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谢国忠

谢国忠博客:只说出心中真相

 
 
 

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麻省理工学院经济学博士

个性介绍: 1960年出生于上海,1983年毕业于上海同济大学路桥系,1987年获麻省理工学院土木工程学硕士,1990年获麻省理工学院经济学博士。同年加入世界银行,担任经济分析员。在世行的五年时间,谢国忠所参与的项目涉及拉美、南亚及东亚地区,并负责处理该银行于印尼的工商业发展项目,以及其他亚太地区国家的电讯及电力发展项目。1995年,加入新加坡的Macquarie Bank,担任企业财务部的联席董事。1997年加入摩根士丹利,任亚太区经济学家,2006年9月辞去该职务。

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谢国忠:再蹈覆辙  

2009-07-23 11:27:36|  分类: 言论 |  标签: |举报 |字号 订阅

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又来了

2009-07-22 
  

Here we go again

 

Asset bubbles all begin with a story - this one has yet to play out to its inevitable conclusion on the mainland

 

 

Andy Xie

 

Updated on Jul 22, 2009

 

 

Assetbubbles come and go. Each begins with a story: Japan as No 1, the EastAsian miracle, dotcom mania, and how financial innovations eliminaterisk - just to mention the last four. Each begins with a plausiblebullish story, which is magnified by the financial markets,manufacturing an inevitable bubble.

 

 

Backin the 1980s, Japan produced world-conquering, seemingly invincible,companies like Sony and Toyota. The competitiveness gains justified there-rating of Japan's asset prices. The issue was by how much? That iswhere imagination ran riot. Next, the East Asian miracle was a story ofgross domestic product. The Asian Tiger economies and Southeast Asiagenerated high GDP growth rates even when the US economy was depressed.Financial markets caught on to that, extrapolated the trend adinfinitum, and repriced their assets accordingly.

 

 

Atthe end of the 1990s, the dotcom phenomenon conjured up the possibilityof making unlimited amounts of money in a new economy. Financialmarkets ignored the role of competition in limiting profitability,while irrational exuberance led to overinvestment and the collapse ofprofitability. More recently, financial innovations were peddled on atale of decreased risk through financial engineering. Lower risksshould lead to the re-rating of risk assets like property or stock. Itturned out that this, too, was just a story. Decreasing risk was amathematical illusion. As more and more people believed the story,prices of risk assets moved higher, which validated the expectation oflower risk - for the time being.

 

 

Thecurrent bubble is unique. It began with a horror story: paper moneywill evaporate in value and, hence, you should buy something - anything- with it. At a recent lecture I gave in Hangzhou , one wealthy memberof the audience said: "Property may be 100 per cent overvalued. But Iwill still get half when it comes down. Paper money will be worthzero." The allure of this latest story is that the economy doesn'tmatter. If the world is in recession, so what? If stock and propertymarkets collapse, so what? We just run away from paper money, right?Better, borrow to buy assets. This is where bank lending policies comein to play. But, the more willing the banks are to lend, the hotter theasset markets become.

 

 

Mainland banksexperienced a banking crisis a decade ago. They lent with abandon forland speculation in the early 1990s. That led to rampant inflation andtriggered monetary tightening. Land prices began to fall in themid-1990s. They sank further in the Asian financial crisis of 1997, dueto falling exports. Forty per cent of all bank loans werenon-performing.

 

 

To rescue the banks,the government stripped out their bad assets, mandated wide lendingmargins for them to earn their way back, and floated them in Hong Kongfor recapitalisation. These helpful measures were accompanied by alending boom after 2004. Now they are ranked first, second and thirdworldwide in terms of market capitalisation.

 

 

However,banks' good fortunes don't usually last. A lending boom is inevitablyfollowed by a crisis. This has yet to play out on the mainland.

 

 

Rightnow, banks are force-feeding the economy with liquidity. The purpose ofthe so-called "quantitative easing" was to generate domestic demandwhile exports slumped. But the liquidity has flowed into property andstock markets instead (and has partly become government fiscalrevenue).

 

 

The inflation-fear bubblewill burst in due course. Paper money loses value over time at the rateof the difference between inflation and interest rates. If theinflation rate is 6 per cent and the bank deposit rate is 2 per cent,paper money loses 4 per cent per annum or 0.33 per cent per month.Stocks and properties in China may be 100 per cent overvalued. Only twodecades of relatively high inflation can justify their prices. However,persistently high inflation leads to currency devaluation, whichtriggers capital flight and, eventually, an asset market collapse. Thisstory simply won't hold together for long.

 

 

Acase in point is the US Savings and Loans crisis of the late 1980s andearly 1990s. The US Federal Reserve kept monetary policy loose to helpthe banking system. The dollar went into a prolonged bear market.During the descent, Asian economies that pegged their currencies to thedollar could increase money supply and lending without worrying aboutdevaluation. The money couldn't leave home due to the dollar's pooroutlook so it went into asset markets.

 

 

When the dollar began to rebound, in 1996, Asian economies came under tightening pressure that burst their asset bubbles.

 

 

Thecollapsing asset prices triggered capital outflows that reinforcedasset deflation. Asset deflation destroyed their banking systems. Inshort, the US banking crisis created the environment for a credit boomin Asia. When US banks recovered, Asian banks collapsed.

 

 

IsChina heading down the same path? There are many anecdotes to supportthe comparison. Property prices in Southeast Asia became higher thanthose in the US. But "experts" and government officials had stories toexplain it, even though their per capita income was one-tenth that ofthe US. Their banks commanded huge market capitalisations, as financialmarkets extended their growth ad infinitum. The same thing is happeningin China today.

 

 

When something seemstoo good to be true, it is. World trade - the engine of global growth -has collapsed. Employment is still contracting throughout the world.There are no realistic scenarios for the global economy to regain highand sustainable growth.

 

 

China is anexport-driven economy. Bank lending can support the economy for a shorttime. However, stocks are as expensive as during the heydays of thelast bubble. Like all previous bubbles, this one, too, will burst.

 

 

Andy Xie is an independent economist




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