The consequences are credit crunch, reduced money supply in the market and falling prices.
This stage is not just a house, many goods will be in a wait-and-see period: waiting for the price to fall.
2. The leverage ratio is the ratio of risk to assets on the company's balance sheet. Leverage ratio is an index to measure the debt risk of a company, which reflects the repayment ability of the company from the side. Generally speaking, the leverage ratio of investment banks is relatively high. In 2007, the leverage ratio of Merrill Lynch was 28 times and that of Morgan Stanley was 33 times.
3, 1, the development of the global financial crisis
This round of global financial crisis began with the subprime mortgage crisis in the United States and originated from the bursting of the real estate price bubble in the United States. After the bursting of the Internet bubble, the Federal Reserve implemented excessively loose monetary policy for a long time, which led to an increase of 1.24 times in the US real estate price index from June 2000 to May 2006. [1] Under the background of low interest rates and rising house prices, due to the lack of financial supervision by the US government, the subprime mortgage market and various financial derivatives based on subprime mortgages have developed excessively. However, the above prosperity is based on the fragile assumption that American real estate prices will continue to rise. When the Federal Reserve re-entered the interest rate hike cycle in June 2004 under the pressure of inflation, real estate prices began to fall in June 2006. The foundation of the subprime mortgage market and the prosperity of financial derivatives no longer exists. In August 2007, Bear Stearns, the fifth largest investment bank in the United States, announced that its hedge funds would stop redeeming, which triggered investors' withdrawal, thus triggering a liquidity crisis. This is regarded as a sign of the full-scale outbreak of the subprime mortgage crisis in the United States. In February 2008, Northern Rock Bank was nationalized by the British government, which was the first financial institution to be nationalized since the outbreak of the subprime mortgage crisis, and also marked that the subprime mortgage crisis had been transmitted to Europe. In March 2008, Bear Stearns filed for bankruptcy and was acquired by JPMorgan Chase under the mediation of the Federal Reserve. The US government's rescue of Bear Stearns marks a new stage of the subprime mortgage crisis, and at the same time strengthens investors' expectation that financial institutions are "too big to fail". September 2008 was a turning point in the evolution of the US subprime mortgage crisis into a global financial crisis. On September 7, the US government announced that it would take over Freddie Mac and Fannie Mae, which meant that a systemic crisis broke out in the US real estate financial market. /kloc-In September of 0/5, Lehman Brothers, the fourth largest investment bank in the United States, filed for bankruptcy protection, but the US government did not implement the rescue. The US government allowed Lehman Brothers to go bankrupt, which broke the expectation that financial institutions were "too big to fail" and directly caused the collapse of the short-term money market in the United States. Because the short-term money market is the most important source of financing for the shadow banking system in the United States, the bankruptcy of Lehman Brothers makes the bankruptcy of American investment banks irreversible. In the same week that Lehman Brothers went bankrupt, Merrill Lynch, the third largest investment bank in the United States, was announced to be acquired by Bank of America, and Goldman Sachs and Morgan Stanley, the first two investment banks in the United States, announced that they would become bank holding companies. The five major investment banks on Wall Street collectively disappeared. In addition, American International Group (AIG), the largest insurance company in the United States, suffered serious losses, which was eventually funded by the Federal Reserve and nationalized, marking the beginning of the collapse of the credit default swap (CDS) market. In September 2008, the crisis also spread from the American financial market to the financial markets of Europe and emerging market countries, and the crisis officially changed from a national crisis to a global financial market crisis.
The crisis in the financial market also affects the global real economy through wealth effect, credit crunch and cutting off corporate financing sources. Since the second quarter of 2008, the economies of the euro zone and Japan have entered negative growth; Since the third quarter of 2008, the American economy has entered negative growth. The three developed economies collectively fell into recession in the second half of 2008, and the economic growth of emerging market countries and developing countries also slowed down significantly. According to the latest forecast of IMF, the global economy will achieve a negative growth of 1.3% in 2009, which is the first contraction of the global economy since World War II. Among them, the economy of developed countries will shrink by 3.8%, and the economic growth rate of emerging market countries and developing countries is only 1.6%. [2] From February to March, 2009, there were four superimposed crises: First, large commercial banks in the United States, represented by Citibank and Bank of America, suffered huge asset write-downs (however, the quarterly financial report of 2009 1 showed that the profitability of relevant banks had improved); Second, since June 5438 +2008 10, there has been a large-scale investor withdrawal in the American hedge fund industry; Third, the real economy of developed countries is still declining; Fourth, the financial crisis triggered by foreign capital flight may break out in Central and Eastern European countries. Therefore, the spring of 2009 is also called "the second financial tsunami" to deal with the systemic crisis in financial markets triggered by the bankruptcy of Lehman Brothers. However, because investors' expectations have been significantly reduced, it is difficult to have unexpected events that break investors' expectations, and the possibility of another systematic crisis in the financial market is relatively low. However, the global financial crisis is still deepening and expanding. Above, we briefly reviewed the development of the global financial crisis. In fact, it is difficult for us to clearly distinguish the development stages of financial crises, because various types of crises often overlap. For example, the decline in house prices began in June 2006 (the US house price index has fallen by 30% so far [3]), the liquidity shortage and credit crunch began in August 2007, the stock market decline began in June 2007, and the real economic recession began in the third quarter of 2008. Therefore, we can only use the occurrence of landmark events (such as the bankruptcy of financial institutions) to roughly describe the evolution of the financial crisis.
Second, the US government's bailout policy and its consequences
Judging the future trend of the global financial crisis is inseparable from the combing and evaluation of the US government's bailout policy. Let's analyze the US government's bailout policy and its consequences from two aspects: fiscal policy and monetary policy. Table 1 summarizes the financial rescue plans issued by the US government so far, mainly including168 billion US dollars tax reduction plan, 700 billion US dollars troubled asset relief plan, 787 billion US dollars Obama administration economic stimulus plan and recently released public-private joint bad bank. Simply calculate, the US government's financial rescue plan has reached 1.66 trillion US dollars, which is about 12% of GDP. The above plan not only includes specific measures to help financial institutions bail out (including injecting capital, divesting problem assets, providing guarantees for financial institutions' liabilities, etc.). ), including specific measures to boost the real economy (including tax cuts and increasing social public expenditure, etc.). It is still too early to comprehensively evaluate the effectiveness of the financial rescue plan, but the introduction of relevant policies has at least eased the further decline of the financial market and the real economy. The direct consequence of the US government's huge fiscal stimulus plan is that the US government's fiscal deficit has soared and the financial financing pressure has increased. From 2002 to 2007, the US government's fiscal deficit averaged $427 billion. According to the Obama administration's budget, the fiscal deficit in fiscal year 2009 will reach 1.75 trillion US dollars, exceeding 12% of the US GDP. Issuing national debt is an important means for the US government to make up the fiscal deficit. As shown in figure 1, since 1990, the net issuance of national debt in the United States has been roughly consistent with the fiscal deficit, which shows that the US government mainly uses additional national debt to make up for the fiscal deficit. Since 1996, the annual net issuance of national debt has been higher than the fiscal deficit. [4] From 2002 to 2007, the net issuance of U.S. Treasury bonds has been stable at around $500 billion, and in 2008 it soared to 1.47 trillion dollars. The market predicts that in order to raise enough funds for the huge fiscal deficit, the net issuance of US Treasury bonds will reach at least $2 trillion in 2009. At the end of 2008, the outstanding balance of the US Treasury bond market was about $65,438+00.7 trillion. If 2 trillion US dollars of national debt is issued in 2009, it is equivalent to a 20% increase in market supply. If the growth of demand for US Treasury bonds can't keep up with the growth of supply of US Treasury bonds, the US government must raise the yield of new Treasury bonds, which will depress the market value of existing Treasury bonds, and foreign investors holding a large number of US Treasury bonds will suffer serious losses. [5] However, the reality is that as of mid-April, 2009, the overall yield of US Treasury bonds is still in a downward trend: at present, the yield of 10-year treasury bonds is less than 3%, while the yield of 3-month treasury bonds is less than 0.20%. The popularity of the US Treasury bond market is mainly related to the deleveraging of international financial institutions and the "flying to safety" effect of international capital in times of crisis. Once the deleveraging of international institutional investors is over, risky assets will be reconfigured, and a large amount of funds will be withdrawn from the US Treasury bond market, which may significantly push up the yield of the Treasury bond market and depress the market value of the Treasury bond. Table 2 summarizes the Fed's response plan since the outbreak of the crisis. The Federal Reserve's rescue plan mainly includes three categories: one is to cut interest rates, reducing the federal funds rate from 5.25% to 0-0.25% within one and a half years after the outbreak of the subprime mortgage crisis; The second is to provide liquidity support to financial institutions through various credit innovation mechanisms, including regular auction loans (TAF) for deposit-taking financial institutions, major dealer credit loans (PDCF) for dealers (investment banks), commercial paper loans (CPFF) for commercial paper issuers, and regular asset-backed securities loans (TALF) for asset-backed securities buyers; The third is the so-called quantitative easing policy, that is, the Fed injects liquidity into the financial market by directly purchasing securities, including government bonds, institutional bonds and MBS. The extremely loose monetary policy of the Federal Reserve has achieved certain results. At present, both the TED spread, which reflects the short-term money market financing cost, and the medium-and long-term mortgage interest rate of American residents are significantly lower than those at the beginning of the crisis. However, the Fed's monetary policy has also caused two obvious consequences: one of the consequences is that the size of the Fed's balance sheet is getting bigger and bigger. As shown in Figure 2, from early September 2008 to mid-April 2009, the total size of the Fed's balance sheet soared from about 900 billion US dollars to about 2.2 trillion US dollars. The main reason for the increase in total assets is the substantial increase in liquidity loans provided by the Federal Reserve through various innovative mechanisms. Since the introduction of PDCF mechanism in March 2008, the liquidity loan of the Federal Reserve has increased from zero to $65,438+$0.2 trillion in mid-April 2009. Since the Federal Reserve implemented the quantitative easing policy, the number of securities directly held by the Federal Reserve has also increased. The second consequence is that the excess reserves of American financial institutions have soared. Since the capital of the Fed has not changed, the increase in the overall size of the balance sheet actually means the increase in the liabilities of the Fed. As shown in Figure 3, among the main liabilities of the Federal Reserve, the cash in circulation is roughly stable at about 900 billion US dollars, while the deposits of deposit-taking financial institutions have increased from about 20 billion US dollars in early September 2008 to nearly 900 billion US dollars in mid-April 2009. Although the increase in liquidity loans from the Federal Reserve to financial institutions is mainly reflected in the increase in excess reserves of financial institutions, this is mainly related to the fact that the deleveraging of financial institutions has not yet ended and the risk appetite is very low, so there is a phenomenon of reluctance to lend. Once the deleveraging of financial institutions ends and lending resumes, the speed of money circulation may increase substantially in the short term, bringing inflationary pressure. Once the financial market and the real economy start to rebound, and the Fed can't withdraw liquidity in time, then the United States is likely to have serious inflation and the dollar may depreciate sharply. In fact, although the Federal Reserve has a large number of securities on its books, the amount of national debt is limited, so the liquidity recovered through the sale of national debt is limited. On the other hand, other types of bonds accumulated by the Fed through innovative credit mechanism are likely to be ignored in the short term, which means that the Fed's ability to withdraw liquidity in the short term is limited, and the possibility of US inflation and dollar depreciation in the medium term is greater.
Third, the future direction of the global financial crisis.
There is great uncertainty in accurately predicting the future trend of the global financial crisis. For example, can the new public-private joint venture bad bank plan of the US Treasury attract a large number of private investors, thus providing sufficient funds for the operation of bad banks? When will the deleveraging of American financial institutions end? When did the US financial market start to rebound? When will the hot market of US Treasury bonds end, and will the central banks of emerging market countries continue to pursue US Treasury bonds? Will the dollar exchange rate reverse? When will it reverse? Once the market rebounds, can the Fed withdraw liquidity in time to avoid the outbreak of hyperinflation? When will the global energy and commodity markets stop falling and rebound?
Although we can't give satisfactory answers to the above questions, we believe that some medium-and long-term directions of the crisis evolution are relatively certain. Next, we will forecast the global financial market, global real economic growth and global inflation. The crisis in the American financial market has not yet bottomed out. Although the profitability of financial institutions such as Bank of America, Citibank, Wells Fargo and Goldman Sachs in 2009 1 quarter exceeded market expectations, their performance in 2009 may be repeated. Financial institutions will continue to disclose bad debts, which means that the deleveraging of financial institutions will continue, and financial institutions will continue to seek equity investment from the government or the private sector. If the situation of large commercial banks deteriorates, the possibility of further nationalization by the US government will not be ruled out. Investors' withdrawal from hedge funds has not weakened significantly. If the short-term money market still cannot resume normal operation, there may be a large-scale dissolution and liquidation of hedge funds in the spring of 2009. With the deterioration of the growth prospects of the real economy, a new crisis may break out in the US corporate bond market. The disclosure of problem assets by European financial institutions is far less than that of American counterparts, which means that there is still a lot of room for downside in European financial markets. [6] Once the financial crisis breaks out in Central and Eastern European countries, western European commercial banks with large credit positions in Central and Eastern European countries will have more bad debts. However, despite this, it is difficult for the global financial market to repeat the systemic crisis triggered by the bankruptcy of Lehman Brothers in September 2008, because investors' expectations have been significantly reduced, and it is difficult to have a vicious incident that breaks investors' expectations and leads to panic selling. We predict that the US financial market is expected to bottom out in the second half of 2009 and gradually restore normal investment and financing functions. The recovery of the real economy is much slower. Judging from the rescue plans issued by various countries in the world, it is likely that the global balance of payments imbalance will not be alleviated, but will further deteriorate. American residents have not significantly reduced their consumption, and China residents have not significantly expanded their consumption, which means that the improvement of the current account deficit in the United States is likely to be only a temporary phenomenon. [7] Once the real economy rebounds and the global energy and commodity market prices rise, the current account deficit of the United States may further expand, and the current account surplus of China will also expand. In the short term, the American economy is expected to stop falling in the second half of 2009 and resume positive growth in the first half of 20 10. However, it may take at least five years to return to the pre-crisis level. The economic rebound of the euro zone and Japan will be later than that of the United States, which largely depends on whether the import demand of the United States is strong again. Stimulated by the 4 trillion yuan investment plan (focusing on infrastructure investment and real estate investment) and the soaring bank credit, China's economy is expected to rebound strongly in the second half of 2009. However, due to the persistent weakness of household consumption, stimulating investment may further lead to overcapacity, and soaring credit may lead to an increase in the non-performing loan ratio, and exports may continue to be weak, which means that China's economy lacks the motivation for sustained growth in the medium term. If the global stimulus policy is not used properly, and governments in various countries lack the courage to make structural adjustment and the foresight to coordinate macro policies of various countries, the whole world economy may show a W-shaped trend, that is, it will obviously recover in the short term and not be optimistic in the medium term. The current global deflation may be only a temporary phenomenon. Of course, if the world economy returns to inflation, the root cause may not lie in the strong recovery of global demand, but in the re-rise of global energy and primary product prices caused by the sharp depreciation of the US dollar. As mentioned above, it is difficult for us to convince ourselves that "Bernanke on the helicopter" can quickly withdraw liquidity when the market rebounds, so the current quantitative easing policy in the United States is likely to sow the seeds of future inflation. Once the deleveraging of financial institutions is over, institutional investors start to allocate risky assets again, and banks start to lend again, which means that the money multiplier may rise rapidly in the short term. If the base money is not reduced accordingly, it will aggravate the inflationary pressure in the economy. With a large amount of funds flowing out of the US Treasury bond market and returning to emerging market countries, the dollar may depreciate sharply, thus pushing global energy and commodity prices higher again. If the price increase in the commodity market is accompanied by the continuous downturn in aggregate demand, we cannot rule out the possibility that the world economy will fall into stagflation.