- Why did the Chinese stock market plummet?
With the development of the Internet, the number of names that were previously only accessible to financial professionals has now become a buzzword for ordinary netizens, but financial things are indeed very professional, and the public's understanding and impression of these are in fact largely derived from the mouths of some pseudo-economists who like to play in the media, people need a simplest explanation, so the central bank's relentless water causes the housing market to crash, and it has become common knowledge.
A peach sold for one dollar and a pear sold for one dollar. At this time, the total banknotes of the whole society were two dollars, corresponding to items worth two dollars.
But this time, Little Red suddenly ran over, holding a monkey, and said that his own monkey also sells for 1 buck a piece. He said: "Our village is full of monkey trees all over the mountains, Little Red, your monkey is not worth a penny". Little Red said that it was like that before, but this year all the monkey trees were cut down, only my house is left, everyone wants to eat monkeys and ask me to buy them.
At this time, the village chief could not see, could not open, the banknote was not enough. He printed a white stripe, written one yuan on it, and then lent it to Little Red for use, the village chief guaranteed that the white stripe could be exchanged at any time to him for something worth one yuan.
In this story, the monkey is the equivalent of land for building real estate, the village chief is the equivalent of the central bank's creek, the one-dollar white line is the equivalent of printing a one-dollar bill. So the central bank has been printing a lot of water stamps, but has not formed malignant inflation for almost 20 years, and the reason is here: the monetization of land. The original land is worthless, because the land belongs to the state, the houses are welfare units.
He had a peach and a dollar in his hand, and a peach and a dollar in his hand. The peaches and the peaches both sold for one dollar each. But at this time, he said to Little Red: "I don't sell peaches anymore, I'll sell you our peach tree for 10 bucks". My peach tree annually grows a peach, each peach can sell a dollar, so in 10 years you'll go back to the book, from the 11th year you'll start to clean up. Little Red was quite economical and bought it.
The village chief at this time couldn't see, the whole society had only 2 bucks in total, but it needed 11 bucks to count, a peach tree 10 bucks plus a pear 1 bucks.
In this story, Choi Ming is the head of Alibaba's listed Ma Yun Ma, and Choi Gang is the boss of you and me, and Choi Red is the shareholder. In this story, we can see that the IPO of the stock market is equivalent to giving all the profits of the company for the next few decades to the shareholders at this moment, in Buffett's words: the discount of the future cash flow. The result is that Ma Yun is very rich, because he collects all the money he could have earned in the next few decades in a day.
There is a peach and a dollar in the hand of the boy, and a peach and a dollar in the hand of the boy. The peaches and the peaches both sell for one dollar. But at this time, the boy suddenly said: "My peaches are for sale for three dollars". The boy was upset, why should your peaches sell for three dollars, and my peaches can only sell one piece?
At this time, the village chief saw that the banknote was not enough, the whole society made the circulating banknote only 2 bucks, but peaches and pears combined are worth 4 bucks, got, did not say, hurriedly printed a white strip worth 2 pieces.
In this story, peaches in the hands of the little guy are equivalent to real estate, pears in the hands of the little guy are equivalent to other assets such as stocks, villagers are equivalent to the central bank's creek. A real estate crash is equivalent to a property owner looting the property of a non-proprietor. In this story, although the central bank can also print, this printing differs from the first two, which causes inflation, as the price of the house rises, the wealthy people start to increase consumption, while the poor people start to work overtime and save, and finally a pear in the hands of the little guy can also sell for 2 yuan, which is equivalent to 100% inflation.
The so-called pool theory is that real estate is a pool and the stock market is also a pool, and money flows between different pools. The misunderstanding is that whether it is real estate or stocks, someone buys and someone sells, and money flows into the pool, there must be money flowing out of the pool, transactions are in and out.
From the above three stories, we can see that in the first story, the stamp resulting from the monetization of the land is positive, the money from the sale of the land is taken by the state to build infrastructure, build bridges, build highways, and there is no malignant inflation, the problem is always a day when the land is sold or not sold.
In the second story, the issuance of banknotes caused by the company's stock listing is also beneficial, although it leads to polarisation, Ma Yun's father and international politicians talk about laughter every day, while many single dogs are working hard overtime. But because the money the company earns in the future will be divided among the shareholders, these future annual earnings can offset the banknotes printed by the central bank when the company is listed by changing the time and space.
In the third story, a bubble in a certain asset class, although the central bank can also borrow and print, but the result is not necessarily good. If you can maintain the high price of this type of asset in the long term, then the rise in the price of this type of asset stimulates consumption, and then slowly transmits to other assets and the real economy over a long period of time, causing inflation and debt relief for the whole society, this is a good result. If you can not maintain this bubble for a long time, the so-called hard landing is the result.
These three stories can also be used to understand why the Taiwanese stock market crashes. Although the Chinese people are resilient, or because of the administrative approval of the stock listing, these are the reasons for the crash crash. But the main reason should actually be because of the monetization of land and the financing of new stock listings of companies, which are still in a phase of rapid growth in the last 20 years, the printed notes are simply not in demand, which causes the secondary market to be sold.
Translated from Snowball