Original Old Fan Mi Basket Investment.
Domestic debt is still in full swing, and it is a long and painful process that I call a "redemption". I have strung together some of my recent fragmented thoughts on debt and will briefly share them with you. Last year, I said in an article:The people's leverage really can't be increased, and the central bank needs to make efforts in 2023. Looking at the chart below, you should be able to understand it clearly. 
This is data from our central bank, while data from the Bank for International Settlements (BIS) shows that at the end of 2022, the leverage ratio of our residential sector was 7244%, and the total debt of residents exceeded 73 trillion yuan. If we use the data of the National Clearing Bank to make an international horizontal comparison, China's resident leverage ratio is in the middle of the world, and it is much higher than the average level of developing countries. 
The scarring effect, the decline in real estate, the decline in income, the lack of confidence, the prepayment of loans, and the rise in the household savings rate. On the general trend, the residential sector is on the way to take the initiative to reduce leverage. After the introduction of the "four trillion" stimulus plan in 2009, the willingness of local governments to borrow was unprecedentedly strong, and the leverage ratio continued to rise. Under the unprecedented impact of the three-year epidemic and the real estate landslide, there are also huge hidden debt mines, and it is difficult for local governments to continue to borrow on a large scale. Therefore, I said last year that in 2023, ** should be the first to become the main force of leveraging and break this negative spiral. 2
After the tone of the Politburo meeting was set this year, we began to promote the conversion of bonds, and then we issued an additional trillion yuan of national bonds, and it came. For this trillion incremental national debt, many people directly want to calculate how much GDP can be pulled, which is too superficial. The trillion yuan of incremental treasury bonds marks the beginning of a fiscal expansion cycle in the system, and also breaks the so-called 3% red line. Our debt problems are mainly misaligned, which leads to debt accumulation over time, and encounters the impact of special events such as the epidemic and real estate, and hits the line ahead of schedule. Calculated using the International Monetary Organization's "Global Debt Database", in 2022, the average proportion of debt to total debt in all countries around the world is 89%, and the median is 96%.
That is, the ** debt of most countries in the world is mainly *** debt.
But we are the first debt ratio is too low, and the proportion of local ** debt is too high. In the past, there was still land finance to keep running, but after the real estate collapsed, many of the original things could not be played. The layer-by-layer transmission of the balance sheet, coupled with the multiplier effect, has caused great financial depression for enterprises and residents. So, at the beginning I said that this is a "redemption" of **. When caught in a so-called "balance sheet recession", as a ** you have the space, the ability, and the obligation to step up and break the ice. 3
I remember that some time ago there was a big debate about debt between two bigwigs on the Internet. Before I said that China's real estate has been a combination of angels and devils in our development in the past few decades. There are also two sides to debt, debt is not opium, but it is also not a panacea. There is a very important word in economics: marginal. Debt can drive the economy, but no marginal debt can also push the economy into the abyss. Let's start with the national debt. The first to play with national bonds was the United Kingdom, the world's first ** bank, and the original intention of the Bank of England was to borrow national bonds for the country. It was with this new financing scheme that Britain won the War of the Grand Alliance, the Anglo-French Seven Years' War, the Napoleonic War, and the Crimean War. Later, the United States learned this set of things, and the blue is better than the blue, and the national fortunes are thriving.
For example, the battle for the founding of the United States, the Civil War, and the victory and reunification of the North were all due to the financing support of Wall Street.
It was not until the end of the 19th century that China began to engage in high-level financial operations such as "treasury bonds". We know that during the Qing Dynasty, Zuo Zongtang carried the coffin west out of Yumen to recover Xinjiang. In fact, at that time, there was a heated discussion within the Qing court about whether Xinjiang should be protected or not. At that time, the Taiping Heavenly Kingdom had just been defeated internally, the treasury was empty, and external and external troubles were constantly harassed. Fighting a war is to burn money, and the key is to make money. In the end, it is to borrow money from a consortium of Western banks, and then use the money to buy their **. In the end, Zuo Zongtang pacified Xinjiang in less than a year. We can find that there is an inseparable link between national bonds and national fortunes. However, there are also many countries that have ended up in a vicious circle through national debt, such as Latin American countries and so on. If the debt continues to accumulate and exceed the economic capacity, the damage is also **, look at the Latin American crisis, the European debt crisis, the US subprime mortgage crisis, etc., which are basically debt crises. 4
Let's talk about debt from a personal perspective. Before, we talked about how much money we have and how much we can do. But now, you say you don't have any money, right?Then they can lend you money to spend, make you overspend, spend ahead, and let you leverage to spend. The game of finance is to discount future cash flows into various financial instruments and derivatives for consumption now. So there is a saying: the last step in eating dry and squeezing out is finance.
Once you discount your current and future, or even your lifetime's cash flow, to the present and spend now, you will be able to borrow excessively.
That means that the rest of your days can only work non-stop, get up early and work late, no complaints, no unemployment, because your income is cut off, your house, car, etc., all will be taken away by the bank. They get your forward cash flow, which is equivalent to you reaching a capital exchange. They can eat, drink, and be merry, they can travel the world, and they can really enjoy life. So, think carefully about who is enjoying and who is suffering. Now is such a magical era: on the one hand, economists say every day that there is overcapacity, and it is necessary to expand domestic demand and stimulate consumption;On the one hand, the elite class treats consumers as monkeys, making consumers spend money and be guilty grandchildren at the same time. 5
Let's take another look at the global debt situation. According to the Global Debt Monitor report released by the Institute of International Finance (IF), total global debt exceeded $300 trillion for the first time in 2021, reaching $303 trillion, a record high, and debt accounted for 351% of global GDP. The United States, the world's largest debtor, has a debt of nearly $34 trillion, more than the economies of China, Japan, Germany, and the United Kingdom combined, and the ratio to GDP is now 12445％。Debt in emerging market and developing economies is at an all-time high, and many countries could face the biggest debt crisis since the mid-90s. Modern society is, in a sense, a debt-driven society. Debt is a terrible thing, but as long as the economy continues to grow, it's fine. Once the economy slows down, all kinds of "demons and monsters" will jump out, and debt is an important part. In recent years, anti-globalization, geopolitical conflicts, the impact of the epidemic, the tension of the global ** chain, the tightening of the Federal Reserve, the global inflation and other shocks have followed. The reality is that the economy has indeed slowed down, not only domestically, but also because of the decline in economic efficiency caused by the general environment of the times. In the face of the complex situation of the world economy and global problems, no country can be immune. In fact, many civilizations exist, or more or less exist, "acts of redemption" in anticipation of a partial reboot of the game and a reinvigorated economy. At some point in the future, the world may be saluted by unbridled debt and quantitative easing.