|
|
本帖最后由 lilyma06 于 2012-1-18 15:06 编辑
How China's Boom Caused the Financial CrisisAnd why it matters today.
BY HELEEN MEES | JANUARY 17, 2012
http://www.foreignpolicy.com/articles/2012/01/17/how_china_s_boom_caused_the_financial_crisis
Since the 2008 financial crisis, Wall Street hasbeen the perpetual whipping boy for the ensuing recession that has rocked theglobal economy. In the United States, Manhattan bankers relied too heavily on subprimemortgages, the story goes, sparking the crisis -- in bureaucratic jargon, whatis dubbed a "regulatory oversight failure." In Europe, the debt crisis -- whichstruckagain last week when the credit-rating agency Standard & Poor's strippedFrance of its AAA rating -- is often blamed on the fact that eurozonegovernments maintained outsized debt-to-GDP ratios, thereby breaking the ruleslaid down in the Stability and Growth Pact they signed when they joined the currency union.
U.S. President Barack Obama has laidthe blame at the feet of Wall Street "fat-cat bankers," and he findshimself in the company of Federal Reserve Chairman Ben Bernanke. EvenRepublican presidential hopeful Mitt Romney criticized WallStreet for "leverag[ing] itself far beyond historic and prudent levels" in his2010 book, blaming its "greed" for contributing to the crisis. The concept ofrunaway European profligacy, epitomized by 35-hour work weeks and gold-platedpension programs, is also firmly lodged in the popular imagination.
But these explanations for the twin crises in theUnited States and Europe simply ignore the facts. Subprime mortgages withexotic features accounted for less than 5 percent of new mortgages in theUnited States from 2000 to 2006. It is therefore highly unlikely that they weresolely responsible for setting off the housing boom that ultimately went bust.The explanation offered for the crisis in the eurozone overlooks the fact thatSpain and Ireland -- two of the weak links in Europe today -- were actuallyparagons of virtue in terms of the Stability Pact. Both countries boastedbudget surpluses in the years leading up to the crisis, and both haddebt-to-GDP ratios of roughly 30 percent, or only about half the level that waspermitted under the Stability Pact.
The immediate cause of the housing bubbles in theUnited States and the eurozone periphery was not regulatory oversight failure,but the precipitous drop in interest rates in the early 2000s. And the countrythat bears partial responsibility for depressing interest rates is atraditional punching bag in the American political arena, one that has somehowavoided most of the blame in this round: China. The ascendance of the world'smost populous country in the global economy not only changed the terms oftrade, but it also had a considerable impact on the world's capital markets.
The chain of events that led to the current economicbreakdown began in 2000, when the Federal Reserve began to lower the Fed fundsrate, its main policy lever, to stave off a recession following the bursting ofthe dot-com bubble. The Fed slashed the rate from 6.5 percent in late 2000 to1.75 percent in December 2001 and then down to 1 percent in June 2003. It thenkept the rate at 1 percent for more than a year, even though inflationexpectations were well above the Fed's implicit inflation target and theunemployment rate was down to nearly 5 percent, which is considered the naturalrate of unemployment. All the while, the Federal Reserve dismissed warningsabout a nationwide housing bubble, with then Federal Reserve Chairman Alan Greenspan evendenying that it was possible to have such a thing.
The low interest rates initially sparked therefinancing boom -- or as commentators liked to say, Americans used theirhouses as ATMs. Between the first quarter of 2003 and the second quarter of2004, the time when the Federal Reserve held its main policy rate steady at 1percent, two-thirds of mortgageoriginations were for home refinance. Americans got themselves indebted up totheir eyeballs and went on a prolific spending binge with their newly acquiredcash. Spending out of home equity extraction amounted to $750 billion, or morethan 4 percent of GDP, in 2005 alone.
Fed policymakers generally looked favorably uponremortgaging as a source of personal consumption expenditure. In his nowinfamous 2005 Sandridge lecture, Bernanke, then a Fed governor, boasted of the "depthand sophistication of the country's financial markets, which … allowedhouseholds easy access to housing wealth."
The possibility that the housing boom could one dayturn to bust, leaving many homeowners penniless, seemed not to have caused anysleepless nights at the Fed. On the contrary, recently released Fed transcriptsshowhow future Treasury Secretary Timothy Geithner scrambled in 2006 at a Fed meetingto come up with a superlative for "terrific" to describe Greenspan'stenure.
But it was China, not the U.S. economy, that prosperedon Americans' spending binge. The world's most populous country grew atdouble-digit rates for much of the 2000s. And while the U.S. savings rate hoveredaround 15 percent of GDP, China's savings rate increased from 38 percent in 2000to 54 percent in 2006. China's savings are heavily skewed toward risk-freeassets, perhaps because the Chinese are culturally more risk-averse, but alsobecause the country's financial markets are still underdeveloped and not fullyliberalized.
The large buildup of savings in China and otheremerging economies (mostly oil exporters) depressed interest rates worldwidefrom 2004 on, as too much money was chasing U.S. Treasury bonds and othersupposedly risk-free securities, driving up the price of bonds and driving downinterest rates. Thus, by the time the Fed startedto worry about rising inflation by mid-2004, leading the Fed totry to put the brakes on the economy, it was already too late. Although the Fed startedto raise the policy rate in July 2004, long-term interest rates in the United Statesremained stubbornly low. While the subprime mortgages with exotic features didnot help, it was these low long-term interest rates that were the mostimportant factor in enlarging the housing bubble.
Europe's story is slightly different, but the messyconclusion is broadly similar. The establishment of a common currency in theeurozone caused interest rates on Greek, Irish, Italian, Portuguese, andSpanish government bonds to converge to the much lower rate on Germangovernment bonds. While opinions differ on what caused this convergence, thefact that exchange-rate risk disappeared significantly contributed to NorthernEuropean banks' willingness to buy Greek, Irish, Italian, Portuguese, and Spanishbonds. It was, after all, only prudent for banks to invest in assets that weredenominated in the same currency as their future financial liabilities.
As a result, Greece, Ireland, Italy, Portugal, and Spain saw interest rates fall from a level of about 13 percent in the late1990s to only 3 percent in 2005. The same excess of savings in China and otheremerging economies that depressed long-term interest rates in the United Statesplayed a role here, too.
The sharp fall in interest rates had a significantimpact on the housing market in the eurozone's periphery. Year after year, housingprices in Ireland and Spain rose by 10 to 20 percent. That in turn resulted inexuberant consumer spending and borrowing, driving up wages as well. While laborcosts in Germany rose a modest 18 percent from 2000 to 2008, labor costs inSpain and Ireland increased by 41 and 45 percent, respectively, and by 78percent in Greece.
The low interest rates also led to excessivegovernment borrowing in Greece, which has now effectively driven the countryinto bankruptcy. And though Italy was running a budget deficit below the 3percent threshold of the Stability Pact for many years, low interest ratesallowed it to run a debt-to-GDP ratio of about 100 percent of GDP. Portugalfound itself in the reverse situation, running budget deficits beyond 3 percentwithout exceeding the proscribed 60 percent debt-to-GDP ratio much of the time.
Now that the Western housing bubbles have burst and bankshave been brought to the brink of collapse, investors have suddenly realized thatgovernment debt might not be a risk-free investment after all. The mechanismthat initially drove down interest rates in the eurozone's periphery has goneinto reverse. Not only have banks in the northern eurozone countries withdrawnfunds, but investors from the periphery have shifted their purchases to governmentdebt in Europe's "core" countries -- driving up interest rates in the peripherywhile simultaneously driving down interest rates in countries like Germany andthe Netherlands, where interest rates have gone negative. Despite all theacrimony in Europe about northern eurozone governments' bailing out theperiphery, the actual costs of the bailouts are low if you take into accountthe windfall that Germany and the Netherlands have reaped due to lowerborrowing costs.
If one looks back, it's fair to criticize the eurozone'sarchitects for not sufficiently thinking through the initial fallout ofmonetary integration. The speculative bubbles, especially in Ireland and Spain,could easily have been avoided if strict lending restrictions had been imposedin time. The same goes for the housing bubble in the United States, where morethan a quarter of residential mortgages are still "underwater" -- in otherwords, a home mortgage loan that exceeds the value of theunderlying property.
The economic cataclysms in the United States and Europemay seem driven by their own peculiar circumstances at first glance, but bothwould have been much less severe without China's ascendance. Without China as a major economic player, the low interestrates at the start of the millennium would have been more effective inkick-starting the U.S. economy, and the Fed would have begun raising the Fedfunds rate much sooner, with theEuropean Central Bank (ECB) following suit. Part of the manufacturing that tookplace in China would have been preserved for the United States and Europe,aiding economic growth in these regions and lessening the need for low interestrates. And without China's rise, inflation in the early 2000s would havebeen higher, propelling the Fed and the ECB into action. But more importantly,China and other emerging economies' savings would not have depressed long-terminterest rates worldwide.
But all is not lost. One consolation is that the pastdecade of loose living in the United States and Europe has done much to lifthundreds of millions of people in China and India out of poverty. Nodevelopment aid program can stake a similar claim.
Another consolation of sorts is that economic growthin the emerging economies will likely go a long way toward buoying the global economythis decade. Apple recently experienced firsthand how ferocious Asianconsumers' appetite can be when near riotsbroke out at its flagship store in Beijing after it postponed the launch ofthe iPhone 4S due to crowd size.
Other U.S. businesses are also eyeing Asian markets as asource of demand for their products and services. As China's economycontinues to mature, it may just be the economic engine that the UnitedStates and Europe need to dig themselves out from under their mountain of debt.
 该贴已经同步到 lilyma06的微博 |
|
狗仔卡
发表于 2012-1-18 09:50
提升卡
变色卡
抢沙发
千斤顶
显身卡
楼主
:hug: