{"id":5124,"date":"2023-01-12T21:42:21","date_gmt":"2023-01-12T13:42:21","guid":{"rendered":"https:\/\/fanyuzhao.com\/?p=5124"},"modified":"2023-01-12T22:44:18","modified_gmt":"2023-01-12T14:44:18","slug":"%e8%bf%91%e6%9c%9f%e7%bb%8f%e6%b5%8e%e8%a7%82%e5%af%9f-6","status":"publish","type":"post","link":"https:\/\/fanyuzhao.com\/?p=5124","title":{"rendered":"\u8fd1\u671f\u7ecf\u6d4e\u89c2\u5bdf"},"content":{"rendered":"\n<h4 class=\"wp-block-heading\">Credibility Affects How the Market Reacts <\/h4>\n\n\n\n<p>Preliminary: \u8d27\u5e01\u653f\u7b56 &amp; \u8d22\u653f\u653f\u7b56\u5bbd\u677e\uff0c\u523a\u6fc0\u7ecf\u6d4e\u77ed\u671f\uff0c\u5e26\u6765\u77ed\u671f\u9700\u6c42\u589e\u52a0\u3002M2 increases results in CPI increases. \u4f46\u662f\uff1a<\/p>\n\n\n\n<ul><li>1. \u957f\u671f\u968f\u7740\u4ef7\u683c\u6c34\u5e73\u589e\u52a0\uff0coutput\u4f1a\u56de\u5230 <span class=\"katex math inline\">Y^*<\/span>.<\/li><\/ul>\n\n\n\n<ul><li>2. Inflation is nothing but a monetary phenomenon. Too much money chases too few goods and services, and then there would be inflation. \u5f53\u8d27\u5e01\u8d85\u53d1\uff0c\u4e2d\u671f\uff0c Goods &amp; Services\u7684\u589e\u52a0\u4e0d\u8db3\u4ee5\u5339\u914d\u8d85\u53d1\u7684\u8d27\u5e01\u65f6\uff0c\u901a\u80c0\u5c31\u4ea7\u751f\u4e86\u3002<\/li><li>P.S. \u4e2d\u671f\u4e0e\u5426\uff0c\u53d6\u51b3\u4e8e\u5e02\u573a\u5bf9\u8d44\u91d1\u7684\u9700\u6c42\u3002<strong>Unrealistic Case 1<\/strong>\uff1a\u82e5\u4e3a\u957f\u671f\uff0c\u4eba\u4eec\u4ecd\u7136\u9884\u671f\uff0c\u672a\u6765\u7684goods n services\u8db3\u4ee5\u5339\u914d\u8fc7\u591a\u7684money\uff0c\u53ef\u80fd\u4e5f\u4e0d\u4f1a\u5e26\u6765Price Level\u7684\u589e\u52a0\uff08\u201cTechnological Growth\u201d Case\uff09\u3002<strong>Unrealistic Case 2<\/strong>\uff1a\u4e5f\u53ef\u80fd\u77ed\u671f\uff0c\u751a\u81f3\u8d85\u77ed\u671f\uff0cPrivate Sectors \u5ac9\u5992\u60b2\u89c2\uff0c\u4e0d\u76f8\u4fe1\u4efb\u4f55public sector&#8217;s credibility\uff0c\u4e0d\u5438\u7eb3\u4efb\u4f55money\uff0c\u4e0d\u7528\u4efb\u4f55moeny\u53bb\u4e70goods &amp; service\uff0c\u54ea\u6015\u6709helicopter drops\u3002\u90a3\u4e48\u6b64\u65f6\uff0cprint money means create inflation directly\uff0c\u5370\u94b1\u4f1a\u5728\u8d85\u77ed\u671f\u5c31\u5e26\u6765\u901a\u80c0\uff01 <\/li><\/ul>\n\n\n\n<p><strong>Based on the previous assumption: One factor that affects how the market reacts to QE is the Credibility of the Public Section.<\/strong><\/p>\n\n\n\n<p>Where the <strong>Credibility <\/strong>comes from? It&#8217;s from the <strong>Stability<\/strong> of a State, People&#8217;s <strong>expectations about future development<\/strong>, <strong>Demographic Structure<\/strong>, <strong>Gov&#8217;s Leverage Rate and Implicit Leverage rate,<\/strong> and so on. Because the Public sector can do <strong>Ponzi<\/strong>, and renew their debts indefinitely.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">After Inflation<\/h4>\n\n\n\n<p>We assume that the public sector is credible and would not default, and the stability and social structures are still healthy. Then, QE result in too much money chasing too few goods &amp; services, and inflation emerges.<\/p>\n\n\n\n<p>After the inflation,  how do people react?<\/p>\n\n\n\n<ul><li>1. Pour money into the Heavy-capitalised assets, such as real estate and &#8216;equity&#8217; shares. Then Asset Price increases to absorb extra money. The advantage is that goods and services (necessities) might not appreciate a lot. The disadvantage is that asset price increase is still not a healthy phenomenon, and systematic troubles accumulate because the bubble collapses one day. If the Bubble Collapses, the CB must reduce liquidity (money). Let&#8217;s move case 2 then.<\/li><\/ul>\n\n\n\n<ul><li>2. QT.   However, QT might be too dangerous, because high financial costs would increase financial burdens for highly leveraged households and firms. Defaults and Disposal Sales increase. Asset&#8217;s price slips. The current financial markets are highly securitised and synthetic. A decrease in core assets would result in a series of dangerous chain reactions. Potential Systematic Risks come true.<\/li><\/ul>\n\n\n\n<ul><li>3. Technological Growth brings extra demands or something else, to absorb extra money. <\/li><li>3. However, Technological Growth might be ambiguous, and is highly unlikely to happen, at least in the current situation. It is only a potential solution and is less likely to happen.<\/li><\/ul>\n\n\n\n<ul><li>If case 3 not working, we have to move back to case 2.<\/li><li>Withdraw Liquidity (money), and kill inflation. Asset Prices, such as housing prices and stock prices, evaporate. In this case, necessities&#8217; prices are less likely to be affected because they are rigid. Housing Price is a large component of the CPI basket, reducing the price of assets might be a possibility to reduce inflation. However, the gov might choose to keep a relatively sustainable and stable recession by maintaining the housing price. House has a special function, living. So, killing the equity market, in which stock prices are not that directly linked with household living, might be the best choice for the gov.<\/li><\/ul>\n\n\n\n<p>The first case might be more effective because problems are left to future generations.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">\u4e2d\u56fd\u5e02\u573a<\/h2>\n\n\n\n<p>Not in the same economic cycle as the U.S. market. There could be a reverse in the short term and even in the mid-term because the pandemic policies are forced to be stopped. However, I don&#8217;t have a positive expectation toward the market in the long run for mainly two reasons. 1. leverage increase in the local government. 2. credibility decreases. Those two reasons interact to make the problem even more severe.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Credibility Affects How the Market Reacts Preliminary: \u8d27\u5e01\u653f\u7b56 &amp; \u8d22\u653f\u653f\u7b56\u5bbd\u677e\uff0c\u523a\u6fc0\u7ecf\u6d4e\u77ed\u671f\uff0c\u5e26\u6765\u77ed\u671f\u9700\u6c42\u589e\u52a0\u3002M2 increases results in CPI increases. \u4f46\u662f\uff1a 1. \u957f\u671f\u968f\u7740\u4ef7\u683c\u6c34\u5e73\u589e\u52a0\uff0coutput\u4f1a\u56de\u5230 Y^*. 2. Inflation is nothing but a monetary phenomenon. Too much money chases too few goods and services, and then there would be inflation. \u5f53\u8d27\u5e01\u8d85\u53d1\uff0c\u4e2d\u671f\uff0c Goods &amp; Services\u7684\u589e\u52a0\u4e0d\u8db3\u4ee5\u5339\u914d\u8d85\u53d1\u7684\u8d27\u5e01\u65f6\uff0c\u901a\u80c0\u5c31\u4ea7\u751f\u4e86\u3002 P.S. \u4e2d\u671f\u4e0e\u5426\uff0c\u53d6\u51b3\u4e8e\u5e02\u573a\u5bf9\u8d44\u91d1\u7684\u9700\u6c42\u3002Unrealistic Case 1\uff1a\u82e5\u4e3a\u957f\u671f\uff0c\u4eba\u4eec\u4ecd\u7136\u9884\u671f\uff0c\u672a\u6765\u7684goods n services\u8db3\u4ee5\u5339\u914d\u8fc7\u591a\u7684money\uff0c\u53ef\u80fd\u4e5f\u4e0d\u4f1a\u5e26\u6765Price Level\u7684\u589e\u52a0\uff08\u201cTechnological Growth\u201d Case\uff09\u3002Unrealistic &hellip; <a href=\"https:\/\/fanyuzhao.com\/?p=5124\" class=\"more-link\">Continue reading <span class=\"screen-reader-text\">\u8fd1\u671f\u7ecf\u6d4e\u89c2\u5bdf<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,21],"tags":[],"_links":{"self":[{"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/posts\/5124"}],"collection":[{"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5124"}],"version-history":[{"count":33,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/posts\/5124\/revisions"}],"predecessor-version":[{"id":5157,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=\/wp\/v2\/posts\/5124\/revisions\/5157"}],"wp:attachment":[{"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5124"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5124"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fanyuzhao.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5124"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}