Cryptocurrency market conditions have been ups and downs recently, but in contrast, global financial markets have shown more painful struggles. US stocks have continued to plummet, global stock markets have fallen sharply, production reduction agreements have broken, crude oil prices have plummeted, and further U.S. stocks have melted and panic. The index hit a new high, and the impact of the epidemic has far surpassed an ordinary health crisis and is bringing more uncertain shocks to the global economy.
On March 10, the Gyro informal talks invited Mikko, a well-known currency economist and founder of Zhibao, to focus on recent hot topics, including how the Fed ’s interest rate cut will affect global asset prices including cryptocurrencies. The interest rate cut several times, how much room for interest rate cuts, why the United States will not implement the "new infrastructure" like China, what are the key points of residential asset allocation, and other key points, opened a wonderful dialogue.
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Guest: Mikko, founder of Zhibao
Moderator: Li Dagou, Chief Editor of Gyro Finance
The following is a transcript of the live broadcast of this "gyro informal talks":
Outbreak is not the same as a recession
When the economic downturn comes, it is difficult for our market to stand alone
Zhibao Mikko: The attribution of the falling factors is difficult, but it is certainly not driven by a single factor. The uncertainty of the epidemic is too large, and the economic impact is far-reaching. Crude oil is only a trigger for market sentiment. In fact, the economy is contracting. Under the circumstances, commodity demand will tend to be sluggish, and the decline in oil prices is beneficial to consumers, but not completely negative. Today the market has picked up a bit. The A-share and US stocks performed well before the market. The A-share trend is relatively independent. The reasons are as follows:
The vertical axis is the number of infections relative to the country ’s population, and the horizontal axis is time (weeks).
Early stage (first stage) refers to countries where new cases have been reported, but the cases are slowly increasing, such as the Netherlands (265 cases), the United Kingdom (273 cases), etc .; the accelerated period (second stage) refers to the large number of new infections and rising day by day. However, countries with relatively limited cures, such as the United States (537 cases), Japan (502 cases), Spain (673 cases), and thousands of Germans (1040 cases) and France (1126 cases); the accumulation period (third stage) refers to new The number of infections has slowed down, and the absolute number of new cases is still large but the number of cures is gradually increasing, such as South Korea (7382 cases), Italy (7375 cases) and Iran (6566 cases); the recovery period (fourth stage) refers to each Countries with fewer new cases and high numbers of cures, such as China (80,735 cases).
At present, China's epidemic situation has been effectively controlled, but there is still a lot of uncertainty in developed countries, so the market performance of developed economies will be worse than ours, but I think the early differentiation of the market is based on the epidemic situation in various countries. Good or bad, but if the final market pricing is switched to the problem of economic recession, it will be difficult for our market to stand alone. However, the current market focus is still on the out of control and liquidity risks of the epidemic, which are currently not seen in China.
2. Is the ongoing impact of the epidemic on the United States and even the global economy more serious than we thought? Compared with the effects of previous major economic events in previous years, what changes have taken place in the current economic background?
Zhibao Mikko: The epidemic is an epidemic, and the economic recession is an economic recession. There is a causal relationship between the two, but there are still more epidemic factors in the market's current pricing.
Controlling the epidemic is completely contrary to economic growth. Economic growth depends on liquidity. In addition, logistics and people flow are also important. However, to control the epidemic situation, people flow and even logistics must be curbed. The epidemic is a fatal blow to global supply, liquidity and market confidence , and because the future direction of the epidemic is not very predictable, it is also difficult for economists to comprehensively consider its negative impact. This is similar to disasters such as major earthquakes The impact is quite different.
The last financial crisis was actually a liquidity crisis. After the assets fell, some financial institutions sold this part of the real estate assets. At the same time, the financial institutions of the financial institutions withdrew funds, which is equivalent to your assets plummeting and your creditors still collecting debts. The sharp contraction of the balance sheet at the same time led to the complete collapse of the financial system. Powell talked about the supply chain during this crisis, which is a series of chain reactions caused by the sudden stop of production activities-the stagnation of the supply chain / industrial chain caused the import and export to stop, the supply shock caused by the decline in production capacity, and the reduction of residents' outing caused the huge shock of the service industry. It is a full-scale supply / demand blow, not a first-in-fashion issue at the financial level.
The nature of the crisis is different. Sometimes it is the financial system, such as the bank run, sometimes asset bubbles, such as the real estate and Internet bubbles, and sometimes it can be external debt and inflation. Specific issues need to be analyzed.
U.S. stock market crash reflects market worries
Fed rate cuts currently have limited effect
3. At 10 am Eastern Time on March 3rd (23:00 Beijing time on the same day), the Federal Reserve announced an emergency rate cut of 50 basis points to alleviate the economic impact of the new crown epidemic. This is the largest emergency rate cut by the Federal Reserve since the 2008 economic crisis. The last time the Fed cut interest rates by 50 basis points occurred on October 8, 2008, when the background was that the Lehman Brothers bankruptcy in September triggered a huge market shock. Both from the time of operation and the magnitude of the action, exceeded market expectations. How do you evaluate the Fed's action this time?
Zhikang Mikko: Unexpectedly, it is not reasonable. The rate cut this time is completely unexpected in both speed and scope. Powell may not have expected that he needs to use an emergency rate cut of 50 basis points to calm the panic in the US stock market. In January, his attitude remained the same. I am more optimistic about the economy, but after the G7 meeting, I hurriedly shot for the bottom of the market. The main reason is that the G7 meeting stated that it must cooperate to fight the epidemic. The Fed only preempted the situation, and Japan and Europe also followed.
4. But the financial market does not seem to buy the interest rate cut. After the news of the Fed ’s sharp interest rate reduction, the three major U.S. stock indexes have turned down after a short rise. The Dow once fell more than 200 points, and the US dollar index continued to fall. Breaking the 97 mark, a new low in the past two months. How to evaluate this market response, how much did a 50 basis point cut in interest rates play? Was the Fed's move a correct one?
Mikko Wichiko: Monetary policy has little effect on potential economic growth. This was what Powell said last year. He called on the US government, Congress, and the Treasury to do more. The market is always correct, and the market's response is to tell the Fed that your interest rate cut will not only have no positive effects, but even increase market concerns. This is not a correct move from the perspective of policy authorities or market participants. The beneficiary is the Treasury, because lower interest rates will help lower the cost of government debt.
Bank of America zero interest rate is coming
Fiscal stimulus will start in election year
5. After the Fed cut interest rates, Trump sent three consecutive tweets to urge continued interest rate cuts. It seems that he is not satisfied with the rate and magnitude of the rate cuts. Does the Fed still have enough room for rate cuts?
Zhibao Mikko: There is not much room, and there are 4-5 times left to hit 0 interest rate. The risk of cutting interest rates too quickly is that there is only a little space for interest rate cuts, and other monetary policy tools, such as helicopters and money, will be activated when they are used up. Zero interest rate means that the central bank cannot cut interest rates further, because further interest rate cuts may cause residents to convert their negative interest rate assets and deposits into cash. In addition, if the bank obtains a negative interest rate at the central bank, it will not be able to provide positive interest rates to savers, and its own interest margin will narrow, creating a profit problem. The Fed may use previously unconventional tools such as quantitative easing, forward-looking guidance, yield curve control, etc. after cutting interest rates to zero.
6. At present, the market generally believes that the Federal Reserve ’s interest rate cuts will bring interest rate cuts in major global economies, including G7. Is this a virtuous cycle? At present, the European Central Bank and the Bank of Japan are already negative interest rates. By adjusting monetary policy to increase flow To what extent can a sexual approach work to boost the economy?
Zhibao Mikko: It will not be a virtuous circle. There is no room for policy in Europe and Japan. They are both in the policy dilemma of negative interest rates. Adjusting interest rates will not help the economy much, cars will not start when they are full, and people will not increase borrowings because interest rates are low. The point is that in this environment, you can't increase or even reduce expenditures. The reason is very simple. Some companies have already built up debts. The residential sector may also have high pressure on mortgages. Therefore, lower interest rates may not lead to the expansion of the private sector ’s overall spending. However, the government has no debt constraints. The government can take the initiative to spend. Promote GDP growth.
7. In contrast to China, in order to hedge the epidemic and the economic downturn, a "new infrastructure" measure was proposed. In addition to the traditional "iron public aircraft" construction, it also proposed to accelerate the progress of new infrastructure construction such as 5G networks and data centers. How do you Looking at the effects of this economic initiative? Can this model be used by the United States?
Zhibao Mikko: The only way to do this is to use fiscal expenditures. The U.S. expenditure process is different from that in the country. All expenditures must be approved by Congress to see how much Trump has paid for the virus. The media counted some provinces and cities in China in 2020. The announced investment scale of key projects will reach 25 trillion yuan. Two systems and two environments, everyone wants to rely on finances, Europe wants Germany to increase fiscal expenditures, Japan has been driven by debt, and the United States is also calling for helicopters to save money, and it is another election year. In the end, it must resort to fiscal stimulus.
Fiscal expenditure will have a positive effect, but it will have a high price, that is, the size of the unsustainable debt stock. In other words, investors start to worry about economic growth, and as a result you trade debt for growth, but investors start to worry about the sustainability of your debt. Spreading money by helicopter is equivalent to negative income tax. During the general election, dignitaries must find ways to obtain votes. Citizens are very fond of paying money.
Not good for Bitcoin
Gold is gold, Bitcoin is Bitcoin
Zhibao Mikko: It's not good. Bitcoin is at most an alternative asset. Similar to gold does not mean gold. Gold once existed in the international monetary system as a settlement currency between sovereign countries. Bitcoin cannot even enter the balance sheets of financial institutions, which is not a thing at all. Gold is gold, and Bitcoin is bitcoin.
9. When the wave of interest rate cuts hits, how will the mainstream asset prices behave. If the real economy cannot benefit from monetary easing, then the financial market may become the largest beneficiary. Will a new round of asset bubbles be created by then? What should be paid attention to in the allocation of residential assets?
Zhibao Mikko: It is now a very serious asset bubble period. Treasury bonds, stock markets, corporate bonds, and ETFs are crowded everywhere. Liquidity may not necessarily be removed, but deleveraging (disappearing) and defoaming can also be achieved. Money can be created from liabilities out of thin air. If the currency expanded through the debt cannot find a rate of return, then the debt contraction can be paid off ( Borrow money to buy stocks. If the stock does not rise, sell the stock to pay off the debt.)
There will be opportunities, but not now. Now the market needs to vent panic. After the venting, it will start thinking about the future configuration direction. For example, developed countries now rely heavily on the supply chain support of emerging markets and Asian countries. After this round of epidemics, they will definitely start thinking about the vacuum of their domestic industrial and value chains, and then there will be new investment opportunities.
1) Is the financial crisis now?
Zhibao Mikko: See how you define the financial crisis. I think it can only be counted as a market panic caused by the plummeting asset prices, not a financial crisis , because liquidity, financial institutions, private companies, and the bond market are not comprehensive collapses, and The previous European debt crisis and the 2008 financial crisis were not in the same order of magnitude. However, the situation may change every day, so recently, we need to watch daily.
2) Can you buy some gold now?
Zhibao Mikko: Recently the market has fluctuated a lot, such as precious metals. Basically, intra-day fluctuations can kill a lot of leveraged traders. It is recommended that beginners do n’t go in to send money. The trading of gold and silver is more than 5 years. My experience is also to open positions every minute, so is US stocks. You cannot find a reason for the market every day. The reason for market fluctuations may simply be that the market needs fluctuations.
Holding cash is also an investment.