in the economic field, drastic measures are inevitable. This is the contradiction! We have endured humiliation and worked hard for today's achievements generation after generation. Now we are unwilling to continue playing with their old-fashioned things. That is why we have a trade conflict with the Western countries led by the United States! If we continue to work hard for them, do you think they will start a trade war?
The tide of the US dollar, through interest rate cuts and interest rate hikes, has made us, who were originally cheap labor, earn even less. The United States harvests weaker countries in this way. This is their routine. Now we just don't want to be harvested by them anymore. There are always people who say that technology and money are also given to you by others, right?
That’s right, but don’t you also make more money in the world’s largest market!
We helped them during the subprime mortgage crisis in 2008, but if you look back, they showed no mercy at all when it came to the trade barriers that followed.
We released a lot of money after 2008. The economy was booming at that time, so domestic capital was leveraging rapidly to build businesses.
To put it bluntly, it is a huge amount of loans, borrowing money for development, and real estate is the main focus here! (Building in a way of overdrawing the future) Then our bubble is getting bigger and bigger! In 2013-2014, we took advantage of the money shortage and increased the intensity of money release, directly blowing up a leveraged bull! House prices are skyrocketing, and the stock market has also entered a bull market! What followed was a 180-degree turn, because the bull turned into a bear, and the whole society entered the stage of deleveraging.
Moreover, the intensity of deleveraging that year was unprecedented, even though the policy has made a 180-degree turn every three years.
Normally, our policies should follow the pace of the US dollar. If we don’t follow the US dollar’s interest rate cuts, it will seriously affect our exports and then affect the economy! In 2020, due to the epidemic and internal strife in the United States, Trump changed his policies and released a lot of money. In 2021, in order to solve the pit that Trump dug for him (inflation), Deng continued to release a lot of money, causing global capital to follow the US dollar’s interest rate cuts, but we didn’t! This also caused our stock market to stagnate after July 2021! After that, in 2022, the Russian-Ukrainian war broke out, and the US dollar entered a 2.5-year interest rate hike cycle!
The US dollar interest rate hike means that all the money in the world will be converted into US dollars, and then flow back to the United States to reap the world. Therefore, the past two and a half years have been the most difficult period for our stock market because of the lack of money!
The top leaders cannot release a lot of money at this stage, because releasing money means possible capital flight! If they don’t release money, they will be in a dilemma of having no money! They can only survive! From the perspective of the United States: What are the internal conflicts of the United States that have continued to this day?
Now it’s after the interest rate hike. We have been resisting for nearly a year. They just want to outlast us and make us collapse first.
But they couldn't survive us, they couldn't hold on any longer, so they released the money first! Once they released the money, capital flight from the United States became inevitable. This indicates that their economy is hollowing out, and it is difficult to keep these assets.
At the same time, the inflation problem during the previous period of massive money printing is still continuing, so the economic outlook is not good and confidence is insufficient! At the same time, all countries have been harvested by the US dollar, and their confidence in the US dollar is even less, so the US dollar credit system will face a very big crisis!
After talking about the two perspectives, let's talk about the intention of lowering interest rates at this stage. Our economy has been very difficult in recent years due to the tide of the US dollar. Our currency anchor is to print RMB calculated by the corresponding exchange rate based on how many US dollars we earn, so we can no longer anchor it in the future. The process of the US dollar from raising interest rates to lowering interest rates is actually a process of solving the current problems. It is okay for it to deal with small countries, but our size is too large, and it is unrealistic to harvest it through capital.
After the US cuts interest rates, capital outflows are certain, but at this stage, we cut the reserve requirement ratio, which is essentially:
1. Save the market, the property market, and the stock market. 2. Alleviate the impact of the US dollar interest rate cut on our export industry. 3. Re-inject vitality into the economy. Let me be more straightforward. In the past few years, we have controlled the flow of funds from top to bottom to prevent capital outflows, to the extent that it has affected the operation of small and medium-sized economies.
But I still persisted for nearly a year, which is to prevent all kinds of capital from fleeing, and try every means to recover the funds that have gone out in the past! Especially when the US dollar interest rate is rising, it is too easy for funds to run out!
Now that the US dollar interest rate has been cut, it can greatly reduce the pressure of fleeing. If we release liquidity at this time, it will be good for our economy! Think about it!
The two largest markets, the stock market and the property market, are now at freezing point!
When the US dollar is raising interest rates, you have a lot of money in your hands. Would you rather see your assets shrink or run to the US dollar to earn some stable interest? But if you run, it will be a loss of domestic assets, which will seriously affect the overall economic situation!
So at this stage, we will lower the reserve requirement ratio and release favorable policies for the stock market and property market at the same time, so that we can spend money in our own homes. It’s that simple!