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Research paper on industry leverage ratio
The Causes and Countermeasures of the Financial Crisis in 2008

Since the end of 2007, the subprime mortgage crisis broke out in the United States, which gradually evolved into a financial crisis and spread abroad. Especially since September this year, the international financial situation has deteriorated sharply and rapidly evolved into the most serious international financial crisis since the Great Depression of the last century. The financial crisis has rapidly affected the real economy, and the risk of global economic recession has increased significantly. How to quickly contain the financial crisis and its impact on the real economy is a top priority and concerted action of all countries in the world.

Keywords: financial crisis, subprime financial innovation, CDS financial supervision, China economic impact.

First, the internal causes of the US financial crisis

The emergence of American financial crisis has its inevitable reasons. In essence, it is a problem of the development model of low savings and high consumption in the United States. From the perspective of system and mechanism, financial neglect of supervision has six major drawbacks.

(1) Subprime real estate mortgage loan.

According to international practice, the mortgage loan for house purchase is a down payment of 20%-30% and then a monthly repayment of principal and interest. However, in order to stimulate real estate consumption, the United States implemented "zero down payment" in the past 10, and did not have to repay principal and interest for half a year. Within five years, only the interest will be paid, not the principal, and even the buyers will be allowed to mortgage the value-added part of the house price to the bank again. The most romantic mortgage system in the world made Americans spend more money, and the poor lived in big houses, which created a brilliant decade of American economy. But behind this glory lurks a huge real estate bubble and related bad debts.

(2) Mortgage securitization.

For the sake of liquidity and risk diversification, American bank financial institutions package mortgage loans, including subprime mortgages, and sell them to social investors through investment banks. The huge real estate bubble is transmitted to the capital market and further to the investors in the whole society-shareholders, enterprises and various banks and institutional investors around the world.

(3) The third link is the alienation of investment banks.

Investment banks are financial intermediaries, but American investment banks are confused by the huge profits of mortgage securitization transactions and their roles are alienated. While earning intermediary fees by underwriting bonds, large-scale trading of subordinated bonds gains income. Figuratively speaking, it is from a casino banker to a gambler or even a banker. The alienation of roles not only makes the mediator lose justice, but also drags himself into the quagmire.

(D) The financial leverage ratio is too high.

The financial market must be stable and the financial leverage ratio must be reasonable. American financial institutions unilaterally pursue excessive profit expansion, using a very small proportion of their own funds to achieve scale expansion through a large number of liabilities, and the leverage ratio is as high as 1: 20-30 or even 1: 40-50. In the past five years, American financial institutions have concocted a huge market and false prosperity with this excessive leverage ratio. For example, Lehman Brothers used its own funds of 4 billion US dollars to form a bond investment of about 200 billion US dollars.

(5) Credit default swaps (CDS).

The leverage ratio of financial investment in the United States can reach 1: 40-50 because of the existence of CDS system, and credit insurance institutions provide guarantees for these high-risk financing activities. If the financing party has financial problems, it will be paid by the institution providing insurance. However, in the absence of default, insurance institutions can not only obtain risk compensation, but also publicly sell CDS in the market. As a result, a huge CDS market with a scale of more than 33 trillion US dollars has been formed. The emergence of CDS not only avoids local risks, but also increases the overall financial risks, making the scattered and controllable default risks concentrated in credit insurance institutions and becoming highly concentrated and uncontrollable risks.

(vi) Lack of supervision over hedge funds.

The interaction of the above five links formed the source of the financial crisis in the United States, and the hedge fund of "chasing up and killing down" accelerated the fermentation of the crisis. There are a large number of hedge funds in the United States that lack government supervision. When the American economy developed rapidly, hedge funds made many commodity markets, such as pushing oil to the sky-high price of 147 dollars; After the subprime mortgage crisis broke out, hedge funds frantically shorted the US stock market, which accelerated the collapse of the whole system.

These six links are linked one by one, forming the spiral body of American financial bubble and growing chain. The collapse of one link will produce a domino effect, which will eventually evolve into a financial crisis in the United States and even the world today.

Second, getting out of the crisis requires three stages of overall planning.

2009 is a crucial year to deal with the world financial crisis. To contain the crisis and get out of the predicament as soon as possible, we must treat both the symptoms and the root causes, and combine far and near. At present, it is urgent to solve the $2 trillion financial bad debts. In the medium term, it is to prevent the financial crisis from turning into an economic crisis, and in the long term, it is to establish a new world monetary system.

(1) Current measures: three measures to rescue the market.

These three measures, first, equity restructuring, capital increase and share expansion; Second, bad debts are packaged, cut and stripped; The third is to inject funds to solve liquidity. First, the government reorganized financial institutions in crisis and increased capital and shares. For example, the United States nationalized Fannie Mae and Freddie Mac and turned private enterprises into state-controlled enterprises. Secondly, peel off the bad debts of the bank, pack them aside, and then redeem the funds after the bank recovers. If the bank fails, the government will pay the bill and clean up the bad debts. Third, when banks are caught in a liquidity crisis and people run, inject funds to increase cash flow. Or the government comes forward to guarantee and enhance social confidence; Or the government can guarantee that other banks can lend. It is estimated that the United States has about $2 trillion in bad debts. This year, through these three measures, 65,438+0 trillion US dollars of bad debts have been largely solved, and the remaining 65,438+0 trillion US dollars will be solved next year.

(b) Medium-term goal: Revitalize the real economy.

How to curb the decline of the real economy is a problem that the whole world attaches great importance to and pays attention to. The solution is still to increase investment, stimulate consumption and increase exports, as well as loose monetary policy and proactive fiscal policy. At present, governments all over the world have initiated policies to increase investment and stimulate consumption, abandoned trade protectionism and taken concerted action.

In the medium term, governments will take three measures. The first is loose monetary policy, loosening monetary policy, cutting interest rates, reducing reserve ratio and increasing liquidity. Secondly, implement a proactive fiscal policy and provide financial subsidies to enterprises and groups in difficulty to help them tide over the difficulties and enhance their vitality. The third is to cultivate market players. Seize the opportunity of a large number of enterprises to stop production, bankruptcy and closure, promote enterprise merger and reorganization, and promote enterprise transformation and development. As the U.S. government, in addition to starting the three major demands of investment, consumption and export, promoting the structural adjustment of industries and enterprises, and revitalizing the real economy, it also needs to make up for it, solve the fundamental problems that breed the drawbacks of the six major financial links from the institutional mechanism, and improve the financial system.

(c) Long-term direction: restructuring the international monetary system.

The Bretton Woods system formed by 1944 is based on gold and the US dollar is the main international reserve currency. The dollar is directly linked to gold, the currencies of various countries are linked to the dollar at a fixed exchange rate, and gold can be exchanged with the United States at the official price of $35 per ounce. At the end of 1950s, the balance of payments in the United States deteriorated, resulting in a global "dollar surplus", and a large amount of American gold flowed out, so the US gold reserve could not support the flood of dollars. 1971August, the Nixon administration was forced to abandon the "dollar standard" and implement the free floating of the gold and the dollar exchange rate. The European Economic Community, Japan, Canada and other countries announced the implementation of floating exchange rates. 1973 after the formal collapse of the Bretton Woods system, although the dollar no longer undertakes the obligation to exchange gold, the strength of the euro and the yen is getting stronger and stronger, but the core position of the dollar has not changed.

As the main issuer of international currency, the United States should abide by the world financial system, enhance the sense of dollar currency responsibility, and prevent the abuse of currency issuance rights. However, from the practice of these decades, especially in the last ten years, the United States has not taken responsibility, and its interests and responsibilities are unbalanced. In 2005, the US GDP was 12.5 trillion US dollars, the loan balance was 18 trillion US dollars, exceeding 50% of GDP, and the stock market value was 20 trillion US dollars, exceeding 60% of GDP. The U.S. government debt exceeds $65,438+00 trillion, with a per capita debt of $30,000. The soaring of various financial indicators means a lot of bubbles, which will inevitably bring financial turmoil. From a macro point of view, this international financial crisis is caused by the accumulated disadvantages of the existing world monetary system. Therefore, it is an inevitable trend to reconstruct the monetary system that adapts to the new international economic order.

What kind of world monetary system is reasonable? In my opinion, the future world monetary system should be a new system with three pillars: US dollar, Euro and Asian dollar (mainly Asian currencies such as RMB and Japanese yen). A relatively stable floating exchange rate is implemented among the three major currencies, and the currencies of various countries are linked to the three major currencies. Countries corresponding to the three major currencies should implement the "G standard"-GDP standard. That is, GDP should be roughly equal to the balance of bank loans, the market value of the stock market and the market value of real estate, and the virtual economy should maintain a reasonable proportion with the real economy.

Third, China's economy has a strong ability to resist the crisis.

At present, the world financial crisis has also had an impact on China. With the correction of stock market and housing market, the orders of coastal processing trade enterprises have decreased, some enterprises have stopped production and closed down, and the financing difficulties of small and medium-sized enterprises have become more prominent. On the whole, however, China's economic structure is still good in the context of the accelerated decline of the world economy. Why? China's economy has six advantages:

First, huge foreign exchange reserves. At present, there are 1.9 trillion US dollars of foreign exchange reserves, which are enough to resist the impact of external risks.

Second, the traditional saving virtue and high saving rate. The people of China are industrious and thrifty, and have the traditional virtue of saving. In 2007, China's residents' savings reached 654.38+72 billion yuan, and the savings rate reached more than 50%. The total domestic debt and foreign debt of China government is less than 60% of GDP, so the risk of financial liabilities is not high.

Third, a prudent, strict and flexible foreign exchange management policy has both control and freedom. Under the capital control, foreign capital cannot enter and leave China at will, while foreign exchange under the current account is more free and flexible.

Fourth, broad development space and huge domestic demand market. China is in a period of rapid development of industrialization and urbanization and rapid improvement of people's living standards. By 2020, a well-off society will be built in an all-round way. After 654.38+0 years, China's per capita GDP will exceed 654.38+0 million US dollars. Broad development space and strong domestic demand will not only support China's sustained and rapid economic development, but also play an important role in alleviating the world financial crisis.

Fifth, a healthy financial system and strict financial supervision. After decades of reform and development, China's financial system has been basically improved, and its ability to resist market risks has been significantly enhanced. China has a sound financial system, strict management and strict control over financial derivatives. There is no problem similar to the American financial system.

Sixth, strong institutional advantages and the government's macro-control ability. Social and political stability, gradual improvement of the legal system and continuous improvement of the development environment in China. The central government has superb leadership skills, seeing things early and acting quickly, and the predictability, pertinence and effectiveness of macro-control are constantly improving. For example, this year, in the first half of the year, the economy maintained steady and rapid development, and prices were controlled to rise too fast; After September, strengthen macro-control and implement flexible and prudent macroeconomic policies; After June 165438+ 10, we will resolutely implement a proactive fiscal policy and a moderately loose monetary policy to promote economic growth and stabilize market confidence.

Generally speaking, China's economic growth will slow down this year, and its inertia will decline in the first half of 2009, and it will begin to emerge from the shadow of the world economic recession in the second half. The international financial crisis bottomed out at the end of 2009, the economic crisis bottomed out around the end of 20 10, and it began to recover from 201to 20 12.

The above is written by the vice mayor of Chongqing, and the analysis is in place.

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