History always has the same rhyme, but it is the essence where it is not completely similar. Although China is a practitioner of the development model of the East Asian model, China does have some differences from Japan and South Korea; when it is Japan/Korea When the natural population growth rate dropped to about 1,000, their total factor productivity almost peaked. In fact, the high point of the Republic’s TFP (after PPP) was around 2017. After Japan and South Korea burned the demographic dividend, it was the final fireworks curtain call. So a basic assumption should be that if we did not walk out of the same path as Japan and South Korea, then our TFP would almost reach its peak. Considering that the population growth rate will slow down in the future, the currency growth rate will slow down, which means. For the global economy to continue to maintain the previous growth rate, there must be the following two possibilities. China’s technological development is beyond expectations. Besides China, there can be a country to top the gap after China’s economic locomotive slows down. So the road ahead seems to be there. The following are 1, the global economy has since slowed down, and the growth of 2% is expected to be in the mirror. 2. The global economy has maintained its growth rate, and China’s technological development has exceeded expectations. 3. The global economic growth rate has maintained, but there is a new global economic engine. Simply thinking about this issue from an economic point of view, you will feel very powerless, because these three possibilities all correspond to a future, and it seems that they are not unreasonable and all possible. But just like Dario’s prescription for the Weimar Republic (to balance inflation and deflation in the economy), this vacuum spherical chicken concept is not valid, because economy, or finance, is not an independent kingdom by nature. It is closely related to internal affairs and diplomacy, and many economically feasible policies are completely infeasible in internal affairs and diplomacy. For example, in international politics, there are often three kinds of theoretical realism, liberal constructivism, among which constructivism is like the Austrian school in my eyes, belonging to the emptiness that does not consider the bias-variance trade off at all. Pull the model complexity to a maximum, and then ignore the bias, and often make some accurate and wrong predictions (for example, the Austrian school believes that the Chinese economy will stagnate after 2008…) The abscissa is the model is complex Degrees and ordinates are model errors. Models that are too complicated and too simple are sand sculptures. So for most of humanity, our international politics are hovering in realism and liberalism. They are like this; world politics is not difficult to find If a country’s economic growth rate is rising, then it is more likely to adopt liberalism, and if a country’s economic growth rate is declining, then it is more likely to adopt realism. This actually explains the difference in diplomatic paradigm between China and the United States in the past period of time. However, the key question is, is there really room for the current economic growth rate to continue to slide towards realism? A simple question, if you think that China’s economic growth rate will not meet expectations in the future, can we use realism to construct a relatively balanced environment? If you think the U.S. economy is growing a little bit lower than it is today, can they create a safer environment than it is now? Here comes the classic problem. If one country pursues absolute security, it will be absolutely insecure for another country. The tragedy is that if these two countries are the world’s largest and second largest countries, and they have no military strength. The generational gap is very troublesome. So many times, I really don’t have a good impression of Trump. Institutionalized peace and prosperity, and global cooperation are China and the United States. In the current economic environment, they are almost the only options. This means that if the population decreases, then the future with nothing to make up for is very bleak, so this also means that most countries will try to avoid this possibility, at the cost of some paradigm shift. If we fail, our best outcome may be to be able to construct a relative balance of power, similar to the Cold War security competition. And even this is not easy. This leads us to the second possibility. If China’s science and technology breakthrough exceeds expectations, then an economic growth rate will recover, a globalized future may be waiting for us, and a world in which the population is declining but artificial intelligence has filled the output gap will emerge. In fact, this future may not be as terrible as everyone thinks, because you can think of artificial intelligence as an immigrant that does not produce ethnic conflicts…Most immigrant countries are actually alive and well. But to be honest, although the Republic needs technological breakthroughs more than ever, this thing is not what you want. Therefore, we still have a third possibility that the global economic growth rate is expected to maintain, but a new country needs to stand up; Macro Markets global credit pulse. This means that when China has three counter-cycles in 2008-20, if we maintain Social financing and GDP match, so the credit pulse, the indicator of social financing/GDP, will inevitably not rise…We need a new country to take on this responsibility. Who wants to increase leverage? Who can increase leverage? If it is observed that the United States has basically had no credit stimulus in the past 15 years, in fact, the United States and a series of developed countries are very likely to stimulate credit in this cycle, using all possible means. The credit stimulus will bring about a classic cycle. This cycle can help everyone understand Dario’s famous saying: Keep nominal GDP growth above nominal interest rates. Whether it is a country, a company, or an individual, we all have assets. The balance sheet, and our balance sheet can be divided into two types according to maturity, short-term and long-term, so we have short-term liabilities, short-term assets and long-term liabilities. Long-term assets and short-term insolvency are called liquidity crisis, and long-term insolvency is called repayment. Sexual crisis. Responding to the liquidity crisis is simple. When short-term assets <short-term liabilities, inject cash short-term assets + cash = short-term liabilities + new long-term liabilities. The problem is that cash is not interest-bearing, but liabilities will (of course, negative interest rates) And zero interest rates will help, but there are currently few long-term zero interest rates for companies/individuals) So after a period of time, when short-term liabilities become long-term liabilities, at the same time, for convenience, assume that short-term assets become long-term assets. The result after long-term assets + cash investment <long-term liabilities + interest on long-term liabilities This is the solvency crisis. This is when the Fed resolved the liquidity crisis in November 1929, and encountered a solvency crisis in the summer of 1930. When the liquidity crisis was lifted in 2008, the European sovereign solvency crisis broke out in 2011. And the reasons for countless similar examples. The only way to avoid this is if your cash growth rate is faster than the growth rate of long-term debt interest. This means that the rate of return on your cash investment is higher than the interest on debt. This is why the ratio of nominal GDP to nominal interest rates is so critical. This is also what the Fed is currently trying to do, not to raise interest rates rashly until inflation has confirmed its response. And if this assumption is true, if the United States and developed countries need to undertake new credit stimulus tasks, then they must ensure that their nominal GDP is above the nominal interest rate, which means that their doves will continue for a long time. Thinking about it this way, Kuroda’s words yesterday are actually very ambitious; to sum up, when China, as the world’s largest economic brighter in the past 20 years (the second is the United States), gradually embarks on the end of the traditional development path, we can have three This path corresponds to China’s technological renaissance in the future with negative global interest rates. Artificial intelligence + technological development is equivalent to bringing cheap immigration to China. Fiscal stimulus in developed markets exceeds expectations. Considering the reality of domestic and foreign affairs, I think the first possibility Sex is actually not big, if it happens, it is actually very catastrophic; the second possibility is unknown and unpredictable; therefore, the third possibility is actually underestimated before the second possibility cannot be confirmed. A little calculation, considering that China’s GDP after PPP is about 125% of that of the United States and the European Union, if China’s credit pulse this year rolls over 12 months from 36-37 trillion yuan last year to 28-31 trillion yuan, then roughly A reduction of 6-8% of GDP means that Europe and the United States must produce an impulse of about 10% of GDP. If one person has half of it, each person needs about 5%. Then the actual credit stimulus that the United States needs this year is actually 1 Trillion. The current US fiscal stimulus is 1.8 Trillion (it is a bit insufficient to spread to 4-5 years or even 8-10 years), but there is no difference in order of magnitude, considering the amount of 0.75 Trillion in the Eurozone. In fact, this round of fiscal stimulus in Europe and the United States is in place. So what is the ending of this one? The liquidity crisis takes the solvency crisis, and the solvency crisis is often followed by depreciation. The gold standard was abandoned in 1933, and the euro depreciated for a long time after 2008. This is why I have always felt that although China, as the leader of the global economy in the past, has slowly slowed down its economic growth, the logic of bearish inflation is still dangerous. People who are bearish on inflation do not fully understand that when a solvency crisis occurs, if your currency value is strong and inflation expectations fall, it is actually a precursor to war.