01. Currency to Break 300 Trillion

The latest data from the central bank shows that the broad money supply in our country has reached 275 trillion, and it is on the verge of breaking through the 300 trillion mark.

What does this mean?

If this trend continues, by the end of this year, it will reach 300 trillion.

It is important to note that, at the end of 2022, the M2 balance was 266.43 trillion yuan, which means that since February, an additional 9.09 trillion yuan has been added.

With so much money, according to past experiences, it would either lead to a rise in real estate prices or an increase in general consumer prices.

Advertisement

Therefore, before inflation sets in, experts advise the general public to spend money quickly, to consume quickly, to buy houses and cars, and to use money as fast as possible, otherwise it will depreciate rapidly.

Savings get thinner and thinner! The sooner you spend money, the better!

02. Increased Consumption by the Wealthy Becomes More Difficult

However, the actual situation is that consumption data continues to be weak. At the same time, figures related to investment and mortgage loans are also showing signs of weakness.In stark contrast, the data on residents' savings is rising significantly.

Our country has been promoting consumption all along, but why can't consumption be stimulated?

It's not that the common people don't want to consume, but they really don't have the money to spend. Although the government has taken a series of measures to stimulate consumption, the effects have not been good. After all, who wouldn't want to consume if they had the money?

While it's true that the central bank's printing press has never stopped, and there is an increasing amount of money in the market, it's also important to consider whose hands this money is in.

In fact, consumption should be differentiated between the wealthy and the less wealthy. The consumption of the wealthy is already quite high, and it won't increase much even if it does.

Let's take an example: suppose someone already has 100 million, and now they have 500 million. Their wealth has increased fivefold, but would you say their consumption would increase fivefold?

The answer is impossible, because they were already spending quite a lot. Under normal circumstances, suddenly asking them to spend five times as much money, they wouldn't be able to do it.

That is to say, if they really had 500 million, their consumption wouldn't directly multiply by five. Therefore, economists have already studied this: the consumption of the wealthy does not increase with more assets; instead, they would invest or save it.

We ordinary people are different. If you have 500 yuan in hand, you would spend all of it; if you have 1,000 yuan, you would spend all of that as well.

It's clear that if the money in the hands of our ordinary people multiplies, our consumption will also multiply accordingly.03, The Ineffectiveness of Reserve Requirement Ratio Cuts

In recent times, the gap between the rich and the poor remains quite significant. For the average person, making money is a very challenging task. However, the wealthy seem to effortlessly accumulate more wealth. We can deduce this conclusion from a recent report by China Merchants Bank: within the country, 2% of the population possesses 82% of the wealth.

Similarly, in the data from China Merchants Bank, we observe that the year-on-year growth of deposits in 2022 was 18.7%. It is evident that this is not due to an increase in the deposits of the average person but rather the increase in the deposits of the wealthy. As we mentioned earlier, when the assets of the rich increase, their consumption does not rise much, but the increase in savings and other investments will be more significant.

At the same time, the loans from China Merchants Bank only increased by 8.64%, which is 10 percentage points lower than the increase in deposits. Everyone knows that last year we had two reserve requirement ratio cuts, each of which meant that banks had more money available for lending. However, we now see that the increase in loans from China Merchants Bank is far less than the increase in deposits. This is a significant deviation from the original goal of the reserve requirement ratio cuts.

The wealthy do not need loans, and the average person is hesitant to take out loans. As a result, despite the issuance of so much currency, it has not flowed into consumption or entered the real economy; instead, it has all remained within the financial system.

Under these circumstances, the average person wants to consume but is unable to do so.