The world's funniest economics stories

Chapter 11 "News 30 Minutes" to take the pulse and analyze hot economic issues (1)
1. The Chinese are suddenly "rich and powerful" - the appreciation of the renminbi

In the 20s, Japan's economic war once entered a trough.Economists used to refer to the 80 years when the Japanese economy entered a trough as Japan's "lost 10 years".

The collapse of the Japanese economy began with the "Plaza Accord" in the early 20s. In the early 80s, due to the sharp increase in the foreign trade deficit, the United States had a serious fiscal deficit.In order to increase the export competitiveness of products and improve the imbalance of the country's balance of payments, the United States has taken measures to devalue the dollar.

On September 1985, 9, under the initiative of the United States, the finance ministers of the seven OECD countries and the central bank governors signed the "Plaza Agreement" at the Plaza Hotel, and reached a joint intervention in the foreign exchange market to induce an orderly depreciation of the exchange rate of the US dollar against major currencies. consensus.

After the signing of the agreement, the signatories of the agreement began to sell a large number of US dollars in the international foreign exchange market, forming a frenzy of selling by market investors, resulting in a continuous and sharp depreciation of the US dollar.As a result, there was a situation where 1 dollar was exchanged for 250 yen.Then, in less than two years, the dollar depreciated by 30℅ against the rest of the world's major currencies, and the yen was forced to appreciate.Since then, the yen-dollar ratio has appreciated from 250:1 to 87:1.

The "Plaza Accord" had an incalculable impact on the Japanese economy.The rapid appreciation of the yen brought about by the depreciation of the dollar made the Japanese government have to release a large amount of currency for market intervention in order to maintain the exchange rate and prevent the further appreciation of the yen.Therefore, in the case of excess funds and low interest rates, funds quickly flowed into the most dynamic industries such as real estate and stocks. From 1986 to 1989, the land price in the center of Tokyo, Japan increased by 2.7 times, and the famous bubble economy was formed.After this economic bubble burst in 1991, the Japanese economy fell into the biggest recession after the war, which lasted for more than ten years, and the Japanese economy still showed no signs of recovery.

The economic bubble caused by the appreciation of the yen has made Japan suffer from various blows such as business closures and bank failures.Since then, the Japanese economy has been hovering in the economic downturn for 10 years.In connection with the current economic situation in the Chinese market, combined with the case of the appreciation of the yen, we should also pay more attention to the issue of the appreciation of the renminbi.

Renminbi appreciation refers to the increase or increase in the value of the renminbi relative to the currencies of other countries.In other words, Chinese money is worth more.For example, in the international market [only in the international market can the increased purchasing power of RMB be reflected], 1 RMB can only buy one unit of goods in the past, and more units of goods can be bought after the appreciation of the RMB.The appreciation or depreciation of the RMB is directly reflected by the exchange rate.In layman's terms, the purchasing power of RMB has increased.For example, in the past, 1 U.S. dollar could be exchanged for 8.27 yuan, but now it can only be exchanged for 6.559050 yuan, and the value is still rising.

Of course, the appreciation of the renminbi has both advantages and disadvantages.Good things: first, it will affect the increase of imported products, which can bring more benefits to the country; second, it can also reduce the cost burden of imported energy and raw materials; third, the appreciation of the renminbi is also conducive to the adjustment of my country's industrial structure.The appreciation of the currency will eliminate a considerable part of low-tech processing trade with low technology content and no brand added value, and optimize export institutions.

The downside: The relative price of our country's exports will increase, undercutting the fact that we are cheap because of our low cost.

Purchasing power parity theory is an important exchange rate determination theory.The theory holds that purchasing power parity [PPP] means that the exchange rate of two currencies within a certain period of time is determined by the quantity of goods and services that the two currencies can purchase in the country.That is to say, the exchange of domestic currency and foreign currency is essentially the exchange of the purchasing power of domestic currency and foreign currency. The long-term equilibrium exchange rate is determined by the comparison of the purchasing power of domestic currency and foreign currency.The "Human Development Report" issued by the United Nations Development Program [UNDP] shows that in 2005, China's per capita GDP was US$1352 calculated at the nominal exchange rate, but it was US$5791 if converted at the purchasing power parity method, that is, the ratio of the nominal exchange rate to that calculated at the purchasing power parity The RMB exchange rate is underestimated by 4.06 times.Generally speaking, the calculation of purchasing power parity only involves tradable goods, and does not take into account the differences in the quality of products and services, so it is easy to overestimate the currency value of developing countries.However, even if the value of the renminbi is not as high as estimated by UNDP, it will not be as low as the current exchange rate.

2. Tulips: Beauty or Evil - Economic Bubbles
Since the 17th century, tulips have won the love and pursuit of the Dutch upper class with their novel colors and unique flower fragrance. Whether he owns tulips has become an important symbol for the public to judge his cultural quality or elegance and vulgarity.Driven by the upper classes of society, Dutch society set off a climax of collecting rare tulip varieties. Many people will not hesitate to spend a lot of money in order to collect precious tulips.

At that time, people's basic necessities of life were almost all related to tulips. In the Dutch upper class, it was the most fashionable dress to wear a tulip flower on a dress.Moreover, comparing the varieties of this tulip, the rarer the variety, the higher its relative status.

When the time came to 1634, the demand in the tulip market was still rising, and many speculators also focused on this area.They did not speculate on tulip flowers, but tulip bulbs, which were very convenient to change hands. Because of the participation of speculators, the price of tulip bulbs soared all the way, and many people made a lot of money as a result.Some other people, tempted by speculators to get rich overnight, also started speculative trading of tulips. So far, the tulip bubble has continued to expand, and its market price has risen to an unbelievable level, which is seriously inconsistent with its value and use value.

When everyone gets involved, people begin to realize that this does not create wealth, it just transfers wealth from one person to another.Some people are awake, but at this time, the tulip bubble should also burst.When someone goes out of his way to sell his tulips, others will follow wildly, selling as much as buying them.And so prices collapsed, and thousands of people lost their homes in a doomed crash.

The above story about tulips is a very famous case in the history of economic bubbles, and it is also the earliest recorded case of bubble economy in human history. I believe that after reading it, everyone will have a lot of insights and understanding.So what is an economic bubble?
An economic bubble refers to the part where the market price of an asset is separated from the intrinsic value of the asset due to partial speculative demand [false demand].It is essentially an asset price inflation that deviates from the basic economic conditions.

The cause of the bubble economy is a local economic bubble. The existence of a local economic bubble lies in the false market demand. It is precisely because of the false demand through the price signal that the resource mismatch is caused. Therefore, the false demand is the culprit of the bubble economy.

In the whole event of the tulip bubble, it was not that the public demanded tulips, but because of the influence of other aspects such as the public's conformity and comparison, the economic bubble appeared in tulips.

The bubble economy is essentially a false phenomenon of economic prosperity. The reason for saying it is a phenomenon of false economic prosperity is that the effective demand of the society in the period of the bubble economy has been overstimulated, that is, there are a large number of false elements in the effective demand of the society. Such prosperity is unreal and will be shattered sooner or later.

Bubble economy, the excessive growth of fictitious capital and the continuous expansion of related transactions are increasingly separated from the growth of physical capital and the growth of the industrial sector, the soaring prices of financial securities and real estate, and the extremely active economic phenomenon of speculative transactions.The bubble economy resides in financial speculation, resulting in false prosperity of the social economy. In the end, the bubble must burst, leading to social turmoil and even economic collapse.

The market mechanism is a way to allocate resources through market competition, that is, a mechanism in which resources are allocated through free competition and free exchange in the market, and it is also a form of realization of the law of value.

There are both differences and connections between economic bubbles and bubble economies. Economic bubbles are a common economic phenomenon in market economies.The so-called economic bubble refers to some non-real economic factors that appear in the process of economic growth, such as financial securities, bonds, land prices, and financial speculation. As long as they are controlled within an appropriate range, they are beneficial to an active market economy.Only when there are too many economic bubbles, excessive expansion, and serious separation from the needs of real capital and industrial development, will it evolve into a bubble economy of false prosperity.It can be seen that the bubble economy is a derogatory term, while the economic bubble is a neutral category.Therefore, we should not simply equate economic bubbles with bubble economies, that is, we must not only recognize the objective necessity of the existence of economic bubbles, but also prevent the excessive expansion of economic bubbles from turning into bubble economies.

3. Aniu Loan Company, which inflated the housing loan bubble--financial crisis
"Do you want to live a middle-class life? Buying your own home can meet your needs."

"If you don't have enough money to buy a house, don't worry, A Niu Loan Company will solve this problem for you."

"If you can't even pay the down payment, you don't have to worry, we will provide you with a zero down payment service."

"Now there is a new investment method. Buying a house is the best investment method. There is no risk. If you invest now, the house price will rise sharply in a few years. Then you will not only earn money from the house, but Lots and lots of money."

Ten years ago, American loan companies set off an upsurge of buying houses with loans in this way. Under such an overwhelming offensive, many people in the United States bought houses without hesitation.

Soon, under this trend, A Niu Loan Company loaned out the loan in a very short time, but what made A Niu more worried was, can such a large amount of money be recovered after it is loaned out?The risk of this loan was too great, so he wanted to transfer the risk, so he found the leading brother in the American economic circles - investment bank.

Under the leadership of these think tanks, the bonds were soon sold to investors all over the world. It is for this reason that since 2001, real estate in the United States has soared, and it has doubled several times in just a few years. Many people, even if they can’t afford a house themselves, still hope to earn a few dollars in a few years to buy a house with a loan, not only to pay off their debts, but also to have extra income.

But the good times didn’t last long. After 5 years of glory, American real estate finally fell. House prices fell. Some people with zero down payment and zero income couldn’t afford the loan when the time came. When the house was sold, they could only repay the loan that needed to be repaid first. Subprime debt cannot be repaid.Then the loan companies began to close down, insurance companies suffered big losses, investment banks suffered big losses, the stock market plummeted, and people lost money, let alone being able to repay their mortgages.This caused a series of chain reactions. The most terrifying thing is that the financial crisis broke out and spread to all parts of the world like a plague.

The financial crisis has been a hotly discussed issue worldwide in recent years. Most people are very vague about the concept, causes, and effects of the financial crisis. Therefore, in this regard, popularizing this knowledge plays a very important role.

Financial crisis, also known as financial turmoil, refers to all or most of the financial indicators of a country or several countries and regions, such as short-term interest rates, monetary assets, securities, real estate, land [prices], the number of commercial bankruptcies and the number of bankruptcies of financial institutions sharp, short-lived and super-periodic deterioration.Financial crisis can be divided into currency crisis, debt crisis, banking crisis and other types.Financial crises in recent years have shown a mixed trend.

(End of this chapter)