2008- 1 1-2 1

The financial crisis in the United States was triggered by the subprime mortgage crisis, which has evolved into a credit crisis and is in danger of becoming an economic crisis. Analyzing the causes of the financial crisis in the United States is of positive significance for us to correctly understand the current external environment, study the macroeconomic trend and take corresponding countermeasures.

First of all, the root of the financial crisis lies in "borrowing for a living"

If we dig deeper, the root of the financial crisis lies in the "borrowing for a living" in the United States. Many Americans have been living beyond their means. Obviously, it is "secondary", but borrowing money to buy a house is the outstanding performance of this "American life" that has already exceeded the safety line. Bank of America has been encouraging American consumers to borrow money to live, granting them various loans and urging them to live within their means. Although the positive role here cannot be completely denied, it is only a matter of time before the borrower's solvency is put on the premise of rising real estate prices, which is bound to lead to a crisis.

1, "borrowing consumption" takes root in the United States

The transformation of American economic growth from production-driven to consumption-driven mode occurred between 1880 and 1920. By the end of the 1920s, loan consumption and "buy first and pay later" had spread to various durable goods and even non-durable goods markets in the United States. In the year of 1930, about 70% of new cars, 85% of furniture, 75% of dishwashers, 65% of vacuum cleaners and 75% of cassette players were sold by installment. In this way, the lifestyle of borrowing and spending took root in American society.

Since the 1980s, Americans have consumed more than their output, so they have become a typical example of "living on debt". Personal consumption expenditure accounts for 2/3 of the gross domestic product of the United States and is the main driving force for economic growth.

The American media once described the lifestyle of China people as "as soon as the sun rises, consumers start shopping". Stephen Cech, investment consultant of Pisca Tower Research Company, said that in 2006, 90% of Americans' income was used for consumption, and 13% was used for repayment of loans, which meant that they had to borrow money to make ends meet. In this country that has been driven by consumption for decades, many people have long been accustomed to "borrowing money to live".

Today, American consumption is about to fall off the cliff and the American economy is on the verge of collapse. Stephen roach, global chief economist of Morgan Stanley, wrote that the financial crisis is the bitter fruit of American crazy consumerism.

The government encourages private ownership of housing.

The proportion of Americans owning their own houses has been rising steadily in the past 30 years, reaching an all-time high of 69. 1% in 2005. One of Bush's favorite slogans is to build an "owner society", and encouraging private ownership of housing is an important cornerstone of this "owner society". Bush even declared June every year as "National Home Ownership Month" in the United States, trying to increase the number of households owning their own homes in the United States by 5.5 million by 20 10.

The U.S. government has really played an important role in encouraging private home ownership: it has established mortgage institutions supported by Fannie Mae, Freddie Mac and Geely; Help private individuals, especially low-income people, buy houses through laws such as the Community Reinvestment Law; And provide a large number of financial subsidies for private housing purchase.

It is not difficult to understand that in such a social environment, low-income people will naturally be willing to be "house slaves" regardless of their own economic strength. The mortgage loan for house purchase in the United States rose from $680 billion in 1974 to $ 14 trillion today. In the past seven years alone, the total amount of mortgage loans in the United States has doubled.

As a result, subprime mortgage loans have also increased accordingly. Sub-prime mortgage refers to the mortgage loan issued by the financial institution (bank or investment company) that initiated the mortgage loan to customers with poor credit to buy houses. Among the 4 percentage points of the increase in American housing ownership rate, its contribution rate has reached half.

The benefits of improving the housing ownership rate are obvious, such as social stability and people accumulating wealth. But like other investments, buying a house is also risky. At present, there may be as many as100000 families living in owner-occupied houses with negative assets in the United States, and millions of them are facing or unable to pay mortgage loans for auction.

3. The government borrows money through financial instruments.

However, the habit of ordinary Americans "borrowing for a living" is only a drop in the bucket compared with the government. The government functions of every city, county and state are expanding day by day, but the tax revenue has not been greatly improved accordingly. What can we do? We can only borrow a lot through various well-designed financial instruments. Hoping on the future tax revenue and the financial allocation of the federal government, governments at all levels tend to issue income bonds without restriction. As a result, the cost of these public projects is becoming more and more expensive in order to get interest from the appropriation. Because these costs are opaque to the public, local governments often increase the costs of these projects without fear.

As a result, the whole country fell into a debt "scam". Economist Jeffrey Sachs pointed out: "The government borrowed a lot of debts, but never intended to repay them." As a result, governments all over the United States lent out problems.

Due to the tight credit market, some local governments are still facing the shadow of bankruptcy, the most famous of which is Jefferson County, Alabama. Because the sanitary condition of drinking water was sued, Jefferson County started a large-scale sewer reconstruction project in 1995, with a total cost of 3.2 billion US dollars. In 2002, the county government issued a series of interest rate swaps in order to reduce the interest payment of sewer reconstruction loans and hedge the risk of rising interest rates. However, due to the credit crisis, the interest expenditure of the county government rose sharply, the swap was not accepted, and the financial situation of the county government deteriorated sharply.

Second, two major boosting factors contributed to the outbreak of the crisis.

Although the American lifestyle of "living in debt" can stimulate the economy, things often go too far. Due to years of low interest rate policy and increasing "leveraged" transactions, Americans have gone all the way to the black in the lifestyle of "borrowing money to live", which led to the full-scale outbreak of the financial crisis.

In this regard, alan greenspan, once regarded as a model of monetary policy makers and the actual helm of the United States and even the world economy, has an unshirkable responsibility.

Critics believe that the low interest rate policy pursued by former Federal Reserve Chairman Alan Greenspan led to excess liquidity; His laissez-faire attitude towards financial derivatives made these derivatives regarded as "weapons of mass financial destruction" by Warren Buffett, and finally detonated the American financial market.

1, Greenspan-let the interest rate drop again.

During the general election in 1990s, there was a saying on Wall Street: Who cares who is elected, as long as Greenspan remains the chairman of the Federal Reserve. However, in 2007, the subprime mortgage crisis broke out in the United States, which made the once glory suddenly dim. One of Greenspan's most important works is The Greenspan Bubble: The Age of the Fed's Ignorance, written by William Flecken Stein and Frederick Sheehan.

The two authors believe that the Fed made a series of mistakes in the most critical period of 19: the stock market crash of 1987, the crisis of the savings and loan association in the 1980s, the bankruptcy crisis of the long-term capital management company of 1998, the technology stock bubble in 2000, the blind fear of the millennium bug, the subprime mortgage and credit crisis since 2007, and so on. Surprisingly, Greenspan made the same mistake in every crisis, that is, cutting interest rates too much and keeping interest rates too low for too long.

The interest rate is too low, which leads to excess liquidity in the financial market. Greenspan succeeded in making American baby boomers frantically withdraw their savings and invest them in the stock market to make up for the shrinking income due to interest rate cuts. When Greenspan praised the "new economy", economists found no evidence of productivity improvement at all. Later, scholars realized that it took a long adaptation period from the emergence of new technologies to the improvement of productivity. The productivity miracle mentioned by Greenspan is only a statistical illusion.

Greenspan's strategy, which is often mentioned, is that when asset prices fall, Greenspan will take immediate action, but when asset prices rise, he just stands by. When the dot-com bubble burst, Greenspan did the same thing again, still hoping to stimulate the American economy by lowering interest rates.

Moreover, while lowering interest rates, American housing loan institutions have continuously relaxed mortgage standards, especially for low-income and low-credit customers, and developed various new loans, such as adjustable interest rates.

This so-called innovation makes lenders who don't have enough financial knowledge and risk awareness blindly borrow money, but these loans become hidden time bombs, which will explode when they expire, leaving borrowers unable to repay and in trouble.

Greenspan was very supportive of this kind of non-fixed interest rate loan. He thinks that this kind of loan can save the lender a lot of money under the background of interest rate reduction. However, real estate prices began to fall after 2006, and many buyers were shocked to find that the loans they had to repay far exceeded the value of the property.

2. "Leverage" trading-giving birth to debt gambling.

"Leverage" is Wall Street's exclusive name for debt, and it is also the core factor that caused the current financial crisis. In the case of low interest rate, the first choice for concocting high yield is not complicated: a large number of investment "levers" are used.

"Leveraged" trading allows you to trade with less money than the contract amount. For example, you can buy an asset that can generate 6.5% cash income, of which 10% is your own fund, and the remaining 90% is borrowed from the bank at 5% interest.

In this way, your own funds will reach the target of 20% yield. For the same transaction, the less capital the customer invests, the higher the leverage effect. But leveraged trading can double your profits, and it can also make your losses expand according to your leverage ratio.

The chief culprit of the Wall Street crisis is the so-called "leveraged" trading. Wall Street invented all kinds of dazzling financial derivatives. Through various "levers", it seems that financial institutions can create credit indefinitely and play the so-called Qian Shengqian trick. However, these measures may promote the return on investment, but they are not helpful for real wealth growth. Executives are willing to borrow money to gamble. As long as they can make profits in the past, they can get more income. If they lose money in the second year, they don't have to return their past income. In this way, executives are willing to borrow money for stock trading, and the more the better, which is called "leveraged" trading.

"Leveraged" trading has been questioned in the United States, at least exposing its ugly side. Buffett criticized this "leveraged" transaction five years ago. He believes that this way will make "those smart guys go bankrupt." Known as the "financial crocodile", george soros made waves in other investment markets, but stayed away from financial derivatives. He once said that he didn't understand the "principle" of these financial instruments.

If people have learned anything from the financial crisis, it is a simple and ancient economic law: there is no such thing as a free lunch. If you want something, you must pay for it. Debt is not bad, when modern economy requires people to use debt responsibly. However, as more and more financial derivatives cover up the real cost, irresponsible lending behavior is often popular.

Third, the consequences of borrowing.

1, Americans "tighten their belts"

Shopping malls are deserted, restaurants have few cars and horses, civil aviation passengers have dropped sharply, and car dealers have nothing to do ... The financial crisis has begun to affect all levels of the real economy. As consumers gradually get used to tightening their belts, consumption, as the biggest driving force of the American economy, may usher in the biggest quarter of decline in more than 20 years. To the dismay of Americans, credit card companies have also begun to reduce their credit limits. However, due to the influence of the traditional concept of "living within our means", most people in China have not been greatly affected by this crisis. This consumption concept has been recognized by some Americans and is considered as the most practical way to tide over the difficulties.

2. The sales of high-end goods dropped sharply.

American car dealers have to face the worst sales record since September this year 15; American Airlines' domestic flights decreased by11.7% in September; The number of customers in luxury hotels and gambling tables in Las Vegas is decreasing. There are fewer and fewer vehicles in suburban shopping centers. ...

The retail industry also felt the chill. Due to the poor sales prospects, some retail stores withdrew the profit forecast reports provided to Wall Street. And some consumers who are usually extravagant have begun to live within their means. Don't shop if you can eat at home, and don't buy high-end products if you can buy cheap ones. "Save it if you can."

Credit card companies reduce their credit limit.

Faced with the sharp drop in real estate value, weak economy and sluggish job market, American consumers are increasingly withdrawing cash from credit cards, and the situation of defaulting on debts is also rising. In order to avoid falling into the quagmire of subprime mortgage crisis, credit card issuers and banks have begun to reduce the credit limit of ordinary consumers, raise interest rates and limit the number of credit card swipes.

On June 25th, American Express, a major credit card issuer in the United States, warned that more and more cardholders began to default on repayment, and then Wall Street predicted that American Express would lower its revenue forecast this year. John Hall, a spokesman for the American Bankers Association, said that in the current economic and financial environment, the caution of credit card issuers is a "necessary measure".

4. Will the consumption pattern of Americans living on debt change because of the crisis?

At present, the American financial crisis triggered by the subprime mortgage crisis is still happening, and the negative impact on the United States and the world will take some time to digest. Although this crisis is the most serious since the Great Depression, the borrowing and consumption-driven growth model that the United States evolved at the end of 19 will not change, nor will its financial capitalism model end, nor will it change qualitatively, but it will shrink to some extent.

The reason is that human's industrial technology and agricultural technology are perfect enough, and human's material production capacity has been greatly improved, which can meet the material consumption demand without too much effort. What ultimately restricts human economic growth is not the shortage of production capacity or investment, but the shortage of consumer demand. Unless there is a fundamental increase in everyone's daily food demand and survival demand from now on, these historical processes will be irreversible and consumption will continue to be the bottleneck of economic growth.

One of the purposes of financial market development is to alleviate the imbalance of consumption power caused by income imbalance at different ages through housing mortgage loans, automobile loans and education loans. Solve the problem that individuals will earn a lot of money in the future but have no cash today, and rely on financial products to help people transfer their income across time. The installment loan consumption model is an exquisite work to straighten out the relationship between personal income process and consumption process. Financial products such as medical insurance, endowment insurance and various funds are also designed to arrange various needs that may arise in the future, reduce the pressure of saving money in young and mature years, and promote consumption. In a word, mortgage securitization and other related financial developments are all about liberating people from the pressure of saving money, and then releasing their spending power. In essence, there is nothing wrong with the consumption pattern of borrowing goods. What is wrong is excessive borrowing, and the government lacks effective supervision.

This development model of promoting consumption by borrowing is not unique to the United States, and developed countries have adopted this model to varying degrees. In fact, China should change from investment-driven mode to consumption-driven mode now, otherwise, China can only continue to rely on manufacturing and export markets.