Feature | Insight into the strong stimulus of the United States: Helping the U.S. economy take off and garner the wool of the world

　　The Paper Journalist Jiang Mengying

　　After entering the millennium, the United States has experienced the Internet bubble, the subprime mortgage crisis, and then the current crisis of the new crown epidemic, and productivity has been in a continuous downturn.

The last time the U.S. economy took off was in the 1990s. Under the guidance of "Biden Economics", is it possible for the U.S. economy to take off again?

　　The Organization for Economic Cooperation and Development (OECD) released its mid-term economic outlook report on March 9th, which substantially raised the US economic growth expectations.

The report predicts that the economic growth rate of the United States in 2021 and 2022 will be 6.5% (predicted value of 3.2% in December last year) and 4.0% (predicted value of 3.5% last December).

"Blond Girl Economy" Will Reappear?

　　International Monetary Fund (IMF) spokesman Gerry Rice said after US President Biden signed a $1.9 trillion stimulus bill that the bill is expected to increase US GDP by 5% to 6% in the next three years.

The specific calculations will be reflected in the "World Economic Outlook" report to be released in April.

　　U.S. Treasury Secretary Yellen stated on the ABC's "This Week" column on March 14th local time that as the Biden administration injected US$1.9 trillion in aid into the economy and is expected to return to full employment, the risk of inflation in the United States remains Downturn.

　　Yellen said: "Is there a risk of inflation? I think the risk is small, I think it is controllable. Some price drops during the pandemic in the United States last year will be restored, but this is only a temporary price fluctuation, not a major one. Risk. If the risk comes true, of course we will monitor it, but we have the tools to deal with this problem."

　　Yellen served a long time in the Democratic government. She served as chair of the Economic Advisory Committee of the former President Clinton's administration and was appointed by Obama as the chairman of the Federal Reserve to help guide the recovery of the U.S. economy from the 2008 financial crisis.

　　"The best way to understand how strong US economic growth was in the second half of the 1990s is perhaps to look back at how much energy analysts put in to predict the outcome of that boom." Yellen wrote in "Amazing Ten Years: Macroeconomic Experiences and Lessons in the 1990s" wrote in the book.

　　Yellen then summed up the two major themes of the 1990s: the shift in policy mix to tightening fiscal policy and loose monetary policy, and the acceleration of US productivity.

Both of these have allowed the "stunning decade" to experience a stunning economic boom.

　　The market and academic circles call it the "Goldilocks economy"—the economy is neither too hot nor too cold, and everything is just right—maintaining moderate growth and low inflation.

　　Have you seen the fairy tale "Goldilocks and the Three Bears"?

The lost Goldilocks entered the bear’s house without permission. She tasted three bowls of porridge, tried three chairs, and lay down on three beds. Finally, she decided that the small bowl of porridge was the most delicious. The small chair is the most comfortable to sit on, and the small bed is the most comfortable, because it is the most suitable for her, not too big or too small.

Goldilocks principle of choosing things is called Goldilocks principle.

　　Have you seen the fairy tale "Goldilocks and the Three Bears"?

The lost Goldilocks entered the bear’s house without permission. She tasted three bowls of porridge, tried three chairs, and lay down on three beds. Finally, she decided that the small bowl of porridge was the most delicious. The small chair is the most comfortable to sit on, and the small bed is the most comfortable, because it is the most suitable for her, not too big or too small.

Goldilocks principle of choosing things is called Goldilocks principle.

　　Yellen pointed out in the book that the most commendable and intuitive phenomenon of the US economic boom in the 1990s was the sharp reduction of the US deficit: the US federal budget deficit fell year by year from US$290 billion in the early 1990s. , Dropped to 30 or 40 billion US dollars in the mid-to-late 1990s, less than 40% of the fiscal deficit in the early 1990s.

In addition, the success of the 1990s also stems from "an unexpected increase in the rate of productivity growth will simultaneously reduce the unemployment rate and the inflation rate."

　　Interestingly, Yellen said on the March 14 program that she is currently in an era of long-term low interest rates and her views on fiscal sustainability have changed, but she also said, “In the longer term, we The deficit must be controlled."

　　In an exclusive interview with The Paper, Lord Adair Turner, Chairman of the Council of the Institute of New Economic Thinking and former Chairman of the UK Financial Services Authority, pointed out that the new crown epidemic has accelerated the development of automation, online economy and online entertainment.

We have seen that the new economy continued to grow in most economies during the crisis-we are seeing an increase in productivity, and this increase is not reflected in the calculation of GDP.

Productivity is growing faster than we thought it actually grew, but it "disappeared."

Because many of the "commodities" we consume are free, they are not reflected in GDP.

　　Apple, Amazon, Microsoft, Facebook, and Google’s parent company Alphabet, the top five companies in the S&P 500, have a combined market value of more than $7 trillion, accounting for nearly 25% of the market value of the S&P 500.

Before the new crown epidemic, this proportion was less than 20%.

The share prices of the five major technology stocks have been "rising without interest", reflecting the U.S.'s increasing transformation into a technology-driven economy, and the new crown epidemic has accelerated this process.

　　Turner said that we can see manufacturing automation shift to online retail, online entertainment, the Nasdaq index continues to hit new highs (although there has been a recent correction), and we have inventions and products similar to search engines that do not require payment.

These services allow us to do things more efficiently, but they are not included in GDP.

When the epidemic is over, there will be a major acceleration of automation in the future.

　　​​​​Do you want to be happy or equal?

　　After the introduction of unlimited quantitative easing, the Fed's monetary easing gave birth to a stock market boom, and the stock market boom created "wealth" growth.

　　Benefiting from the rise in the stock market, the net worth of US households increased and hit a record high.

The Federal Reserve report shows that in the third quarter of 2020, the net assets of American households increased by US$3.8 trillion (an increase of 3.2%) to US$123.5 trillion, of which the value of stocks held by residents rose by US$2.8 trillion and the value of real estate increased by approximately US$430 billion.

Since March 2020, the wealth of American billionaires has increased by $1.1 trillion, and the number of American billionaires has increased by 46 people.

　　However, on the other hand, under the raging epidemic, tens of millions of Americans are facing a food crisis and cannot pay their rents and become homeless.

Since June 2020, about 8 million Americans have fallen below the poverty line, and the U.S. poverty rate has risen by 2.4 percentage points.

Data from the US Department of Labor shows that the number of unemployed people in the US still exceeds 10 million.

　　Even though the vaccine is gradually being promoted and the US economy is recovering strongly, economists are still worried that the US economy is showing a "K-shaped recovery"-like this letter, high-income groups are going up and low-income groups are going down.

　　Yellen pointed out in her inauguration letter: “Everyone is worried about experiencing a K-shaped recovery-but in fact, we were living in a K-shaped economy long before the epidemic. The rich got richer, while others became more and more wealthy. Ignored."

　　In his speech, Biden repeatedly emphasized the "four historical crises" facing the United States: the new crown epidemic crisis, the economic crisis, the systemic racial crisis, and the climate crisis.

　　Turner also pointed out to The Paper that such a situation is caused by a series of structural factors. The subprime mortgage crisis and the crisis caused by the epidemic are additional events that only strengthen these structural factors.

I am afraid that the result will be that this global monetization will continue forever.

　　The Speaker of the U.S. House of Representatives, Pelosi, stated on the ABC on March 14 that the Biden administration’s next big plan for the economy is infrastructure measures, and she emphasized that it will ensure fiscal stability.

Although she hinted that tax policy might include measures similar to the Obama administration's "Building America" ​​bonds, she declined to confirm whether tax increases are needed.

　　In an exclusive telephone interview with The Paper, Wolff, the chief economic commentator of the Financial Times, repeatedly referred to Biden and his policies as "radical" because of the dominant concept in the Western context for the past 40 years. It is that the government should do as little as possible. It should be left to the market to decide. The government's intervention in the economy should be relatively small.

And in these 40 years, the only important reform is "Obamacare"-this is an incomplete reform of the medical system.

In this context, the Biden administration’s views on the role of the government and the scope of government actions that should be covered, including huge fiscal deficits and infrastructure plans, seem to be very radical-these concepts all reflect the government’s social and economic The shift in the neutral role played.

　　"Biden himself is a centrist, he is not a leftist in the Democratic Party. In my opinion, the entire Democratic Party has become more leftist." Wolff added.

　　"I want to say that everyone is a utilitarian nowadays," Wolff said.

　　Utilitarianism is a theory in Western ethics that advocates the pursuit of "maximum happiness".

In Wolfe's view, utilitarianism is essentially the philosophy of government—compared with pre-modern times, government is stronger and more purposeful.

In today’s world, improving the well-being of the people has become the main goal-judging whether a government policy is good or bad is through the result, that is, the utilitarian result theory in the philosophical sense-whether it can maximize everyone "Happiness" (utility).

　　Yellen also stated in her inauguration letter that she entered the government from academia because she firmly believes that economic policies have a powerful role in promoting social well-being. climate change.

　　Utilitarian philosophy is complicated and inextricably linked with other moral standards. Utilitarianism is by no means the only philosophy that dominates Western society. The philosophy of freedom, human rights and egalitarianism all develop in parallel with utilitarianism.

Wolf pointed out that only when individuals can pursue individual rights and freedoms can they successfully realize individual freedom.

　　This year marks the 100th birthday of American philosopher John Rawls.

Rawls grew up in the era of the civil rights movement and is the most influential philosopher who questioned utilitarianism and advocated egalitarianism in contemporary times.

In the original state set by Rawls, individuals under the "veil of ignorance" cannot identify with utilitarianism, so he sets two principles: the first principle should be the principle of equality, that is, the principle of equal rights.

The second principle is the difference principle, that is, social and economic inequality policies are acceptable if they are most beneficial to the most disadvantaged.

　　Wolfe commented that the issues of social equality and individual rights have always been very important in the United States, and related discussions have never stopped.

In the United States today, the issue of egalitarianism has once again become one of the core issues of political discussion after the abolition of slavery and the civil rights movement.

　　Will the wool of the whole world benefit the whole world?

　　When the United States sneezes, the whole world will catch a cold.

　　The unique status of the U.S. dollar as an international reserve currency and settlement currency makes the Federal Reserve increase currency issuance, which will not necessarily trigger domestic inflation.

　　Wolf pointed out that because the United States can purchase goods globally, the inflationary effect of the additional currency issued by the United States is not borne by the country, but by other countries through global trade and the output of the dollar.

In addition, a large amount of funds flowed into the US stock market, reducing the impact of currency expansion on commodity market prices.

　　There are also many skeptical voices who believe that the United States dared to freely issue money and print a large amount of money. In fact, it is because other countries are paying for the United States.

The large release of the US dollar is destined to cause inflationary pressures in other countries.

　　However, IMF spokesperson Rice specifically pointed out that the US$1.9 trillion stimulus package will greatly increase US demand for goods, goods and services. Most countries should benefit from it and help the global economy recover.

　　The British "Economist" magazine called this coming situation "the United States has a fever"-the US economy may not only rebound strongly in 2021.

The total scale of the Biden administration’s stimulus package this year may exceed US$2.5 trillion, which may easily push economic output beyond the “potential” level estimated by the US Congressional Budget Office.

If the U.S. economy overheats, its impact will not be confined to the United States.

　　Rice reminded that emerging markets and developing economies, especially those with financial fragility and weak trade relations with the United States, should be prepared to adopt contingent policies to respond to potential interest rate surges at any time.

According to Rice's analysis, due to the unusually low dollar financing cost, the extremely low dollar financing cost means that the financial environment is at risk of sudden tightening. Central banks of various countries "should manage with caution" and be alert to sudden rises in interest rates and financial tightening.

　　"We believe that the US economic stimulus plan has a potential positive spillover effect on global economic growth. But as always, we should also pay close attention to potential risks." Rice said.

　　In addition, Wolff also warned that US debt expansion and the Federal Reserve’s quantitative easing policy would put the reliability of Western currencies, including the US dollar, at risk—weakening the credit of the US dollar.

　　Fed Chairman Powell was also named the "Cryptocurrency Figure of the Year" for his implementation of unlimited quantitative easing. He was jokingly described as leading a "3 trillion dollar bitcoin marketing campaign", indicating that investors continue to be pessimistic about the prospects of the US dollar.

　　The U.S. dollar index has fallen all the way, although it has rebounded, it is still close to 10% from the decline at the beginning of 2020.

On the other hand, Bitcoin is so powerful that its price has tripled in 2020.

After the signing of the US$1.9 trillion stimulus bill, it rushed to a record high of US$60,000.

　　Some analysts believe that if the U.S. government increases the value of the U.S. dollar by increasing a large amount of debt, and the central bank’s low interest rate and quantitative easing policies suppress market price discovery, Bitcoin is not so much a bubble as a foreseeable safe haven or alarm. .