This article is from WeChat official account:Wang Jian’s perspective (ID: wangjianzj0579) , author: Wang Jian, head Figure from: vision China
Everyone knows that the United States is releasing water.From the data point of view, by the end of 2020, compared with the end of 2019, the US M2 will increase by 25%, an increase of 3.85 trillion US dollars; the base currency will grow 52%, an increase of 1.78 trillion US dollars. . At the same time, interest rates are also low.
Especially M2. We have not paid much attention to US M2 because the US is a financial system dominated by direct financing. Direct financing will not derive M2, so the total amount of M2 will not be particularly large. In contrast, my country’s M2/GDP is extremely high, and there have been voices saying that my country’s currency is oversupply. For this view, my suggestion is to go back to school and retake “Money and Banking.”
But this time, the M2 in the United States really scared us. What about “low M2/GDP in a direct financing environment”? . It turned out to be an increase of 25% year-on-year. You know, even in the subprime mortgage crisis and the European debt crisis, the growth rate of M2 did not exceed 10%. It can be seen that the impact of the epidemic is far more severe than the financial crisis. This time it really frightened Americans (Yes, I also have to go back to school to retake “Money and Banking” , Even have to rewrite the textbook “Money and Banking”).
At this time, we will find that “Money and Banking” is still the most useful course, but most of the textbooks do not take you to use real-world currency data for practical training. The monetary system in the United States is also the mainstream “central bank-commercial bank” secondary banking system. The central bank issues basic currency and commercial banks issue broad currency(M2). Through the analysis of the balance sheets of the central bank and banks, we can see how how so many base currencies and M2 were released in 2020. strong>
But the situation in the United States is more complicated than that in my country, because there are more subjects and more complex, which is also a good thing, and the information provided is more detailed. At the same time, the currency issued by the United States runs all over the world, and many figures and information may not only be reflected in the balance sheets of the US central bank and banks. Therefore, there will be a large error, but it will not affect our understanding.
First, as usual, we first pull out the annual changes in the balance sheets of the Federal Reserve and U.S. Commercial Banks, that is, the number at the end of 2020 minus the number at the end of 2019 (If you are interested in a certain stage, you can also observe that stage instead, such as the first half of 2020, or even the second quarter, when the epidemic is the most severe). We have condensed some subjects and highlighted key subjects. First look at the Fed’s balance sheet:
The Fed’s operations this year are relatively clear. The base currency (including Federal Reserve bonds, bank deposits, and government deposits) increased by 3.04 trillion yuan. The main sources are: through the purchase of treasury bonds, MBS(including premium) has placed a total of US$3.21 trillion in base currency and is also repurchasing the bank(made in 2019) will not be renewed after maturity, and 0.23 trillion U.S. dollars of base currency has been withdrawn. Therefore, about 3 trillion U.S. dollars of base currency has been released.
Simple and clear, People Yang Ma has invested about 3 trillion US dollars through various “buy, buy and buy” of QEbase currency. A small part of the newly released base currency is withdrawn as cash. The remaining US$1.49 trillion is used as bank reserves for the central bank, and the other US$1.26 trillion is used as funds in the national treasury, which the government has not spent yet.
Look at the balance sheet of commercial banks again:
This is a balance sheet that looks very magical at first glance. It is completely invisible to be responsible during the epidemic, or to support the real economy. In our country, which bank leader dares to do this. Will definitely be held accountable. But such a bunch of bank stocks have risen more than ours. You say they are irritating and not irritating? On the right side of the balance sheet, deposits have increased by US$2.97 trillion, explaining the entire increase, and changes in other accounts are very small.
On the asset side, the loan was put in US$0.35 trillion, and the national debt, MBS, and other securities purchased US$0.28 trillion, US$0.48 trillion, and US$0.12 trillion, respectively. Finally, the bank also stocked 1.48 trillion US dollars in cash (that is, it is stored in the central bank, which can be matched with the Fed report above).
In other words,they put in loans to industrial and commercial enterprises for only US$0.35 trillion(Of course there are some ABS out of stocks in securities)< /span>, the rest is to put in housing mortgage loans and national debt, and finally hoard a pile of cash. Of course, they may say that meeting the reasonable housing needs of the people is also a support entity. Giving money to the government to allow the government to support the entity also indirectly supports the entity. There seems to be nothing wrong with this.
These two tables are just the result of changes throughout the year. In order to better understand how Americans release water, let’s review the entire process. Due to insufficient data, this process can only be a rough approximation and has a certain relationship with reality.The difference, the following steps do not represent the true order, but it is sufficient to reflect the water release process.
(1)Bank lending, including US$0.35 trillion in industrial and commercial enterprise loans and US$1.1 trillion in housing loans, has resulted in deposits of US$1.45 trillion.
Then, the housing loan will be first transferred to Freddie Mac, etc., and then sold as MBS, and the bank will buy it back. Of course, the numbers in reality cannot be so accurate, we just describe the process.
(2)Banks purchase US$2.64 trillion in national debt, using reserves stored in the central bank. This step does not involve deposits.
On the Federal Reserve’s table, bank deposit accounts decreased by 2.64 trillion U.S. dollars, and government deposit accounts increased by 2.64 trillion U.S. dollars.
(3)During the disaster relief period, the U.S. Treasury Department dropped coins and spent 1.38 trillion U.S. dollars in fiscal expenditures, while deposits and base currency were each 1.38 trillion U.S. dollars. The bank statement is:
Merge:
The Federal Reserve report is:
(4) The Federal Reserve QE, buy, buy, buy, from the bank, it bought US$2.36 trillion in national debt, US$0.62 trillion in MBS, and the premium incurred when buying securities.(I don’t know what the securities are) US$0.23 trillion, for a total of US$3.21 trillion. Bank deposits with the Federal Reserve increased accordingly. The bank’s statement is:
Merge:
The Fed’s table is:
(5) There is also a small transaction. The Fed’s positive repurchase of banks expires, returning 0.23 trillion U.S. dollars of base currency:
Federal Reserve Statement:
(6) Withdraw cash, U.S. people withdraw US$0.28 trillion in cash(With so much cash, the cash balance accounts for the proportion of deposits It’s over 13%, is their payment method so primitive?):
Merge:
Federal Reserve(The Federal Reserve Bank notes are the US dollar bills we talk about every day, in fact, they are M0):
The above report is close to the actual report, there is still a little difference, because the operation of some other assets is not reflected, and the amount is not large, so just ignore it.
Conclusion: U.S. M2(is the main body of “deposits” on the bank’s liability side, including M0) high growth (Of course it refers to the high growth of deposits), part of which comes from bank loans (mainly mortgage loans, industrial and commercial There are fewer corporate loans, indicating that this round of credit expansion is driven by real estate) credit derivation, and the other part comes from fiscal money.
And the financial money comes from the bank’s purchase of treasury bonds(Of course, others are also buying), the bank bought Treasury bonds are sold to the Federal Reserve, so the Federal Reserve (with banks as intermediaries) indirectly give money to the finances and invest it in the private sector. Yes, the deficit is monetized, this is very American, this is very MMT (that is, Modern Money Theory, also translated “buy to buy”, buy through the central bank Buy to solve financial problems).
Finally look forward to the outlook. The United States will launch a fiscal stimulus of US$1.9 trillion in the future, and there is still US$1.61 trillion in the fiscal treasury, which is still quite sufficient. (of course they are all printed out), so it seems that the implementation of this plan is not difficult. Of course, it is not yet understood how the $1.9 trillion plan was implemented. Let us first assume in a simple way that this plan is just to throw out the money from the treasury. After the funds in the national treasury are released, the base currency and deposits will be put in at the same time, and the liquidity will be very loose. It is really a flood. At 1.9 trillion US dollars, the M2 in 2021 will have to increase by more than 12%. Theoretically, at this time a responsible central bank will withdraw some liquidity, which can still maintain easing.
The next question is, Is the Fed a responsible central bank?
This article is from WeChat official account:Wang Jian’s perspective (ID: wangjianzj0579) , author: Wang Jian