If you should come, you can't escape.
First McDonald's raised prices, and then there was a price increase in the magic capital, it seems that inflation is really coming
In fact, most people look at the rise and fall of prices from the perspective of CPI, that is, from the retail side.
However, as we have said before, China is a big producer, and the rise and fall of the PPI (Producers' Index) is the key to a real measure of inflation in China.
From the perspective of the division of labor in the industrial chain, most of the large-scale manufacturing industries in our upstream are state-owned enterprises and central enterprises. The long-term negative growth of PPI means that the finished products they sell can't get up.
On the other hand, internationally, although inflation is said to be well controlled. However, in fact, a large amount of energy, equipment, parts, agricultural products, and resource goods are still supported by huge inflation.
This also means that a large number of our state-owned manufacturing enterprises are experiencing soaring costs, but the revenue side is under constant pressure.
The problem now is that the orders given to these manufacturing companies are either exports, domestic real estate, or infrastructure.
Exports, needless to say, the amount of our direct exports to the United States has fallen to the level of the mid-90s of the last century.
Real estate, after a few years of slapping, a large number of developers have closed down and defaulted, which has caused a sharp decline in fixed investment.
Infrastructure, local finances themselves have a lot of debts, and it is difficult to violently boost infrastructure in the short term. What's more, there are very few good projects now.
Therefore, in the short term, to quickly help a large number of state-owned manufacturing enterprises to restore profits, the traditional three methods are not so easy to use.
What to do?Let the visible hand let its core assets fall little by little?
If this is really the case, then it is better to go from the Americans a few years ago and not engage in industrial upgrading
So, there is only one way to go:
Supply-side inflation.
In other words, upstream state-owned manufacturing enterprises collectively began to raise prices in large quantities, and directly transmitted their cost pressure, under-profit pressure, and debt pressure to the retail side.
Anyway, households can't see the ** of these companies, and they will only feel that things on the retail side have risen. This layer of isolation, in fact, can also play a great role in stabilizing.
Now, many financial voices are talking about deflation and what they want to follow the path of Japan in the 90s.
The national conditions are so different, the enterprise structure is so different, and the macro environment is so different, it can be directly benchmarked
In fact, there is a general perception that moderate inflation is good for all parties.
Don't underestimate this consensus, which also gives the visible hand a lot of room to operate.
Next, a large number of upstream state-owned manufacturing enterprises, people's livelihood security departments, some infrastructure service departments, etc., gradually began to increase prices, which should be the general trend.
The economic pressure in 2023 will also put pressure on these economic entities.
You must know that these economic agents are often supported by a large number of loans, otherwise they would have been out of financial condition long ago.
By raising prices, they can repair their cash flow statements relatively well, thereby improving the tension on their balance sheets.
In addition, the demand on the retail side is insufficient, and everyone does not spend money, how to crack it?
Through the transmission of supply-side price increases, households are forced to gradually feel the flurry of the tickets in their hands, and the bank deposit interest rate has been lowered, which makes the "cost performance" of hoarding money gradually decline.
It is clear that the visible hand of these things is progressing gradually.
How to understand?Quite simply, it's "electric shock movement".
In the past few years, when everyone was happily buying, buying, buying, buying, and buying, all kinds of slapping exercises made everyone stop for a while.
Now, everyone has learned to be obedient, lie down, you come, you come to beat me, I will lie down, take a little bit out of the deposit every day to spend. Even if there are so many policies, it is still lying down.
Now the visible hand is in a hurry, and it is a little panicked.
And so the "electric shock campaign" begins!
When you lie down, it will use inflation and other supporting measures to gradually intensify the electric shock to you, so that you can't lie down, make you feel that lying down is not fragrant, and even "reward" the person who is not lying down.
Ladies and gentlemen, this is the core logic behind the entire macro initiative in 2024!!
Still fantasizing about the prolongation of deflation is actually in a huge judgment error.
In fact, let's think carefully about industrial upgrading, aging, great power games, debt stabilization, etc., which relief does not cost money.
If there is no money, then you can only rely on over-issuing currency. And the continuous over-issuance of money will be deflationary in the future, how is it possible?
Japan, which has a unique historical opportunity, is facing the decoupling of China and the United States, and the current over-issued currency has also begun to show high inflation. Isn't that exactly a good mirror image?!
Alan Greenspan, the former chairman of the Federal Reserve, once said a logic:
If money is introduced at a slower rate than labor productivity improves, then printing a little more money will not lead to high inflation. Otherwise, it will trigger a clear inflationary trend.
In fact, the theoretical basis behind the extreme monetary easing of the United States for so long in the past 30 years is still around the logic of this uncle.
This is why we dared to say in 2020 that high inflation in the United States was imminent. Excess money rushed into the market, and the United States was stuck in the epidemic at the time, and there was no possibility of an improvement in labor productivity, so it would be nice not to fall. Then, inflation in 2021 will naturally not be able to run. If you are interested in Lao Tie, you can also take a look at the historical articles of that time.
In the same way, in the face of the blockade of the Americans and the transformation of our own economic structure, it is not easy to improve labor productivity in the country. Even though it can be made into many finished products of advanced manufacturing, many times it is a loss of efficiency.
What could have been bought for a little money, now you have to do it yourself from scratch. From the perspective of economic efficiency, economic benefits at this stage are at a loss. It can only be said that from the perspective of long-term economic development, from the perspective of great power competition, and from the perspective of economic security, this is a very valuable thing.
Therefore, in the short term, it is very difficult for us to continuously inject money, increase M2 in various ways, and improve labor productivity in various ways of social finance. So, once the "electric shock movement" gradually appears to have an effect, let's ask: can't the inflation in it rise?
This is one of the fundamental reasons why I have been saying lately that "domestic deflation is not sustainable".
As the visible hand becomes more and more urgent, the "electric shock movement" should continue to increase in the future. You don't move, it has 10,000 ways to make you move.
Then, the gradual increase in the money multiplier is also trending and irreversible.
And once the currency multiplier is up, and so many currencies are put into the benchmark, the liquidity of the market will gradually improve, and it will be almost impossible to suppress domestic inflation.
Especially now we are trying our best to force money to flow out of the banking system, and we are not allowed to idle it, let alone "not transfer" (hoarding deposits).
It should be pointed out that when inflation comes, it is often all at once. Because, with the multiplier of the currency, it will be easy to quickly amplify the liquidity of the market.
Following the slapping campaign, the "electric shock campaign" may be a major macro event that a large number of households do not think about at present. This will profoundly affect everyone's money bags, and even various expectations for the future.
Therefore, we really have to think about such a question:
Are we really ready for a new cycle of gradual strengthening of inflation?