Chinese government rescue plan
1
From the outbreak of the epidemic to the present, the rapidly deteriorating domestic economic situation has forced the Chinese government to recently launch a “rescue plan.”
1) Save the rapidly deteriorating real estate industry: Improve the decline of the real estate industry by relaxing various requirements for real estate purchases,
2) Improve the declining stock market: The central bank plans to provide direct loans to financial institutions for investment in its stock market;
3) Support local governments trapped in debt: The Ministry of Finance issues long-term treasury bonds to support the urgent needs of local governments;
4) By distributing money to the public at one time, it is used to improve the unprecedented weak consumption situation of the public.
2
These measures targeting different areas have one thing in common: solving problems through debt (borrowing money). Specifically,
1)
It is reported that the home ownership rate of Chinese social households has reached 90+%, and each household (house owner) owns an average of 1.xx houses. This shows that the social demand for houses has exceeded saturation. Except for a few new use demands, any purchase of a house has neither use demand nor investment value, but is an additional waste. In this case, the government introduces policies to stimulate real estate and intentionally induces the public to further borrow money/engage in personal financial waste, which is moral turpitude/bad conduct even if it is not a crime;
2)
The central bank directly lends money to financial companies for stock market investment. Financial companies have almost unlimited investment energy, and thus have the ability to manipulate the rise of the stock market according to their own needs. This is a conspiracy between the Chinese government and financial companies to defraud ordinary shareholders. Do your best. When announcing the policy, Pan Gongsheng, the governor of the central bank, said (to the effect), “First, loan 500 billion yuan to financial companies (for stock investment),[if the results are good]then loan another 500 billion yuan, and possibly a third 500 billion. On this issue, we are open…” This passage seems to imply that the Chinese central bank’s printing of money to invest in the stock market may become a continuous behavior, and there seems to be no upper limit to the amount of money printed.
3)
The Chinese government’s rescue measures are unprecedented in their wide coverage and intensity. Such a risky move is reminiscent of “The Battle of the Bulge” in World War II of the last century.
The Battle of the Bulge/The Battle of the Bulge
In early June 1944, the Allied forces landed in Normandy, France, and then advanced all the way. Six months later, the war on the Western Front of Europe was pushed to the western border of Germany, and they were within easy reach of the invasion of Germany. Due to the inability of logistical supplies/replenishment of troops to meet the needs of the rapidly advancing Allied forces/the conflicts between the American and British generals (Patton and Montgomery) in the Allied forces/the interference of bad weather/the exhaustion of Allied soldiers in continuous battles/the extraordinary bravery of the German army to defend the country to the death, forcing The Allied forces halted their advance and built a long but weak line of defense along the German border in preparation for further advances in the future.
In response to the many weaknesses of the Allied forces, Hitler formulated a bold counterattack plan: to gather almost all of Germany’s remaining tank units and use blitzkrieg to break through the weak link in the American and British defense lines – the Ardennes between Belgium and Luxembourg. After creating a breakthrough, the German army It develops in depth (left) and then detours/outflanks up and down, forming a division/encirclement/annihilation of the United States and Britain, and ultimately forces the Allies to make peace with Germany.
The solid purple line from top to bottom in the picture below is the original Allied defense line. Germany is on the right, and Belgium/Luxembourg/France have been liberated by the Allies on the left. The red arrows extending to the left are the German troops. The lines of the counterattack formed a “bulge” behind the Allied forces; the purple dotted line (long and short) was the Allied defense line after the German counterattack, and retreated as the German army pushed forward. The Chinese meaning of bulge is “round bulge”, from which The Battle of the Bulge got its name.
Results and predictions
The biggest similarity between China’s bailout plan and the German Army’s “Battle of the Bulge” in World War II is that in times of desperation, no expense was spared/all-or-nothing, in an effort to “save the world with one sword.”
1
From December 16, 1944 to January 28, 1945, the “Battle of the Surprise” lasted 1 month + 1 week + 5 days. Although in the initial stage of the battle, the Allied forces were unprepared and were stunned, and the German army made many gains, but in the end due to insufficient supplies/oil and fuel/limited troops, the German army was completely defeated. In the later stages of the battle, when defeat was certain, the German general’s request to withdraw troops was rejected by Hitler, resulting in Germany losing a large number of additional tanks/large artillery and irreplaceable soldiers necessary to defend Germany in the future.
In World War II, “The Battle of the Bulge” was the last offensive battle of the German army.
2
The core of China’s bailout plan is to borrow money to solve problems. But the problems China’s economy is facing now are precisely the result of uncontrolled borrowing by Chinese officials and people in the past few years. “Borrowing money to solve borrowing problems” is never a good idea.
Unlike the German Army’s “Surprise Battle” which had a clear goal of “forcing the Allies to negotiate”, it was regarded as the most powerful rescue plan of the Chinese government and did not have a clear goal/achieved effect. The governor of the central bank did not give a clear explanation of “(printing money and stock trading) is effective”, leaving the judgment of the success or failure of the “bailout plan” entirely to the decision-maker’s personal opinion. This will not only make it easier for the Chinese government to end the plan in the future, but also put China’s financial system under the shadow of personal likes and dislikes.
Not only is the “bailout plan” likely to fail, it is also the last “bailout plan” launched by the Chinese government. The psychological impact that its failure has brought to the Chinese public is tantamount to the despair that the failure of “ancestral secret recipes” has brought to patients.
China’s stock market carnival should not last beyond the end of 2024; Central Bank Governor Pan Gongsheng will be the scapegoat for “destroying China’s financial system.”
The central bank purchased 507.1 billion treasury bonds in August, which means that the central bank officially started printing 507.1 billion unanchored money in August and will definitely continue. A financial person said: If printing money can solve the problem, then there will be no economic crisis in the world. This is a kind of determination and madness that penetrates into the bone marrow!
correct:
1) China’s bailout plan is bound to fail, and the degree of failure will not be inferior to the consequences of the Great Leap Forward/Great Steelmaking;
2) The central bank provides loans to financial institutions to engage in stock trading, which is a replica of “the boldness of people, the wealth of land”. The subordinates dare to report how many kilograms per mu the superiors need.
3) Pan Gongsheng knows that he is committing a crime and will become a scapegoat in the future; Xi Jinping is the initiator of China’s “war of sudden emergence”.
