Original Liu Xiaobo.
Recently, the central bank announced the monetary aggregate as of the end of November 2023:The broad money M2 reached 2912 trillion yuan, a year-on-year increase of 10%.
If the year-on-year growth rate of M2 remains at 10% in the next two months, the total amount of M2 is expected to exceed 293 trillion by the end of December 2023 and 300 trillion by the end of January 2024.
Historically, January has been a "super month" for monetary delivery, often "topping" a few months in one month. For example, the M2 at the end of January 2023 is 74 trillion.
m2 (broad money), which can be seen as the monetary aggregate;The year-on-year growth rate of M2 can be seen as the speed of money printing.
What does it mean for the total monetary volume (m2) of RMB to exceed 300 trillion?
Before analyzing, let's briefly review the history of the renminbi.
The first set of renminbi was issued in December 1948, before the end of the Liberation War;Later, the Korean War broke out.
The two wars have brought about relatively serious inflation. It also adds several zeros to the back of the currency, which is not conducive to commercial exchange. Therefore, when the second set of renminbi was issued in March 1955, the currency system was reformed. The exchange ratio of the first set and the second set is 10,000 yuan for 1 yuan.
The 300 trillion yuan we are about to usher in is calculated from the "1 yuan" redefined in March 1955.
In 1956, China's monetary aggregate (broad money M2) was 17.5 billion yuan, which exceeded 100 billion yuan in 1975, 1 trillion yuan in 1988, and 10 trillion yuan in 1998.
By March 2013, China's broad currency, M2, exceeded 100 trillion for the first time. It took 57 years to break through the first 100 trillion.
In January 2020, broad money M2 exceeded 200 trillion. It took less than 7 years to break through the second 100 trillion.
If it breaks through 300 trillion in January 2024, thenIt took only 4 years to break through the third 100 trillion.
Does the increasing number of currencies mean that inflation is rising?If inflation is rising, why is the CPI so low now?
The chart below is the CPI data released by the National Bureau of Statistics as of November this year. The blue line is the year-on-year comparison, and it is also the target of our main observation:
In recent years, China's price control target has been "around 3%". The CPI so far this year has been below 1% since March, and there are many months of negative reading. So there has always been talk of deflation, but the official denial.
An important reason for denial is that the speed of currency issuance is not slow.
The chart below compares the year-on-year growth rate of social financing scale and stock and the year-on-year growth rate of M2 in the past two years
There was a divergence between the two figures, with the largest gap between January and February this year. At that time, the reason why the gap was so large was closely related to the central bank's profits (which stimulated the surge in M2);Recently, the gap has narrowed significantly, which is related to the acceleration of the issuance of local bonds and treasury bonds at the end of the year (stimulating the upward movement of social finance).
The year-on-year growth rate of the scale and stock of social financing can be understood as "the speed of printing money with a wide caliber";The year-on-year growth rate of M2 can be understood as "the speed of printing money with a narrow caliber (or normal caliber)".
No matter which speed of money printing, it is faster than the current GDP growth rate (52%) is a lot faster, about 42 to 48 percentage points.
So it's not deflation at the moment, it's just that some people have deflationary expectations.
How to calculate inflation, there are many indicators and there is a lot of controversy. CPI is a commonly used indicator, but it is more of a reflection of the basic survival index, which can be understood as the survival index.
The growth rate of social finance GDP and the growth rate of GDP are broader price indexes, which reflect how much faster the rate of money printing is faster than the rate of wealth creation in the year, and can be used to observe real inflation. It can also be understood as an investor index.
You invest for 1 year and get a 3% return. Looking at the CPI, it seems to outperform the price increase, but in fact, it only outperforms the "low-standard price increase", or the "survival index", but not the "real inflation" and "investor index". Because this year's money is being printed more than 4 percentage points faster than GDP.
The chart below shows the comparison between CPI and "M2 year-on-year growth minus GDP year-on-year growth" since 2000, which shows that the gap has been large. In economic downturns, currency over-issuance and CPI downturn often occur at the same time, such as in 2009, and the situation is somewhat similar this year.
The chart below shows the ratio of m2 (monetary aggregate) divided by GDP (annual wealth increment) in recent years:
Total m2 GDP "is on the rise, and in 2022 it hit a new high since the beginning of the new century, and it is expected to slightly exceed this record for the whole of this year."
This means that we are not slow to issue money. The CPI is currently hovering at a low level, which must be temporary, and will reach a suitable position in the future.
The first-class economic work conference just held updated the expression of the relationship between monetary aggregates, GDP and prices.
The previous statement was: to maintain the growth rate of the amount of broad money and the scale of social financing to basically match the growth rate of the nominal economy.
The latest statement is that the scale of social financing and the amount of money match the expected target of economic growth and the level of social financing.
There are two changes:
1. The position of the scale of social financing and the amount of money (m2) has been reversed, and social financing has run to the front.
2. "Nominal economic growth" has become "economic growth and the expected target of the highest level". The nominal economic growth rate originally included "GDP growth + real inflation rate", and now it is said separately, emphasizing the ** level expected target.
The message is that social finance is wider than M2 and better reflects changes in the overall currency. In the future, these two indicators are important references, but social integration is placed in a more important position. In addition, the top management is more concerned about **. In other words,It is hoped that the current situation of CPI downturn will be changed, and the deflationary expectations of some people will be broken, so that everyone will dare to spend money and invest more daringly.
The following chart shows the changes in the year-on-year growth rate of M2 (money printing speed) since 2000:
It can be seen that in the years before the epidemic, we once suppressed the growth rate of the currency, and later due to the impact of the epidemic, there were large fluctuations.
This is actually what I often say, the past is the "era of printing money", and the future is "the era of printing **". In the future, the over-issuance of currency will be controlled, and the future wealth printing machine will mainly be "scientific and technological innovation + capital market".
Due to the problem of economic efficiency, "1The "5x curse" didn't really break.
The so-called "1. .The "5x curse" is a concept I put forward a few years ago: because there are a large number of inefficient enterprises and social enterprises, we must not print money at a rate lower than 1 percent of GDP5 times. If it is low (such as between 2017 and 2019), it must be made up later.
As can be seen from the figure below, after the lack of currency issuance from 2017 to 2019, how the bad was made up later:
Some readers may ask: What do you mean by talking about it for a long time?
To sum it up:
1. China's broad currency M2 is about to exceed 300 trillion, which shows that our currency issuance is not small, the speed is not slow, and there is no real deflation at present.
2. In the long run, anti-inflation is a "major life proposition" that everyone should consider. Inflation is inevitable and long-term, while deflation is contingent and short-term.
3. China's currency issuance speed was once relatively fast, and in recent years it has been restraining itself, maintaining the ratio of the renminbi, preventing the gap between the rich and the poor from widening, promoting the clearance of backward production capacity and realizing economic transformation. This is the reason why the economy has stabilized and recovered relatively slowly in the "post-epidemic era". If you understand this, you will not be pessimistic about the future.
The year will be the first year of RMB-denominated assets. A historic bottom is just around the corner. After all, money is increasing.