The economic crisis in the United States and Europe has finally become indisputable.

The financial crisis started with the U.S. subprime mortgage crisis in 2007, followed by the Fannie and Freddie incident, the US$700 billion U.S. financial rescue plan, and then Australia, Europe, Asia, Latin America, and many Asian countries. Financial institutions injected capital, and finally convened a global financial summit to find countermeasures, which fully demonstrated the global nature of the crisis. Today, we have every reason to expect that it will become an epoch-making event in the economic history of the United States and the world.

Many financial institutions that went bankrupt, closed down, or suffered huge losses during this crisis were, until yesterday, regarded by us as models of “Built to Last.”

The fact that the world has fallen into such a large-scale, large-scale, and deep financial crisis and economic crisis cannot be explained by just a few people saying what they say. We must examine, analyze, and analyze from the perspective of social development with a critical eye. Review your own thoughts, ideas and behaviors.

The trigger of this financial and economic crisis is subprime mortgages, but there are many causes. The financial industry was originally an intermediary for the real economy, but today it has become an intermediary for the virtual economy. Banks, securities companies, insurance companies, trust companies, investment banks, etc. act as intermediaries to amplify each other's risks, and use the high leverage ratios of financial instruments and products to create currency, asset, and capital bubbles exponentially. The causes of these problems are, in the near term, problems with product design in the financial industry, in the middle, in mixed-industry operations, in the long term, in issues of financial development concepts and values, and even in the philosophy of human existence.

Contemporary mainstream financial views and economic development views have led to the occurrence of financial crises. If the money-oriented economic and financial development outlook is not corrected, global financial and economic crises will emerge, and their destructive power will be even greater.

Mixed business operations and becoming bigger and stronger are the beginning of the problem

Mixed business operations (also known as "comprehensive management") are leading to unlimited expansion of the financial industry and monopolistic financial groups. an important condition.

Financial institutions initially operated in separate industries. Japan and the United States began mixed operations in the 1980s and 1990s respectively. The initial theory and motivation of mixed operation is to increase profit channels and disperse the operating risks generated by a single business. However, the results did not lead to an increase in the overall benefits of financial institutions, let alone an increase in social wealth. Under mixed operation, the investment impulse of financial institutions becomes stronger, and the equity relationships within the institution become very complicated. The parent company and subsidiaries of a group, and subsidiaries and subsidiaries hold one-way or mutual shares, and various businesses Not only can the risks not be hedged, but the risks will be transferred to each other, resulting in superposition and amplification. With the disappearance of professional division of labor, financial risks have become more uncontrollable, whether for financial companies, regulatory authorities, or the entire economic and social fields.

China has always been on par with the United States economically. After the mixed operation of the American financial industry, relevant Chinese theories and evidence began to appear. As soon as we entered the 21st century, the door to mixed operation was opened. After the U.S. subprime mortgage crisis, Chinese financial institutions showed no signs of vigilance or hesitation. Instead, they viewed the crisis situation as a good opportunity for expansion. Many institutions have implemented, are currently implementing, or are planning to implement ambitious mixed-industry acquisitions and mergers plans.

On the other hand, the development goal of “getting bigger and stronger” is the direct cause of financial and even social and economic problems.

Why? The fundamental point is that financial enterprises, especially banks, operate with liabilities. If they want to expand indefinitely, they must continue to increase the scale of liabilities. After that, they must increase the scale of assets indefinitely. When the asset scale reaches a certain level, it will be affected by capital. There are restrictions on the loan ratio, and various external or social financing methods must be used to replenish capital (due to their eagerness for expansion and rapid expansion, banks almost never adopt the stable form of self-replenishment of capital). This cycle is endless, which has a negative impact on social loans. Increment, the situation of the securities market, and the trend of social economy have had a wave of impacts. Since the bank's motive for the above-mentioned actions is to make itself bigger and stronger, the social benefits are not what they care about.

In terms of capital ratio, Chinese banks adhere to the minimum standard, that is, operating with a bottom line of 8%. For some banks in Europe, America and Asia, the bottom line is around 12%. This alone makes the risk much greater.

The expansion of banks is outstanding in terms of market competition. For example, in recent years, the competition among domestic banks in the personal loan market, especially the personal housing mortgage market, has reached a blood-stained situation. For the promotion of personal housing mortgage products, banks' indicators are gradually enlarged after being decomposed layer by layer. Some branches even proposed to "use all means" to get real estate agencies and developers; some banks have included training plans for account managers. Named after beasts; in the implementation of housing mortgage policies, some banks have circumvented the relevant policies of regulatory agencies, such as zero down payment, re-mortgage, etc.

In terms of becoming bigger and stronger, almost no commercial bank in China is willing to be a regional bank. A commercial bank born in a provincial city has proposed to set up branches across provinces, and has become a regional bank. The ambitious goal of national commercial banks. In the United States, there are nearly 8,000 regional or regional commercial banks, and they are happy to serve their local communities.

The growth of banks has also led to economic bubbles, inflation, and subsequent economic recession, leading to unnatural and non-demand fluctuations in the economy.

Take the real estate bubble as an example. People’s deposits go through banks and are turned into development funds for real estate developers. Then, many people overdraw almost a generation’s future income to buy a house, and the bank pays the depositor The price is also a negative interest rate. This is a cruel game of financial operations. Most depositors do not know the truth. According to statistics from an article in "Finance Weekly" in April 2008, the average capital-liability ratio of 105 listed real estate companies in Shanghai and Shenzhen stock exchanges is 55.7%, with the highest reaching 89.1%. That is, 89 yuan out of 100 yuan in assets comes from Borrowed from the bank.

The proportion of real estate development loans and personal mortgage loans of commercial banks in total self-operated loans, even among banks with strong risk awareness, is close to 30%. If other loans that use real estate as collateral are included, Loans involving real estate are close to 50%.

In sociology, as with most things, the truth is originally clear. The reason why the truth of many things has become confusing is because the truth has become the political or economic demands of various interest groups. Once a large number of truths lose their essence, that is, become synonymous with political power and economic power, social crises will arise.

The huge remuneration of executives is the driving force of the problem

At present, people mostly attack the huge remuneration system of executives of financial institutions from the perspective of the huge gap in social wealth distribution. In the United States, it is not rare for financial institutions such as stock exchanges, investment banks and comprehensive banks to have executives with an annual salary of over 100 million US dollars, and those with an annual salary of tens of millions of dollars are common. Since the 21st century, globalization goals have made rapid progress in the area of ??remuneration for executives of Chinese financial institutions. The remuneration of executives of many financial institutions has doubled or doubled a year in recent years.

There are many reasons why executives of financial institutions set their own salaries. One of them is globalization. They compare themselves to an institution in the United States. Another way is to promote themselves by introducing overseas executives. salary. The salary gap within financial institutions is generally about 200 times, and if the subsidies (reimbursable expenses) received are calculated, it is even higher. Judging from the data disclosed in the annual reports of listed companies and other aspects, in the entire financial industry, the difference between the highest value of more than 60 million and the lowest value of 50,000 is more than 1,000 times.

Discussing the compensation of executives in the financial sector is not to discuss the distribution of social wealth, or to simply discuss this issue. What I want to say here is that the huge compensation of financial industry executives has led to the unlimited expansion of financial institutions, led to the emergence of financial crises, economic disorder, and even social unrest. Because the remuneration of executives of financial institutions is generally linked to the size, total assets and total profits of the institution, which is a basic factor. Want a high salary? It is necessary to expand the scale and increase profits. Should the salary be higher? We must expand the scale and increase profits, and so on, without end. How to expand the scale? Increase outlets, expand customer base, increase deposits; how to increase profits? Make more loans and do more intermediary business. The above is the situation of banks. The insurance industry is increasing insurance types and selling more policies; securities companies are expanding their customer base, increasing their clients' securities trading volume, sponsoring more companies to go public, etc.

Financial institutions compete with each other for scale, products (i.e. "innovation"), and profits. Annual profits can increase by more than 200%, while the growth of the real economy is only a few percentage points. Is this normal? Since contemporary financial institutions control the monetary wealth of the country, social legal entities and natural persons, that is, they control most of the liquidity in society, such crazy pursuit of profits will undoubtedly cause strong economic expansion and subsequent bubble collapse.

However, for financial executives with huge capital, there is almost no loss when financial risks occur, and their salaries for the year will not even be reduced. Analyzing from a higher political level, very large financial groups or enterprise groups, especially monopolistic and dominant giant multinational groups, can influence and influence a country's politics and even global politics.

Stiglitz, who served as vice president and chief economist of the World Bank and won the 2001 Nobel Prize in Economics, said: The global financial crisis is closely related to the huge bonuses of financial industry executives. association because bonuses incentivize risky behavior. It's like paying them to gamble, and if everything goes well, they walk away with huge bonuses; but when things go bad, as they are now, they don't have to share the losses. Even if they lose their jobs, they can still walk away with a lot of money. Capping bonuses will not help solve this problem. The key is to establish a mechanism that links bonuses to long-term performance.

His prescription is: the bonuses of financial executives should first be escrowd by a third party for 10 years. If there is a performance loss in the second, third, or fourth year, the bonuses will also be kept accordingly. reduce.

Financial derivatives are the tools that create problems

Financial expansion and wealth accumulation require channels and tools, from which various derivatives and products are produced. From the development of options and futures in the mid-1980s to the design of CDS (credit default swaps) by JPMorgan Chase in the early 1990s, Wall Street produced an endless stream of complex financial derivatives.

As a result, most of the products began to run counter to the original intention of finance. First, they tried every means to take money out of investors' pockets. Second, various financial industries used each other, traded with each other, and grabbed commissions and interest from each other. The financial industry was in chaos, and the social economy was in ruins. Turbulence ensues. Financial derivatives have become an effective tool and means for financial institutions to plunder social wealth, and the subprime mortgage crisis is just a typical case.

For example, bank credit asset securitization (ABS), which is considered an important innovation by Chinese financial experts, is designed to diversify bank risks. The bank's intention is to transfer both the returns and risks of credit assets to society. Let’s put aside the motivations of banks and their impact on social and economic entities. Let’s first look at what banks do after they have successfully transferred risks. The funds obtained by banks after selling credit assets must be greater than the costs they pay (since it is beneficial to the bank's own product innovation, it will definitely not lose money), so it will continue to lend this money. At this time, the bank has sold an item three times: the first time it issued a loan to the enterprise is the first sale, and the loan interest is the price; the second time it is sold to the society; and the third time it is sold to the enterprise after obtaining funds. . At this point, the total amount of credit in society has more than doubled, which has pushed up commodity prices and created asset bubbles and capital bubbles.

History tells us that unlike the innovation of scientific, medical, industrial, and artistic products, the innovation of financial products is designed from the beginning to win more profits for itself, and the design of derivative products is particularly outstanding. This difference is not a moral issue, but a matter of professional attributes or the nature of the profession. Now, even financiers who admire and make a living from financial derivatives are beginning to understand the nature of their evil. Doug Kass, chairman of the hedge fund Seabreeze Partners Management, said that excessive leverage in the U.S. financial market was the cause of this financial disaster. He said that if the leverage ratio is higher than 30 US dollars for every 1 US dollar of equity, the equity will disappear as long as the asset value falls by 4%.

Complex financial derivatives, coupled with complex trading procedures, form complex virtual assets. When Bear Stearns was acquired by JPMorgan Chase, it couldn’t even calculate how much it was worth because of its balance sheet It is extremely complex. What criteria should be used to value it? No one on either side can tell. It can be seen that there are risks in the capital accounting of financial institutions, and the gameplay of financial products and financial transactions is very clear.

In this financial crisis, why did so many old banks collapse instantly despite capital adequacy constraints and deposit insurance systems? The reason is that under the circumstances of asset securitization and high leverage of financial products, the most basic support of finance - integrity and reputation - has been trampled on for no reason; various constraints such as capital adequacy ratio are in name only, and accounting fails and is distorted; it has been Due to the mixed operation of international financial institutions, market risks and credit risks are rapidly transmitted and diffused in the international financial market, making liquidity highly fragile. The entire financial system has become vulnerable because, unlike traditional deposit and loan businesses, it has real economic needs and support.

The statistics on the trading volume and nominal principal of financial derivatives and derivatives are very complicated and difficult because most of them are off-balance sheet businesses with complex correlations and opacity. There is no authoritative organization in the world that can conduct complete and accurate statistics.

Incomplete statistics show that the total transaction volume of the global derivative financial instruments market was US$100 trillion in 1999 and nearly US$677 trillion in 2007, of which US$80 trillion was traded on the exchange and US$80 trillion was traded over the counter. Amount of 596 trillion US dollars. According to Fitch statistics, the credit derivatives market alone reached US$50 trillion in 2006, with a 15-fold increase from 2003 to 2006. The market value of CDS is US$62 trillion, which increased 100 times in the seven years before 2008.

According to statistics, Bear Stearns alone handled US$100 trillion in over-the-counter derivatives transactions, and it still had US$9 trillion before being taken over by JP Morgan Chase. The amount of CDS involved in AIG is also as high as US$446 billion.

From October 2007 to September 18, 2008, approximately US$4.6 trillion in global wealth was evaporated. In other words, financial derivatives have caused the global economy to bungee jump in the range of US$4.6 trillion, and its destructive effect on natural persons, enterprises and society cannot be overestimated.

Today, most of the innovative financial products are derivatives, and most of them are N-time derivatives, and their combinations can be continuously changed. For example, CDS not only packages credit assets, but also packages a wide variety of financial products. Only a few financial instruments, designers and users of financial products (not investors who use these products and tools) know their risks, and many financial practitioners are also ignorant. The reason is that it has high "technical" content and complicated "procedures", and is considered to be the behavior of a few elites.

In May 2008, Warren Buffett commented on CDO at the Berkshire Hathaway shareholder meeting: To understand a CDO security, you need to read a 750,000-word report. The creation of financial derivatives based on portfolios of mortgage-backed securities is just crazy.

Japan's "Economist" said, "This is an era where the tail commands the head. The tail refers to the financial economy, and the head refers to the real economy. Global deposits plus virtual assets including stocks and bonds It has reached 3.2 times of real assets (nominal GDP), while before economic globalization, the former was only 1.7 times of the latter."

The endless variety of financial derivatives tells us that it is now a thought. In the age of excess, excess ideas are particularly terrible for the financial industry.

Take a medium-sized commercial bank as an example. Its corporate business products include as many as 150 types. In terms of retail business and private banking business, there are countless products. One bank has more than 800 products in its fiduciary financial management business alone. These are all manifestations of excess thinking and excess energy. In the financial field, we must be wary of crises caused by excess ideas.

The rentier characteristics of the financial industry have led to the unlimited expansion of the financial industry. In recent years, even senior figures in the U.S. financial sector have been worried. They are especially worried about the excessive development of investment banks and the influx of talented students majoring in economics and finance into the investment industry. . In a society, so many people do not engage in the real economy, do not engage in scientific, cultural and artistic creation, but flock to the so-called investment banks, funds and other investment fields. This is not industrial investment, but virtual investment, playing the game of "capital operation". Every day I think about using virtual products to seize social wealth in the virtual market. How come financial disaster and economic disaster are not coming?

Excessive "development" of the financial industry, failure to correct financial concepts, failure to stop financial expansion, and failure to abolish multiple derivatives will eventually lead the social economy into a dead end. Without intervention, the world in the future is likely to develop according to the goals of transnational financial monopoly capital, and the consequences will be dire. Politicians, sociologists and even economists do not have enough understanding of this.

Regarding the causes of the financial crisis, Greenspan, Paulson, Bernanke, senior officials in China's financial sector, and many economists have made similar remarks - the most vocal It is caused by inadequate supervision and excessive financial innovation.

We must examine the contemporary financial industry from the perspective of social development. Although the financial industry has introduced the concepts, means and methods of risk control and internal control in the past ten years, it is far from enough to offset the disasters caused by its wrong development concepts and development directions. The direction of development doesn't help at all. Therefore, the current global financial crisis and economic crisis are not a cyclical crisis or a low-probability event as some scholars have said, but are inevitable for the development of the contemporary financial industry.

Correct the development ideas and concepts of the financial industry and standardize the behavior of the financial industry. Like economic globalization and financial globalization, the control of financial risks also requires globalization. To this end, we must first seek a way out from the ideological and macro aspects, that is, we must establish a correct outlook on human development and economic and social development. Economic development speed, national economic aggregate, per capita national income, etc. are not the correct concepts and indicators to accurately evaluate the status and direction of human development. Development is not synonymous with expansion, monopoly and control. The relationship between development and existence must be organically unified. Scientific and harmonious development, environmentally friendly development, social-friendly development, peaceful and cohesive development, mutually beneficial development, and happy existence development are the correct social outlook of mankind. Development is not the primary and fundamental proposition of the philosophy of human existence. Harmonious existence is the fundamental proposition of the philosophy of human existence.

In terms of action, we must gradually achieve the following points:

First, countries can define the concept and scale of super monopoly financial institutions according to their national conditions, and formulate laws to limit their Unlimited expansion and curbing the emergence of monopolistic and dominant super financial groups. Due to the particularity and importance of the financial industry, special legislation can be made to restrict financial monopoly.

Second, the United Nations should assume the highest international responsibility and play an irreplaceable role in preventing global financial risks. International legislation is needed to prevent global financial risks, and transnational monopoly financial groups are not allowed to emerge. Formulate financial rules that all countries must abide by in the context of globalization. All countries, first of all the financial industries and financial institutions of developed and developing countries, must correct their financial outlook, correct their abnormal development thinking, and refrain from exporting financial risks.

Third, the IMF’s functions must be repositioned. It must be responsible for supervising the financial behavior of various countries, preventing global financial risks, and adjudicating financial disputes. It must have the means to control illegal financial behaviors of member states and effective measures. means of punishment.

(The author is a senior economist at the head office of a domestic commercial bank, the original text is 22,000 words, and has been deleted)

My personal opinion is: investment banks have excessively ignored systemic risks (almost every The mathematical models of investment banks are all based on the assumption that systemic risks are not taken into account), thereby excessively de-innovating finance, amplifying risks, and invariably exposing risks under the opportunity of a real estate market. Speaking of the development path, maybe the above article has some guiding inspiration, but under the current circumstances, who can predict how it will develop. I personally believe that investment banking will continue to develop slowly. After all, its original intention is to serve the industry. It just became disengaged later on.

You should know the current situation. There is basically no investment banking business in the United States. The 3rd, 4th, and 5th investment banks should collapse and be acquired by commercial banks. The 1st and 2nd investment banks should transform into commercial banking businesses. ~~~