** and the cause of the housing crash is hidden in the modern banking system.
What the bank does is that when you are not short of money, you desperately try to persuade you to take out a loan. When you're short of money, you start taking out loans again.
This leads to a pro-cyclical effect.
When the bull market is in the future, the overdraft blows the bubble.
When you ask the bank to borrow money, you are actually asking your future self to borrow money. Because the borrowed money has to be repaid in the future.
Lending is essentially an overdraft of the future.
What banks do is overdraft everyone's future.
A mortgage is essentially an overdraft for everyone to buy a house in the future.
Excessive overdraft in the future will lead to a large amount of money that should belong to the future being moved by banks in the form of loans. This, in turn, leads to an overabundance of money that triggers inflation.
In the past few years, housing prices have risen to the point that they cannot afford them, which is actually caused by inflation. But inflation can also be interpreted as a bull market. Because, currency depreciation will lead to stock price and house prices, and from the perspective of homeowners, it is a "bull market".
Real estate and **, can allow related companies to use the real estate in their names and ** as collateral to apply for more loans from the bank. This exacerbates the need for future overdrafts and inflation.
And due to excessive overdraft, real estate and ** can't absorb so much money. Most of these overdrafted currencies will flood into industries that have nothing to do with productivity, such as high-end consumption such as online celebrity live streaming, luxury consumption, and gym personal training.
The premise for this model to work is that the future must be more developed than modern times. If the future is poorer than today, there is no way to overdraw. For example, if there is a sudden natural disaster that leads to a recession, and the future is poorer than it is now, this pattern of overdrawing the future will be broken. This in turn led to the bursting of the bubble and triggered an economic crisis.
China's housing prices since 08 are overdrawing the future. Then this overdraft model was broken by the three-year pandemic, and now it's time to start paying off the debt.
It's like taking out a loan to buy a house, taking the house as an investment, the premise of making money from this investment is that the house price has been **, and the rate of house price ** is higher than the bank interest rate. As long as house prices** rate is lower than bank rates, people will sell their houses and no longer pay their mortgages. This in turn triggers further housing prices.
The epidemic is equivalent to **, the house is gone, and the mortgage is still there.
In this case, once the income is less than the bank interest rate, people will sell the money and deposit the money in the bank, which will cause the stock price. Then, as banks have more deposits and fewer loans, banks lower interest rates to stimulate lending. The economy will return to a bull market.
However, in this process, when the interest rate is low, the best people will make a lot of money, and when the interest rate is high, the people who take out loans will lose all their money, which is equivalent to the person who entered the market first cutting the leeks of the people in the field.
Compare this with Japan, which has had 30 years of economic stagnation and said that it had "lost 30 years". In fact, it is better to say "overdrawn for thirty years". Japan's economic bubble in the decade overdrew the next 30 years. At present, it may be more than 30 years.
It is not clear how many years China has been overdrawn. However, it can be estimated from one aspect that it will take you to pay off your mortgage. Probably ten or twenty years.
In fact, I wonder if the state should introduce a policy to amnesty private debts if the banks' provision coverage ratio is sufficient.
In ancient times, there has always been a tradition of forgiveness of debts, the change of dynasty will pardon the debts of the previous dynasty, and the new emperor will also pardon the debts when he ascends the throne, for example, Qianlong will pardon the debts of the Yongzheng Dynasty.
Debt forgiveness is the only option I can think of to save China from economic crisis. Don't listen to some people's embarrassing boasting that "China's economy is stable and improving", now China has 800 million debtors, 470 million overdue, and 9 million judgment defaulters.
Basically, it can be said that except for the elderly and children who cannot take out loans, all people are in debt. If the debtor is overdue, he will lose his spending power. Your consumption is someone else's income. The debt of the whole people and the overdue of the whole people will lead to the non-consumption of the whole people and the loss of income of the whole people. If you can't afford to pay off your debts without income, it will exacerbate the debt overdue, triggering a vicious circle.
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