Ye Tan, commentator of NBD
It is impossible to solve the problem of excess liquidity by writing off money. We should not be afraid of moderate inflation. We should be alert to the hidden wealth loss of seigniorage.
Mr. Fan Gang, a macroeconomist and member of the Monetary Policy Committee of the People's Bank of China, excitedly defended the macro-control and refuted the view that the macro-control has not achieved much: "It is precisely through macro-control over the years that we have effectively curbed the production of excess productivity, successfully avoided economic overheating, and achieved steady and rapid economic growth.", "If these measures are not taken, our monetary growth rate will be 30%, or even 40%, instead of the current 18%. The resulting liquidity overflow will inevitably lead to inflation and real estate bubbles.".
Is macro-control effective? The benevolent see benevolence, the wise see wisdom. Judging from the window guided credit tightening policy implemented by the central bank at present, we can see that excess liquidity is indeed serious. What Mr. Fan Gang can show is that macro-control has indeed played a certain role, but it is impossible to eradicate excess liquidity. His argument is that without macro-control, the monetary growth rate may be 30%, 40%, rather than 18%. To solve the problem of overheated economy, we need to adjust the economic structure. The top priority is to promote the reform of the fiscal and taxation system. At present, the government is on the way to fiscal and tax reform, individual income tax , resource tax and other reforms will be introduced one by one.
Excess liquidity has become a negative word housing price Rising prices and overheated economy are all attributed to excess liquidity. This is irresponsible. We should acknowledge the fact that in the critical period of economic development, prices and wealth will rise, which is the case in South Korea, Brazil, Mexico, Russia and other emerging economies. When Germany was reunified, there was also slight inflation. It is true that there was no inflation during the industrial revolution in Britain and the United States, but the gold standard or the duplicate system and the difficulty of gold mining at that time had anchored the currency. If measured by gold, the current price of oil is still in the 1970s.
The increase of money caused by the increase of wealth creation ability is quite different from the inflation caused by the excessive issuance of money by the government. The former is driven by economic development, while the latter is a process of looting, which leads to productivity development falling far behind the growth of money and the collapse of the economy and capital market.
The excess liquidity in China can be seen in two stages. The reform of financial institutions after 2001 and the difficulty relief of state-owned enterprises have cost trillions of yuan in reform costs. These yuan belong to seigniorage, which is the implicit cost of reform. The money multiplier effect caused by the increase of goods circulation and the development of capital market should be regarded as the result of economic development and should not be excluded.
At present, the excess liquidity of RMB cannot be eradicated. The fundamental reason is that RMB is a paradise attached to the rapid economic growth. As long as the appreciation expectation is high and the trade surplus is high, this fact cannot be changed. The amount of hot money pouring in varies from $100 billion, $300 billion to $500 billion. These data measured according to different caliber reflect the attractiveness of RMB assets.
Inflation is certainly a monetary phenomenon. According to Peking University China's economy Song Guoqing, a professor of the Research Center, studies that, in general, 60% - 70% of the current inflation rate higher than 2% is driven by monetary factors, so the overall inflation change depends on the money supply. The central bank's efforts to write off money are not small, but from the market point of view, money is still extremely abundant, and money is multiplied in high-speed economies. The central bank had to use the credit freezing method, and through the suppression of the capital market, the book wealth of 5 trillion and 6 trillion disappeared.
This means has great sequelae. Freezing credit is just a matter of hoarding funds, and one day it will come out. However, in the process of freezing, a large number of small enterprises in urgent need of funds will die, making it even more difficult for SMEs to get loans, which is the same as the situation in Japan during the austerity period, resulting in a decline in economic vitality. It is even worse to crack down on the capital market. To tighten in a way that harms the interests of ordinary shareholders is basically a way of doing more than enough, which runs counter to the government's goal of ensuring people's livelihood.
There are many ways to cool the economy. Improving social security, levying resource taxes, and increasing market competition are all good ways. The CPI index matching GDP is not so unacceptable. Shrinking liquidity at the cost of economic damage is short-sighted and will not pay off. When the loss of wealth exceeds people's acceptance, the ultimate problem of shrinking liquidity will become a heavy topic.
