1. The additional currency has not flowed into the hands of consumers
The original article mentions that after the additional currency issuance, one of the possible reasons for the price ** is that the additional currency issued does not flow into the hands of consumers, thus failing to stimulate the demand for goods, which in turn leads to a decline in prices. Specifically, judging from the growth of loan volume in November, although the loan amount increased by 1 trillion, the growth of personal loans was less than 300 billion, and most of them were long-term loans.
Further interpretation, personal long-term loans are mainly used to buy houses, and from the perspective of statistical accounting, house purchases are not regarded as consumption behaviors. As a result, most of the new loans do not go to consumers. If consumers do not have money in their hands, they will not be able to increase the demand for goods, and they will naturally not be able to drive prices**.
In addition, although there is a lot of additional money issued, if most of the new money is used for deposits rather than consumption, it will also not be able to stimulate prices**. The data shows that total deposits increased by 25 percent in the first 11 months65 trillion yuan, with a growth rate of 102%, which is higher than the growth rate of M2. This means that, despite the increase in money issuance, most of the money is used by savings rather than consumption, leading to a decrease in prices.
2. Consumers' willingness to deposit has increased
Even if consumers have enough money in their hands, they will not necessarily choose to spend, but will be more inclined to save. When economic growth slows and income growth slows, consumers may feel pessimistic about their future incomes and are more likely to choose to save precautionarily and spend less.
This is also confirmed in the deposit growth data for the first 11 months. Total deposits grew by 2565 trillion yuan, with a growth rate of 102%, which exceeds the growth rate of M2. This suggests that although consumers have enough savings, they are more willing to save their money than spend it because of concerns about future economic uncertainty. This phenomenon further weakens the role of currencies in driving prices.
3. The effect of additional currency issuance is weakened due to the surplus of commodities
In addition to the failure of the additional currency issuance to flow into the hands of consumers and the increase in consumers' willingness to deposit, the surplus of goods is also one of the reasons for the weakening of the effect of additional currency issuance on prices. When there is an excess of money, if the amount of goods produced exceeds the demand, even if more money is issued, it will not be able to push prices.
For example, if an additional 1 yuan of currency is issued, and the output value of the goods produced increases by 2 yuan, consumers need to use 1 yuan to buy 2 yuan of goods. In this case, prices are inevitable. Therefore, if you want to drive prices**, you will not be able to issue more money. However, excessive currency issuance can cause other problems, so monetary policy must be used with caution.
In the specific data analysis, we can see that although the additional currency issuance is carried out on a large scale in terms of quantity, it does not effectively flow into the hands of consumers. Although the total amount of loans has increased by one trillion, there are less than 300 billion personal loans, and most of them are long-term loans, mainly for housing loans.
This has resulted in a relatively small number of new loans going to consumers. In fact, in the current situation where the amount of goods has not changed much, the rise and fall of prices mainly depends on the degree of demand, and demand comes from consumers. Therefore, it is only when the additional money can flow into the hands of consumers that the demand for goods increases, thereby driving prices**. However, based on the loan growth data, we can see that most of these new loans do not go into the pockets of consumers, thus failing to increase demand for goods and have a relatively small effect on prices**.
Moreover, even if consumers have enough money, it doesn't mean they will spend more, but rather they are more willing to save it. Especially in the context of a slowdown in economic and income growth, people may feel pessimistic about their future incomes and are therefore more inclined to save precautionarily and spend less in advance.
Based on the growth of deposits in the previous 11 months, the amount of deposits increased by 2565 trillion yuan, with a growth rate of 102%, which is higher than the growth rate of M2. This suggests that although consumers have ample savings, they are more willing to save their money than spend it due to concerns about future economic uncertainty. This further weakens the effect of the currency on prices.
In addition, the surplus of goods is also one of the factors that lead to the increase in the issuance of money. When money is issued on a large scale, if the amount of goods produced exceeds the demand, even if more money is issued, it will not be able to push prices. Therefore, the effectiveness of monetary policy will also be affected by the supply and demand of commodities.
1. Guide the flow of loans to the real economy and consumers
In order to increase the influence of monetary policy on prices, the key is to channel lending to the real economy and consumers. On the one hand, central banks can strengthen supervision of banks to ensure that they use their loans to support the development of the real economy, especially in key areas and weak links. On the other hand, the central bank can take measures to encourage banks to increase short-term lending lines to boost consumer demand. By directing loans to the real economy and consumers, it can effectively increase demand for goods and drive prices**.
2. Improve consumer confidence and willingness to spend
On the other hand, the central bank can improve consumer confidence and willingness to spend through various means. First, the central bank can stimulate consumers' desire to spend by lowering interest rates and reducing financial burdens. Second, the central bank can strengthen the supervision of the financial market, stabilize the market order, and improve consumer confidence in the financial system. At the same time, the central bank can also support and encourage innovative consumption, cultivate emerging consumer markets, and create more consumption opportunities. By increasing consumer confidence and willingness to spend, it can effectively increase demand for goods and drive prices**.
3. Maintain the balance between supply and demand and avoid excess commodities
In order to avoid the problem of commodity surplus caused by the issuance of additional currency, the central bank needs to strengthen the monitoring and regulation of ** and demand. On the one hand, the central bank can control excessive investment and excess capacity by raising interest rates moderately and tightening the supply of funds, so as to prevent the amount of goods from exceeding demand. At the same time, the central bank can also strengthen cooperation with the first sector, promote structural reforms, optimize the industrial structure, and improve the quality and competitiveness of goods. By maintaining the balance between supply and demand, prices can be effectively driven**.
In summary, the reasons behind the decline in CPI may include factors such as the failure of the additional currency issuance to flow into the hands of consumers, the increased willingness of consumers to deposit, and the surplus of goods. In order to increase the influence of monetary policy on prices, we can achieve this goal by directing loans to the real economy and consumers, improving consumer confidence and willingness to spend, and maintaining the balance between supply and demand. At the same time, the implementation of monetary policy needs to be prudent and balance the relationship between the currency** and the price level to ensure economic stability and sustainable development. The above is the analyst's analysis of this problem and is for reference only.