Fourth, the causes of bubbles

One morning, Mr. Song asked Yinhua to push his wheelchair to the sea, he let the wheelchair stop under a coconut tree, and he began to read his blog post, he said excitedly facing the sea: "The blog post I want to read today is "The World of Bubbles"

He continued: "From the economic perspective of the world, the surface of the world is full of large and small economic bubbles, and the big and small bubbles are showing signs of blowing bigger and bigger, and people with a bit of brains look at the big and small economic bubbles around the world and shout: 'Wow! Bubbles don't blow anymore, once they blow the world economy will collapse.'" Pen | fun | pavilion www. ｂｉｑｕｇｅ。 ｉｎｆｏ”

In the face of the bubble, the three people have different views, and the politicians said: "How can the bubble not be blown up, you have all seen that the Federal Reserve turned on the money printing machine to print money and carried out quantitative easing three times, that is, to blow bubbles to the world, and if the bubbles are not blown, the US economy will be finished." ”

Economists are a little humble and say: "The bubble can't be blown all the time, it has to be blown and stopped, and we have to find a way to decompress the bubble, that is, deleveraging, otherwise if we really keep blowing the bubble, the world economy will really be finished." ”

Poor eggs look at the big and small economic bubbles, they have another feeling in their hearts, they think that they are poor eggs in a world full of bubbles, bubbles blow up we are still poor eggs, it has little impact on me, maybe the bubbles have blown up the house prices have fallen, prices have fallen, we can buy a house to spend less and do more.

I think the world economy has suffered from incurable diseases so far, governments around the world have ridden on the bubble, and the real estate bubble, the financial bubble, and the debt bubble have grown like wild poisonous mushrooms all over the world. The politicians are already very worried about the bubble, so let's stop blowing it! The economy is in a downturn, and the people are dissatisfied, so let's continue to blow it! The economy has rarely improved, but this kind of improvement has become smaller and smaller because of borrowing to repay the principal and interest, and the bubble will be punctured! It will cause an economic collapse and chaos in the world.

This has left politicians in a dilemma, watching Venezuela blow bubbles into the printing press, printing more money than toilet paper, and less toilet paper than it is worthless, domestic prices are soaring, people are hungry, and the economy is collapsing.

The Brazilian bubble has caused the national police to pay their salaries, and the national economy is in extreme difficulty. In some small African countries, the bubble has been blown so that civil servants cannot pay their salaries, and the president has no choice but to sell the presidential plane and use the money from the sale of the plane to pay his own salary.

It can be seen that the disaster of the bubble bursting is very terrible. However, there is still a lot of room for the bubble in some countries to continue to blow, and the local officials very much want to blow up the real estate bubble, and the local finances rely on the real estate bubble to get a huge income from land sales to make a living, but the overall bubble in the world has reached a dangerous situation, and the local officials and petty officials stand on their own standpoint and think about it, so it is better to continue to blow it! It is better to hold on to death than to starve to death.

At this point, people should not only ask why there is an economic bubble in the world, but also how did the economic bubble come about? Under the gold standard, the value of each unit of currency is equal to a certain weight of gold (i.e., the gold content of the currency), and when different countries use the gold standard, the exchange rate between countries is determined by the ratio of the gold content of their respective currencies - gold parity.

The internal and external values of currencies are generally the same, the comparison between currencies is relatively stable, and the exchange rate system has a relatively solid foundation. However, after the circulation of paper money in various countries, the process of determining the exchange rate has become complicated, and the changes in supply and demand caused by the balance of payments and inflation play a decisive role in the exchange rate, thus affecting the exchange rate system and affecting international monetary and financial relations. The SDR is another big patch that the Americans have given to the Bretton Woods system after the "gold double price system".

Of course, from the very beginning, the Americans did not allow the SDR to play an excessive role, the United States just hoped to use the SDR to get rid of the shackles of gold against the dollar, and the real protagonist had to be the dollar. Therefore, from the beginning, the SDR could only be used for settlements between central banks, and could not be used directly, and today, the SDR is no longer pegged to gold, but to the four main currencies (US dollar, British pound, euro, yen).

Like the dual-valent system of gold, the SDR is unlikely to fundamentally solve the Triffin problem, and these two major patches are nothing more than a temporary continuation of the Bretton Woods system, but functionally untying the golden ropes that bind the dollar little by little. In 1970, with the issuance of Special Drawing Rights (SDRs) through the IMF, the United States was content and continued to print money at full capacity. In the summer of 1971, the United States had only $10.2 billion in gold reserves and $52 billion in short-term foreign debt, which was only one-fifth of the short-term foreign debt. Unable to recover, in order to hedge the risk of depreciation of the dollar in their hands, governments have exchanged dollars for gold to the U.S. Treasury, and U.S. gold reserves continue to decline.

On August 9, 1971, the British economic representative personally visited the U.S. Treasury Department and asked for the exchange of $3 billion into gold, which was as high as more than 2,600 tons at the official price at the time. This was the straw that broke the camel's back, and Treasury Secretary John Connery immediately reported to President Nixon. On Friday, the 13th, Nixon suddenly ordered 16 key cabinet members who make economic policy to take a helicopter with him to Camp David for an emergency meeting. To ensure that the meeting would not be leaked, Nixon cut off all attendees' external communications. At the meeting, in response to the British government's huge gold exchange request, all participants unanimously agreed to close the gold window, that is, refuse to exchange gold to any country. On Sunday, August 15, Nixon made a televised speech in the evening prime time, announcing the implementation of the "New Economic Policy" of the United States, the core of which was the decoupling of the dollar from gold, and the United States would no longer exchange gold with any country.