Rebirth 79: I opened a bank in the United States

Chapter 234 The Crisis Behind the Prosperity

"Usually an interest rate, such as your 12% here. It includes three parts: risk-free interest rate, risk premium and profit. The risk-free interest rate is relatively fixed, which is the basis to ensure that your funds will not be lost."

"If you only look at the risk-free interest rate, assuming that everyone can afford the money 0% without risk, the risk premium is classified as 0, and the profit is also classified as [-]. Only lending loans with the risk-free interest rate is equivalent to your current Give out a loan of [-] U.S. dollars, and ten years later, when the principal and interest you reap are added together, its purchasing power will be equivalent to the current [-] U.S. dollars."

Jim draws a cylinder in his notebook, and the largest part below it is the risk-free rate.Then continued:
"Have you seen this ratio? The risk-free interest rate is the basic core of money circulation. Because the risk premium will increase or decrease according to the qualifications and past records of applicants for loans; the profit rate will also vary depending on the bank's The goals are different, but there are changes, for example, the profitability of commercial banks is much higher than that of savings banks, so their interest rates will be added to the profit part.”

"So what really affects the market, everyone, all banks, all credit institutions, including industries related to the loan market, is the risk-free rate."

"Then the risk-free rate is"

Carter looked at Jim's diagram thoughtfully.

"You can refer to national debt. In fact, there is no real risk-free interest rate in reality, but the national debt issued by the government of a large economy country can basically be regarded as risk-free. Because the pledge behind the national debt is national tax revenue, for a large country , the tax revenue is stable and large, and there is almost no insolvency.”

"Combined with this, have you found the problem?"

At this point in the introduction, Jim stopped writing and opened his mouth to guide Carter to think.
"Just now you said that the interest rate on the [-]-year treasury bond has risen! Are you trying to say that this interest rate is not controlled by the Fed?!"

"Yes, but it's not absolute. Interest rates are a cyclical indicator, overnight interest rates, weekly interest rates, January interest rates, or even one year, ten years, twenty years"

Jim nodded approvingly, affirming Carter's statement one-sidedly.

"About the future, each of us is a prediction. How can we give it a standard for the things predicted? Even if it is given, we don't recognize it, don't we?"

"Federal funds rate, the only thing the Federal Reserve can control is the interest rate of the day. This is the current one. The money is with me. If you want to borrow, you have to follow my rules! This is an interest rate that is completely controlled by the Federal Reserve, but in the long run, That's impossible!"

"For example, now that the Federal Reserve says that I want to set the ten-year loan interest rate at 8%, what's the use? Now the annual inflation is above 10%, that is to say, the purchasing power of my currency depreciates by about 9.1% every year. , your interest rate only adds 8% to my value, so I'm not a fool, why should I buy this product that I originally wanted to use to preserve or even increase value?"

"These medium and long-term loan interest rates, that is, the interest rates that the central bank cannot directly control are LPR, that is, the loan market quotation rate. This interest rate is determined by the market and cannot be directly controlled by the central bank, but they can be indirectly affected. This is what I just said you Yes, quantitative control!"

Quantitative control?

Before Carter finished digesting the previous content, Jim's words came again:
"On the eighth floor of the New York Fed headquarters building, there is an office called the Fed Trading Room. The job of this office is to regulate the open market. They keep an eye on the government bond market, buying bonds with high interest rates and selling them. Issue bonds with low interest rates to control the total amount of money. Make people unwilling to continue to spend money on illusory investments, and concentrate on looking at the present. It is good to use the money for life, or do something.”

"In short, it is to reduce the circulation of money in bonds and the securities market. This is quantitative shrinkage, artificially affecting the economy. Following this line of thought, think about what you are doing?"

"Loan interest is the lowest in the state! It's even the lowest in the country. You are encouraging the locals to get loans quickly and increase the currency circulation in the market crazily."

"I know that you made a lot of money speculating in gold, but we never thought that you spent all your money here! A large amount of money that did not belong to Douglas entered, and the stock of money in the market increased greatly. , not to mention the people you're attracting now."

When Jim said this, his whole mind was buzzing.

"3000 households, more than [-] people. The real estate market alone will bring you more than [-] million yuan in total currency. All of this money is super-issued currency! For Douglas or Pearson. If you take the central bank as an analogy, the money you got that is not Douglas should have, is that you are issuing more currency and using quantitative easing to regulate this market and make it more active!"

"But you have to know that these means and methods can only stimulate, or affect economic development to a limited extent, rather than fundamentally solve the problems in the economic system! , The money they bought for the house was borrowed from the original city, right?"

"That's right."

Carter nodded, and when he was about to say something, Jim asked again:

"What's the interest rate? 16? 17? Or 18?"

"Average around 17.1%"

"Okay, let's calculate it at 17%, a loan of 6800 yuan. In the first year, you need to repay the interest of 12 yuan, and then they buy your house, they should borrow another 1200 yuan, right? Calculate it at your [-]%, and the interest rate is [-] yuan." Yuan."

"Damn it, I don't have enough money to pay back! My current monthly salary is 500, and it's only 6000 a year without eating or drinking."

Carter exclaimed and immediately realized the problem.

"Understood? I talked to them in the morning. To be honest, you are lucky. The people who have come here now have some savings in their hands. They can carry it for the time being. They can make up some money by themselves. Turn this fund into a whole. But what about consumption?"

"For a family of four, the minimum living expenses are 400 US dollars a month, and the money he can use to repay the loan is only 1200 US dollars throughout the year. Even the interest is not enough, just to repay the interest, and he still makes up nearly 5000 US dollars every year. They How much spending power is left?"

"So, should I get a raise? Or keep adding jobs?"

Carter, who had never carefully calculated the accounts before, and only thought about making money by himself, was shocked.then
"No! If the pressure is so great, why would they choose to relocate with a loan?"

"Because of what, didn't I just say that? They actually live well in the local area, and the real poor never come here because they can't afford it! They can't afford to move this house!"

Jim sighed, those old friends in Alabama, those childhood playmates appeared in his mind unconsciously.
"It is necessary to increase salaries or increase jobs, but it is not urgent right now. If you want to increase salaries and increase jobs, you have to find more demand!"

"Indeed, you have stimulated a lot of market demand now, but there is no end to this matter!"

"As soon as their current work is finished, they will often face a situation of no work. Not to mention salary increases, it will be great if they don't lay off employees. Then where will you find demand? Or continue to launch some projects and carry out a cycle What? And most importantly, where does the money come from?"

(End of this chapter)