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Step into the new year

Step into the new year, global asset markets into drinking on an empty stomach of drunkenness, this mainly is the new year’s day America Congress passed to solve the socalled fiscal cliff based on the bill, even though it’s only a bipartisan political game, and not to solve real problems, but will kick the ball down. in the global scope, the fiscal cliff has become the keyword end early, around the essence of the dispute of this problem, whether need American fiscal consolidation. World leaders, determines its global effect American choice. According to the logic of economics, the huge fiscal deficits of open economies remains high, will lead to increased amount of issuance of treasury bonds, interest rates rise, the currency exchange rate appreciation, increased imports to reduce the export of. It America has double deficit situation, the fiscal deficit widened the trade deficit, will cause the net capital inflows increased. This is Stiglitz’s double deficit theory. however, the logic of economics is not real. Here, logic and reality detachment, lies in the interest rate and exchange rate effects in the chain is not necessarily determined by rising theory. Over the past few years and the reality is, although American fiscal deficit increases continuously, but the dollar interest rate and foreign exchange rate is still at the lowest level in history. This makes the fiscal deficit impact on the trade deficit, and no expansion effect theory indicates, even the two movements in opposite direction. the reason is, the logic does not take into account the America government manipulation of monetary policy: just a few years has a substantial quantitative easing monetary policy, the maximum driving down the dollar interest rate and exchange rate. However, the damage to other economies. Hold the world financial control America, always make its negative externality is transferred to his country to bear. such as American cannot pass the degree of income reduction due to fiscal consolidation, then throws the ball to the monetary policy, and the latter to hit the corner and lost flexible. The result is to be expected: the fed only once more quantitative easing. Extreme cases, it is not only Q4, but Qn. By repeatedly issuing money flying dollars, to eliminate the fiscal deficit soaring boost to interest rate and exchange rate, thereby dissolving of trade deficit pressure. Moreover, the Obama administration launched the export doubling plan in his first term, if fiscal consolidation remain stagnant, Obama in his second term will depend more and more on the super currency forcibly suppress interest rate and exchange rate, in order to cut the fiscal deficit and trade deficit close to rise logic chain. But this is tantamount to quench a thirst with poison. If this policy America combined cycle continues, not only the price of monetary policy tools is not enabled room, is the entire monetary policy will also lose the initiative, what is more, the rise in inflationary pressures and high unemployment coexist inevitable. to the whole world, the dollar wanton will bring two results: one is the global commodity and asset market inflated, but this is just a kind of speculative prices. If the past ten years, the global rise in commodity prices is supported by the China demand this one real factors, next up is mainly the result of a flood of dollars to boost,


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