1. Foreword
In the past period of not too short a period; from January 17, 2022 to September 20, 2022; at least regarding 8 months, following systemic risk tossing, the Taiwan stock price index finally burst into laughter, hurry up and follow Afterwards, US stocks rose, out of a short-term upward trend.Dow JonesThe stock price index is a leading indicator of this wave of Taiwan stocks; it may be that the U.S. mid-term election is regarding to vote, and U.S. investors hope that certain policies in the country will have the opportunity to reverse the U.S. domestic and foreign policies through democratic elections; Finance has opportunities to change for the better, so investment enthusiasm for this election has arisen. The change of members of Congress requires changing the structure through elections, so that the political party you like can get a majority of seats in Congress, and then you can lead all proposals and implement your ideal “beautiful world”.
2. The combination of political expectations and bond yields cooling down in the UK and the US has created a stock market that is heating up!
The “midterm election” in the United States is held regularly in November of the second year of the president’s inauguration; voters once once more decide who is the majority party in Congress. This time, all of the 435 seats in the House of Representatives, 33 or 34 of the 100 seats in the Senate, and the governors of 36 states will be elected, including the state secretaries, state attorneys general and congressmen. According to Juheng.com, the greatest probability of the election at that time was that the majority of seats in the U.S. House of Representatives would be won by the Republican Party in this election; The uptick offers a window of opportunity. But in the final result, the Democratic Party narrowly won the Senate, which made President Biden confident in participating in the G20 meeting.
After a string of “systemic risk” attacks this year, theDow JonesThe global market for industrial stock indexes, followingdollar indexwith beauty 10-Year Treasury Bond YieldSlow down, the two gradually tended to fall weakly, and of course the stock market rebounded significantly.dollar indexThe decline shows that foreign hot money is no longer converted into US dollars as a safe haven; therefore, including the Taiwan stock market and emerging stock markets, there are obvious external capital injections. Why do foreign hot money no longer want to strongly hold the US dollar at this time? Because starting in March 2022 this year, the Fed announced that in order to combat inflation, it announced that the FOMC federal funds rate would be raised by three yards of 0.75% for the first time; under the inertia of this model, it has been announced at least 4 times so far, and the FOMC target interest rate will be raised to 0.75%. rise to over 3% to 3.25%. After the latest announcement of the Fed’s interest rate policy, some members of the Fed finally breathed a sigh of relief and released a dovish message, which eased the bond selling pressure, suspended the rise in yields or even fell back, and temporarily stopped the decline in bond prices.dollar indexwith the United States 10-Year Treasury Bond YieldBecause of the hope of possible change brought regarding by politics, we also join hands to cool down and congratulate!
Under the changes of the above two variables, the supportdollar indexThe tightening of monetary policy and the reduction of bond yields have finally made thedollar indexHigh-end reversal; created the United States and emerging market stock markets are gradually booming.The sinking of the stock market in the past has beendollar indexThe decline is stabilized; if it is stabilized this time, it can continue to causedollar indexIf there is a significant retracement, the bullish market in emerging stock markets has a chance of a substantial reversal, and there will be a wave of more impressive market following that.At this time, the global benchmark interest rate, that is, the US 10-Year Treasury Bond Yield, After raising interest rates by more than 3 yards, the Fed began to change, to conduct a necessary period of observation and inspection of the financial and inflation situation; this need to observe sentiment comes from the trend of public opinion given by the possible results of the mid-term elections of American voters. As mentioned in the preface of this article, it is necessary to meet the expectations before the US election on November 8. American citizens hope that the Democratic Party of the Biden administration can give up the seat of the speaker of the House of Representatives in this midterm election; it is best to hand over the seat of the speaker of the Senate to the Republican Party. In order to contain the large amount of public expenditure plans of the Democratic Party regime in fiscal policy in the past two or three years, so as not to add fuel to the fire of inflation, and also to prevent the government from issuing too much debt, resulting in the outstanding balance of the country’s debt being too high, and squeezing the private sector Corporate mergers and acquisitions issued bonds and capital expenditure funds, but the results were often counterproductive.
3. Sudden “big tax cut policy” to boost the economy? The British “Truss” cabinet will step down for 45 days!
The logic of the US election was also played out when the prime minister’s residence in Downing Street in the UK recently changed hands. Ms. Liz Truss, British Prime Minister, was forced to resign as Prime Minister on October 20, 2022; setting the shortest tenure in office of 45 days. Her excitement and enthusiasm are completely different from the facts; the main reason is that she appointed a new finance minister as soon as she came to power, embraced idealism, and proposed an extremely high tax cut policy, hoping to stimulate people’s willingness to consume and increase economic growth through tax cuts. She wants to use the government’s financial burden to reduce people’s living expenses and reduce the burden of living in inflation.As a result, the policy set off big waves in the British financial circles, and British citizens were worried regarding it; because British voters worried that excessive national debt would lead toGBPDepreciation, and the national budget deficit are so bad that it is difficult to deal with it; and as everyone desperately increases consumption, inflation will become more serious. Under these unusual worries, the British financial market has undergone sudden changes in policies,GBPThe yield rate of the national debt fluctuated sharply; this contrasting outcome has caused serious splits within the British Conservative Party.The announcement of the plan has triggered more intense investors, selling national debt andGBPthe situation forced the Bank of England to intervene more and clean up the followingmath.
Now the midterm elections in the United States seem to have encountered the same problem. Because of the spread of the epidemic in 2020, before the vaccine is fermented, it may cause a severe economic recession. The White House and Congress want to strongly rescue the market. Therefore, the United States not only uses the unlimited QE policy, but also plans to raise large sums of money, borrow money from the state, and invest in public funds. Construction of “big infrastructure”; especially following the US-China trade and economic war has escalated, the US believes that most of its subways and highways have almost become old “historical relics” and need to be remodeled. It has planned to throw hundreds of billions US dollar, ready to do a big job; use expansionary fiscal policy to fill the gap of tightening monetary policy and show the performance of national construction. But these ideas also seem to fade away in 2021, following inflation burns. Due to the expansionary fiscal policy, it is bound to ignite consumer demand once more. Before the inflation is completely extinguished, the wildfire will continue to burn, and the spring breeze will regenerate, which will cause continuous inflation once more; therefore, the Democratic Party’s large infrastructure plan, It is still in the plan, and has not yet started to operate with live ammunition.
This time, Prime Minister Tesla of the United Kingdom stepped down following only 45 days of prime ministership in order to cut taxes crazy. Economist Thomas. Thomas Piketty suddenly proposed a solution to the serious inequality between the rich and the poor caused by the global loose monetary policy. Finally, he suggested taxation to achieve the goal of “average wealth”. After the global financial turmoil in 2008, following US Fed Chairman Bernanke launched three QE policies, he published a book in France in September 2013 to discuss his economic distribution theory: “Capital Theory in the 21st Century”. Half a year later, it continued to publish the English version in the United States, which became a sensational economic theory book at that time, and finally published more than 1.5 million books in more than ten languages. The main discussion in this book is that it explores the social problems following the expansion of the global rich and poor, which will become the source of conflicts among the common people and the source of social contradictions. Piketty believes that the real rate of return (r) of “capital assets” (portfolio investment) must be much higher than the growth of economic industry production profits (g) from the long-term development of sample research; in other words, the fastest way to get rich It is a hyped financial capital asset. This law will cause the distribution of wealth in human society to become more and more uneven, and the phenomenon of inequality will continue to roll; finally, it will anger the grassroots people who are living in hardship, and everyone will come together to carry out social revolution. This book is essentially similar to Marx’s “Das Kapital”, and it also means that capitalism must be reformed, otherwise social unrest will follow; However, due to the continuous large-scale QE in the United States, the people at the grassroots only pick up the leftovers, while the rich eat their food. In the end, Piketty was praised as the “Max of the 21st century.”
4. Conclusion: If Xi Jinping is the Max of the 21st century! Then Piketty’s “Capital Theory in the 21st Century” is an important reference work for Xi Jinping to move towards “common prosperity”!
Piketty has also debated with White House economists; aesthetic scholars believe that consumption, population growth, and taxation factors are still sufficient to downplay the characteristics of wealth inheritance, dilute concentrated wealth, and dilute wealth inequality in the future. But Piketty retorted that there is no economic principle in the world that can guarantee equality and overall harmony. In fact, everyone knows that the source of wealth of each rich person is different, and some rich people do come from hereditary inheritance. But most rich people get rich in different ways. For example, the rich in the Soviet Union may have been privatized from the state-owned property of the year; but the rich in Europe and the United States may have come from business operations, technological product innovation, and so on. Moreover, these ethnic groups have not been rich for generations, so much so that they have always owned wealth; this wealth class also has advances and retreats, and is mobile. This article believes that the most significant thing is that Schumpeter’s technological innovation in the past and recent business models such as e-commerce are also the reasons for the generation of rich people over the past few decades. But Piketty believes that to improve this phenomenon, especially to deal with the changing costs of climate change, a special 50% tax on the rich needs to be imposed; this is also unthinkable, because it seems to be a “cumulative” penalty tax Fu? Even to make up for the 2008 global financial turmoil, the European Central Bank and the U.S. Fed launched multiple QE monetary policies, and the global social problems caused by the sharper gap between the rich and the poor; Piketty advocated for the global rich class, An additional 5% wealth tax is levied every year. He also proposed to levy all tangible and intangible capital asset transaction profits, that is, the profit tax on all commodity capital price differences; for example, Taiwan’s stock exchange income tax, and in recent years, in order to combat speculative transactions, Taiwan has imposed short-term speculation on real estate speculation. High tax rates on sex transactions, etc.; and then use these taxes as welfare for the poor to remedy the worsening situation of the growing gap between rich and poor.
According to Piketty’s statistics at the time in 2014, the richest 0.1% of the world’s population has more than 80 trillionEUR, financial assets and real estate, this wealth is equivalent to more than 19% of global wealth; and the richest 10% account for 77% of global wealth. Piketty’s research and statistics are quite frightening; but his theory is, following all, an ideal of fair distribution. This time, as soon as Ms. Tesla took office in the UK, she came up with a substantial tax cut plan with similar logic but opposite actions. Once she proposed it, it almost triggered the British financial crisis and riots. This verifies that all the ideals of fair distribution must be in line with the objective social environment at that time, otherwise all good plans will become catastrophes instead. The mainland’s plan to eliminate the epidemic has obviously caused considerable anxiety among foreign investors and panic among the people.
Piketty’s tax on the rich; and British Prime Minister Tesla’s substantial tax cuts may be extremely ideal. But when the society fell into inflation and the country was in high debt, Tesla’s “substantial tax cuts” almost led to a financial crisis; and Piketty’s high tax on the rich did not clarify the factors that make the rich rich. , It will also stifle the innovation of entrepreneurs and the creative spirit of scientists; it is not conducive to the evolution of world civilization. Therefore, when implementing any idealism, it is necessary to go through or repeatedly think regarding it and deduce it many times. Don’t ignore the actual environment and act hastily. We don’t know whether the Chinese Communist Party has gone through a thorough “clearing” policy and “common prosperity” before it has fully debated and verified it with all the Standing Committee members and think tanks, or is General Secretary Xi Jinping insisting on going it alone? Will China really move towards a well-off society and achieve common prosperity? Decades later, the outcome of the US-China economic war will speak for itself. However, following researching and thinking from various parties, this article believes that Piketty’s “21st Century Capital Theory” may be the core “Warring States Policy” of Xi Jinping’s future administration?
(Explanation: This article integrates social, political, and financial development prospects, and tries to use modern economics theory to explain China’s future socialist modernization policy. This article specializes in international economics, finance and economics, not political science.)
