Rebirth 07: Start adding points from elementary school students

Chapter 79: The financial wind has finally reached New Taipei City ( collection milestone plus additional chapter)

financial crisis?

This was not the first time Li Yan had seen this word. When she was surfing the Internet during the summer vacation, she had seen many related reports.

His related memories have always been vague, as if his self before rebirth didn't know much about this matter.

Among the roommates present, only Lin Heng could talk to Chen Fan, while the others basically looked like they were waiting for some scientific information.

However, for this group of people who don't even understand the meaning of the word "finance", Chen Fan's "subprime mortgage crisis", "stock market", "financial system", "inflation"... are completely incomprehensible.

In fact, Chen Fan himself didn't quite understand it. He raised the issue because he wanted to hear everyone's opinions, not to take the lead in popularizing science.

After listening for a long time, Lin Heng summarized:

"Finance is all about playing with money. America has gotten it wrong and is now in big trouble."

"What does that have to do with us?" Li Ruofei, a literary person, couldn't understand it at all.

"It's a big deal! This is America. If they collapse, it will affect the whole world." Chen Fan was very positive.

"Uh... can I understand it as follows," Liang Ban frowned, "this crisis is because America sold houses and kept lending money to people, but in the end the borrowers couldn't pay it back, so it collapsed?"

"It's probably like this. Normally, when you lend money to others, you have to make an assessment. If they can't pay it back or can't operate the loan, then there will be problems. But for subprime loans, there is no assessment and you can just lend it out at will." Chen Fan nodded.

“If you lend two or three million to a beggar, how can he pay it back?” Lin Heng also nodded.

"Let me interject a few words. Why does America lend money to people to buy houses? Or conversely, why do people have to borrow money to buy houses?" Li Yan asked.

"Because housing prices have been rising, you will make a profit if you buy it." Chen Fan continued to answer.

“Why are house prices rising?”

“Because there are so many people buying it!”

"Isn't this a chicken-and-egg problem?"

"Ah..." Chen Fan was stunned. "Anyway, there must be a reason. Oh, America lowered the loan interest rate, so people took the opportunity to borrow money to buy houses. As more people bought houses, the price of houses went up. This is easy to understand, right?"

“Then why lower the loan interest rate?”

"..." Chen Fan was stuck, "Anyway... this should involve some, um, more complicated things, let's ignore it for now."

"Then according to Liang Ban's summary, why should banks lend so much money to the public?"

"Banks make money by charging interest on borrowed money."

"Oh... so the more you borrow, the more you earn, provided that you can pay it back. What if you can't pay it back?"

"The house you buy belongs to the bank."

"And because house prices have been rising, banks are guaranteed to make money?"

"Yes, yes, yes." Chen Fan became excited. He really liked this kind of question-and-answer session with Li Yan.

"But the money in the bank is limited. If you borrow too much, you can only wait for others to pay you back slowly or be left with a bunch of houses."

"You hit the nail on the head!" Chen Fan's eyes lit up. "So the financiers in America are really good at playing around. They did something... I don't really understand, but they just sold the outstanding debts again!"

When these words were spoken, everyone in the dormitory was stunned. How could it be sold if there was debt owed?
"It's packaged as a financial product, just to get others to pay for it. Don't those who borrowed the money have to pay back the principal and interest? When the time comes, the principal will be paid back to the people who paid for the bill, and part of the interest will go to the bank and part to them."

"What's the connection?" Zhu Qinglun frowned. "The people who buy the bills earn a little more interest, but what's the bank trying to do? They even make less money."

"The bank has cash," Li Yan added, "so it can continue to lend money out."

"Oh my god..." Even though they only had a vague understanding of finance, these young geniuses still felt the risks involved.

"Li Yan is right. Banks continue to lend money because housing prices have been rising. So they don't care whether the people who borrowed the money can pay it back or not." Chen Fan continued.

"One thing has not changed," Li Yan actually began to summarize, "It's all still based on 'everyone can pay back the money'."

"As I was talking, I got myself into trouble. The bank is not afraid of others not being able to pay back the money, so how come..." Chen Fan was suddenly confused.

"Chen Fan, what you just said has another premise, 'House prices will continue to rise', but this is impossible."

Suddenly, the whole dormitory became silent and listened to Li Yan express his opinions.

"House prices go up because everyone is buying them, but there are only a limited number of people, and things are more valuable when they are scarce. What will happen if everyone can't pay back the money and the bank takes back the house?"

No one answered, everyone just listened.

"There are too many houses, and the supply-demand relationship suddenly becomes oversupply in the short term. The house prices are already very, very high, and banks may not be able to sell them even if they want to. What will happen at this time?"

"House prices... have dropped?" Li Ruofei asked in a low voice.

"Yes, 'there is a problem' is referring to this problem. Where does the bank get so much money to lend out? It is deposited in the bank by everyone and given by people who buy bank bills. As more and more people cannot repay their mortgages, what has this money become?" "Houses?" Li Ruofei asked again in a low voice.

"The house price has dropped again. What does this mean? The money has evaporated."

"This is too short-sighted!" Liang Ban was inexplicably annoyed. "These people are doing this and that just to make more money. It's all a game. It's simply..."

"No value was created." Li Yan helped him say it.

"Yes! These financiers are so disgusting, aren't they? They play with themselves, but the money we deposited in the bank is gone? Why do they have to make money this way? Why do banks continue to lend money when they have no more money?"

Li Yan's work memory was suddenly triggered, and he vaguely remembered the most disgusting part of his one-year working life...

The face of a capitalist.

"The Game of Capital," Li Yan shook her head. "You can read Marx's Capital, and you will understand it a little bit, although I haven't read it yet..."

This sentence awakened everyone who was immersed in thought, and Zhu Qinglun was the first to speak:

"Hey, Li Yan, where did you get this knowledge?"

To be honest, before his rebirth, Li Yan had never been very interested in finance and didn't know much about it. Even after his rebirth, he only took a cursory look at a basic book on economics during the summer vacation, and he only had a vague understanding of it.

Therefore, this wave of questions and answers based on examples actually deepened his understanding. At least before, he was even confused about the idea that "banks make money from the interest on loans."

Ding!
Sure enough, it came.

[Economics +1, Level 12 skill, 50/]

This is what Li Yan asked the system to note, he now has too many skills.

"Well, I did read some basic books." He was too embarrassed to say that he relied on logic, it sounded too pretentious.

"At first I thought you were asking us because you didn't know, but later I realized you were trying to help us understand it clearly." Liang Ban gave him a sincere look, "My summary was indeed just superficial."

"Indeed, they say there is a problem, but they can't clearly explain what the problem is." Chen Fan also began to reflect.

Lin Heng was stunned, "Damn, then my beggar can't pay the money... I'd better hide under the quilt."

No...it’s not necessary to be like this, brothers. Li Yan didn’t dare to speak.

"Alas, but no matter what," Chen Fan shook his head, "the impact of this crisis will spread to the world. What will China do then?"

"Our house won't increase in price that much, right?"

"Definitely not. You might as well worry about your parents losing their jobs."

"Does anyone in your family invest in stocks? I actually heard from my parents that some stocks have fallen sharply, although I don't understand it."

"The money my family deposited in the bank won't evaporate, will it?"

"I don't think I've heard much about the impact on us so far?"

"The storm is coming, the storm is coming..."

"No, it's okay." Li Yan said, and the whole place fell silent again.

His gradually regained memory of the financial crisis was very, very thin.

This means that the financial crisis he experienced in 08 and even 09 did not have much impact on his life.

Although my family runs a small business, we have not bought a house or engaged in finance, so we may not be affected too much.

But my parents didn't show any anxiety, worry or sadness at that time.

The memory has lost the details, but the emotions are clear.

China must have found a solution, or the financial crisis must have failed to cross the ocean.

It is possible that it actually caused a significant impact, but my home is not within this scope - but this also shows that it did not cause too much social impact.

"Why?" Chen Fan asked.

It’s over. I accidentally opened my mouth while thinking deeply. How should I answer this?

"Anyway...it won't have much impact on my family, I guess."

Because his family has no money and has no connection with finance, he has nothing to fear as long as there is no horrible social event like the evaporation of bank deposits - that is, exaggerated inflation.

After turning off the lights, while Li Yan fell asleep peacefully, his roommates who had mobile phones specially created a new group just to discuss his wealth level.

"How rich must this guy's family be to not be afraid of the impact of the financial crisis?"

(End of this chapter)