Many of our ** and economists have been denying that economic deflation has occurred in China, but whether economic deflation has occurred, we have to look at the economic data, following the double-digit decline in China's imports and exports, the consumption data in July that has just been released is not optimistic, among them, the producer ** index PPI is -44%, which means that China's manufacturing industry has been declining for ten consecutive months, while the consumer ** index CPI continued to decline to -0 in July after falling to 0% in June3%, the largest real estate sales in consumption is a record decline of more than 30%, this kind of economic data is not at all the mouth of some experts to stabilize and improve, but the real economic deflation, China's economic balance sheet is deteriorating.
So what exactly is the cause of this economic deflation, and if this economic deflation cannot be reversed in the short term, what will be the adverse effects, and how should most of us deal with this economic phenomenon?
First of all, the reason why deflation occurs in the economy is generally due to the combination of three reasons: the cyclical law of the economy itself, the geopolitical influence, and the special pattern of domestic economic development
Generally speaking, when the United States is in the interest rate hike cycle, the world will cause a liquidity crisis because of the increase in interest rates, and then the increase in consumption costs, and the increase in consumption costs will inhibit consumption to a certain extent, and China as an export-oriented country, once foreign orders begin to decrease, it will be difficult for the domestic economy to perform well, because we are still a labor-intensive country as a whole, and if external demand is not good, it will cause a large number of unemployment at home, and production and consumption will naturally decline。
Second, geopolitical influence mainly refers to the influence of different economic ideologies, and from a broad perspective, it mainly refers to the gradual confrontation between Eastern and Western ideologies.
Third, the impact of the special domestic economic development model mainly refers to the fact that China's economic development is achieved by active infrastructure investment, and our currency circulation also depends on real estate. If the real estate market is better, then China's monetary system can work well, and all industries will also get the funds released by the central bank to stimulate the economy, but on the other hand, if the real estate market continues to be sluggish, even if the central bank releases more funds, it is difficult to flow into the hands of ordinary residents, because the pipeline of capital circulation is blocked, and China's current housing price level, most ordinary people can no longer afford to buy houses, and the financial leverage ratio of Chinese residents has been nearly 70% The role of continuing to stimulate real estate has been very limited.
Secondly, if deflation cannot be reversed in the short term, the direct result is the occurrence of a large number of unemployment, because consumption is reduced, then production will naturally decrease, and production will naturally occur corporate layoffs, corporate layoffs will further exacerbate the reduction of consumption, so that the reciprocating cycle will slow down the transformation of money flows, reduce the rate of currency depreciation, and the currency cannot be circulated, if the depreciation rate is too low, it will cause various assets including housing prices,** Further price reductions in commodities and consumer goods eventually lead to a gradual shrinkage of a country's balance sheet, which is a process of gradual evaporation of wealth, so an economy with moderate inflation is more beneficial to the majority than deflation that will cause massive unemployment.
In addition, excessive economic deflation produces long** The main reason here is an expectation problem, when everyone is pessimistic about economic expectations, it will become cautious about consumption and investment, and when most people are unwilling to consume and invest, then the bank's credit will appear to be a strange phenomenon that the loan cannot be made, and the central bank releases money to be released through commercial banks step by step, and the funds released by the central bank cannot enter the real economy or are released back to the bank and are not used in the real economy, which is the so-called liquidity trap crisis。
Finally, when economic deflation is confirmed, how should we deal with it, here to divide it into two looks, for people with spare money and stable income in their hands, this is just a good time to invest, because when the economy is deflationary, good assets are often lower than the actual value, if appropriate, you can get excess returns when the economy recovers;For people who have a more stressful economic life and have little extra income, keeping their existing jobs and income is a top priority.