[Look at China, October 1, 2021]There is a famous period in American history called the “Gilded Age”, which was probably from 1860 to before the First World War. The U.S. economy during the Gilded Age increased by leaps and bounds. From 1860 to 1900, the output value of American manufacturing increased from 1.9 billion U.S. dollars to 11.4 billion U.S. dollars, railway mileage increased from 30,000 miles to 250,000 miles, and coal production increased from 10 million tons to 212 million tons. Steel production increased from less than 1 million tons to 11 million tons. The period from 1871 to 1913 was a critical period for the U.S. economy to catch up with the United Kingdom. During this period, the U.S. GDP increased by 5.26 times, while the United Kingdom only increased by 2.24 times. By 1913, the United States‘ per capita gross output value and gross industrial output value both ranked first in the world, undisputedly becoming the world‘s largest economic power.
After the outbreak of World War I, Europe fell into a melee, and the US arms industry and manufacturing continued to expand.
The characteristic of this period is that the U.S. has an extremely strong industrial foundation and a complete range of categories. Almost all industries (including military technology, etc.) occupy a leading (or important) position in the world. This is the United States can win both. World War II and established the cornerstone of American hegemony after World War II.
We know that the Great Depression broke out in the United States in 1929 after the First World War. There are of course many reasons for the Great Depression, but the core reason is the worsening of the gap between the rich and the poor. This is already a conclusion. When the gap between the rich and the poor worsens, social wealth will be concentrated in the hands of a very small number of people, making most people lose the ability to consume. At this time, there is a profound contradiction between industrial capacity (and the debt behind the capacity) and demand. The stock market crash (the demand side shrank suddenly) kicked off the Great Depression.
After Roosevelt became president in 1933, the government invested in infrastructure to rescue the crisis. The logical relationship here is: the government expands expenditures for infrastructure activities-laborers have income, and there is also a demand for basic commodities-demand recovery creates the demand side in economic life-after the demand side, enterprises will Work can be started and workers can be hired one after another, which allows economic activities to resume, and after the resumption of social and economic activities, income (tax growth) can be generated, forming a cycle with the government’s expenditure on expanding infrastructure activities.
If you look closely, the approach taken by China after the 2008 subprime mortgage crisis is no different from the approach taken by the United States after the Great Depression.
The United States triggered a subprime mortgage crisis due to subprime loans. Since the United States is the most important demand side in global economic activities, the crisis in the United States quickly evolved into a global financial tsunami. At that time, China’s property market and stock market plummeted, and it was immediately plunged into crisis. After the crisis, China introduced four trillion (and associated supporting funds may reach about 20 trillion) infrastructure stimulus measures, saving the economy from the crisis.
In 2020, a global pandemic of the new crown virus broke out and the global economy was shut down. Although the United States used huge fiscal expenditures to provide relief to residents, this also led to a decline in terminal demand: First, the debt ratio of the US government has risen, and government demand has been restricted; Second, the shutdown of many industries has caused residents to lose income, and the increase in household debt ratio will lead to a decline in residents’ demand; third, when the end demand of the government and residents declines, the demand of enterprises will decline. This is the reason why the terminal demand of American society has declined significantly after the 2020 new crown virus pandemic.
Consumption growth accounts for about 70% of the U.S. economic growth. After the end demand stalls (downward), the economy will stall (meaning that it is more sluggish than before 2020. This year’s economic growth is just on the low base of last year. The rebound is also a short-term effect brought about by large fiscal expenditures and is not sustainable), but the US government’s debt has risen to a higher level, and the US debt system and fiscal system cannot continue to operate. This is what the US is today. The core issue. When the U.S. economy returns to a low growth rate (lower than before the epidemic), the debt problem will worsen and cause the fiscal deficit to get out of control. This is a currency crisis. The 2014 ruble crisis and the collapse of the Soviet Union during the collapse of the Soviet Union are all currency crises. The most typical performance of the United States, the comprehensive national strength of the United States will experience a sharp decline.
The Biden administration is facing such a prospect.
It should be noted that the situation in the United States today is different from that of the subprime mortgage crisis in 2008. At that time, the debt ratio of the U.S. government rose from about 70% to over 100% after the subprime mortgage crisis hit, although the debt ratio was already high (this is The main reason why U.S. debt lost its AAA rating in 2011), but the U.S. dollar is the world‘s most important reserve currency. This level of debt allows the U.S. finances to be maintained for the time being. But even so, the debt ratio of the US government during the second term of Obama and Trump (Trump) is still on a slowly rising track. This is the result of the debt ratio reaching a high level. Continue to promote the government debt ratio. But today is different. The debt ratio of the U.S. government has risen to a very dangerous level (about 140%) after the 2020 plague pandemic. This level has exceeded the level of Italy in 2019, and then Italy was classified as Europe. Pig country. This does not include the new economic stimulus plan being discussed by the US government and Congress), which determines that the US government’s debt ratio will rise faster under the pressure of high debt interest rates (the rise will be much higher than Obama’s The second term and Trump’s term), prospects like the 2014 ruble crisis are beckoning to the United States.
Anyone who has a little knowledge of the economy will know that the only way out for the United States today is to carry out large-scale infrastructure activities to deal with this situation, and resolve debt pressure through a period of high growth and high inflation. The logic here is that high inflation has a diluting effect on debt, and the superposition of high growth and high inflation can form high nominal growth (that is, economic growth including inflation factors), allowing high fiscal revenue to grow, and rapid dilution of debt And the high growth rate of fiscal revenue to gradually resolve the high debt problem of the US government.
Can Biden really achieve his wish?
The United States could use infrastructure measures to stimulate the economy after 1929. That was because the United States had a complete industrial chain of basic industries and a sound industrial chain of basic commodities such as energy, metals, chemicals, building materials, and electrical appliances; it began in the 1980s China began to reform and open up, and by 2008 already had a complete industrial chain of basic industries. When a large-scale infrastructure investment plan is launched, the entire industrial chain of all basic industries can be stimulated, and all other industrial activities built on the basic industries can be stimulated, and the economy can be pulled out of a crisis state.
However, since the mid-1970s, crude oil production in the continental U.S. began to decline, and basic industries began to move abroad. After China’s accession to the WTO in 2001, the rate of relocation of basic industries in the United States accelerated. This is the appearance of a rust belt in the United States today. The root cause of this is that the basic industries in the United States are no longer sufficient to support the United States’ need to initiate large-scale infrastructure activities.
Since the U.S. does not have the entire industrial chain of basic industries, it cannot drive U.S. basic industries through infrastructure investment, and it cannot promote other industries based on basic industries (such as most service industries, consumer goods industries, etc.), so , If the Biden administration makes large-scale infrastructure investments (such as the US$3.5 trillion investment that is being promoted), it is likely to lead to the following outcome:
First, the effect of pulling the economy is limited, and the effect of promoting fiscal revenue growth is limited. It will not help solve the debt problem or even worsen the debt problem, leading to a further decline in the credit rating of U.S. debt.
Second, the opening of large-scale infrastructure will increase the import of basic commodities, worsen the balance of payments of the United States, and increase the pressure on the depreciation of the dollar.
Therefore, it can be seen that the current China policy of the Biden administration is more like left-handed interaction, military containment, continuous rejection and strikes in technology (especially the semiconductor industry), but it continues to send Kerry and others to it. China seeks cooperation. Containment, strikes and cooperation are themselves mutual gambling. In terms of cooperation, there are also two directions: first, hope to cooperate on environmental issues; second, China is currently the most comprehensive country in the world’s basic industries. If the United States wants to carry out large-scale infrastructure activities, it needs China’s cooperation at least temporarily. When China’s basic industrial chain can operate stably, it is beneficial to the US’s infrastructure activities. However, these two directions are also contradictory. Intensifying efforts to clean up the environment requires shrinking energy-consuming industries and energy-consuming products (basic commodities). The prices of all energy-intensive products will rise sharply, which will impact the U.S. infrastructure plan (destroying the current budget and pushing up the debt ratio of the U.S. government), causing Biden’s infrastructure plan to “cut off”, so this It’s another game between left and right hands.
At present, the United States is weak in its basic industries and the international industrial chain is constantly broken (China’s power cuts are one of the results of the break of the global industrial chain. The shortage of coal has led to the power cuts, which will further lead to metals, chemicals, etc. The supply of energy-consuming products shrinks, which means that the prices of basic commodities will fluctuate sharply or even supply interruptions at any time), even if the Biden administration launches a large-scale infrastructure plan as it wishes, it will not be possible to reach President Roosevelt’s infrastructure plan in 1933. The effect of China’s four trillion stimulus plan in 2008 (in the event of a shortage of basic goods, it will not even be able to advance), but it will greatly stimulate inflation in the United States. The root cause is that the shortage of basic goods and the increased pressure of the depreciation of the dollar will further push prices.
A generation of empires has fallen under the leadership of the Sleeping King to the point of “Handan Toddlers”. Is this the United States that allows everyone to show their individuality?
Editor in charge: Yu Zhen
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