一口气了解全球经济形势

Hello all

We have a big project today.

Let's have an overview of

the global economic

I guess you have seen

a bunch of headlines from all over the world.

The United States has broken the debt ceiling again.

The Japanese stock market has reached a new high.

Certain company has moved its factory to India,

etcetera

Maybe you only

hear about it

but have not think carefully about

what is the current situation of these economies.

Today, Lin plans to

walkthrough this with you

from a more professional perspective

and from the direction of macroeconomics.

Let's do this. First take a look at

the summary of the entire global economy.

so that you get an idea

Then we pick a few major economies

and break them down one by one

What are the good and bad parts,

what are the risks

Of course, I am not an economist

there won’t be any outrageous comments.

I just absorbed a lot of professional research reports

including some opinions from people in the industry,

and picked out some that I think are more reasonable

and share it with you

It’s just my opinion.

What will you be looking at in this video?

I think looking at the data to look at the current situation

is actually just one aspect.

Let’s also take a look

at what kind perspective would an

average professional take

when they analyse

a country's macroeconomic

and how would they think

I think this

should be more helpful to everyone.

At the end, I will also briefly summarize

how I personally

look at a country's economy.

My methodology

includes some points that may be easy to trip up.

How about I give you

a little peek at my

knowledge tree.

This is sincere enough.

Those of you who are interested can save this video/

We know that in 2022

the global economic theme is crisis

Inflation, interest rate hike,

energy crisis, etc.

Then the theme of the global economy in 2023

In sum is

Recovery

Inflation, energy crisis

have been brought under control

and interest rate hike have basically come to an end.

Although each country

has some hard-to-learn lessons about the economy

overall it is better than expected.

In particular, the economies of the United States and India

are both

stronger than expected.

This is like

in 2022,

the global economy is suffering from a serious disease.

On the one hand, the body is very weak

and on the other hand

it has to fight this disease,

so it has a fever , right?

Countries are raising interest rates, killing the enemy by a thousand, and damaging themselves by 800

no matter what it is

inflation has to be suppressed first.

By 2023,

it seems that the recovery

is better than expected

head no longer hurts,

appetite has increased,

and can even walk two steps

The theme of 2024 is

Normalisation

It's like after this person gets sick,

can he return to

a normal life

without leaving any root causes/

Can he resume

consumption and investment,

control inflation, and slowly start to cut interest rates

In fact, this is what many countries call

"soft landing"

to avoid backward recession.

This is the growth situation of

some of the world's larger economies that

I compiled in 2023.

Some countries' fourth quarter data has not been released,

so I used an expected one.

Anyway, it doesn't vary much.

You can take a look at it

I picked the ones with a GDP of more than trillion,

which are the big ones.

The fastest growing

is India at 7.3%,

the second is China at 5.2%

and the last two are Saudi Arabia and Germany .

Saudi is easier to understand

after all, it is affected by oil.

To be honest, they have indeed

won a lot in 2022

But Germany? We did not expect that

2023 will be so difficult for them

But there is an interesting thing.

News came out two days ago

that Japan’s economic data for the

fourth quarter of 2023 came out

significantly lower than anticipated

The title of the third largest country in the world

is snatched away by Germany

Here comes the problem

didn't I mention Germany was second

to last after Saudi Arabia?

How come it has surpassed Japan?

The content of this news

is definitely correct,

but the algorithm

is different.

It actually has an exchange rate issue.

The general economic growth rate

is actually calculated using the national currency

after adjusting for inflation

The GDP value

we mentioned

when we said Germany surpassed Japan

is actually a nominal GDP that is

converted into U.S. dollars

based on the exchange rate of that year.

So why did Japan

lose the third place to Germany?

Actually, the main fault is the exchange rate.

Japan's real GDP

has actually increased in the past 2 years

If calculated using Japanese Yen it has increased

but the Japanese yen has depreciated very much,

so after the nominal GDP was converted into US dollars,

it plummeted and was overtaken by Germany.

So let me tell you

do you know how Japan can regain

the title of the third largest economy in the world?

They should use their foreign exchange reserves

to buy up the yen,

so that they can save the position.

So let me tell you,

the headlines are sometimes very confusing.

At first glance when you hear

Germany is going to surpass Japan

and become the third largest economy

you'd feel that Germany is very strong

and Japan is very weak, right?

But in fact,

Japan is not as bad as insinuated,

and Germany is not that strong.

Actually

neither of them can stay third for too long

Well, I just

served you an appetiser

Are you more curious about

why Germany is so sluggish,

why is the United States and India so strong?

What’s wrong with Japan?

Don’t worry, let’s go through it slowly.

First, let’s take a look at Japan.

In 2023

Japan's GDP increased by 1.9%

For

a country that has been stuck in economic stagnation for a long time

they are actually doing pretty well

But it has recently experienced two consecutive quarters of negative growth and

has fallen into a theoretical recession.

Inflation

has finally ended the shadow of the previous thirty years

of fighting against deflation.

remained at 3%

Unemployment rate

which is still Japan's consistent style

stable as an old dog, full employment

and its stock market is unusually strong

The exchange rate is very weak,

and the central bank is still considering exiting

a set of bizarre monetary policy tactics

that it has been using for more than a decade .

If I were to use one word

to describe Japan's economy for the past two years,

just one word

Awkward

The inflation that they have been begging

for years has finally come,

but when it's here they don't like it

The central bank's interest rate policy

is neither liberalizing nor restrictive.

The exchange rate has fallen sharply.

The Japanese economy is a love-hate relationship

Food is facing inflation

but wages are not rising

The real economy is average

but the stock market is rising

Does it make your head hurt to listen to it?

Let me tell you that

Japan can be said to be the most complex and chaotic

amongst all these economic bodies

Let’s start with its inflation.

We know that

Japan’s inflation rate

has been hovering at zero level

for the past thirty years

and fighting against deflation

Japan's inflation target

has always been 2%,

but it can't get it.

So I tell you,

the Bank of Japan

is the most desperate central bank in the world.

It has used all kinds of easing policies.

I guess in the past two decades

if the world awards a

Central Bank Innovation Pioneer Award

it must go to the Bank of Japan.

Note that

this is a satire, not a compliment.

You see, they first invented quantitative easing

which can be said

to be a

very, very radical monetary policy in the early 2000s

Now everyone may feel

that it is a standard configuration.

Later, the Bank of Japan felt that it was not enough,

so it came up with two weird tricks.

One is negative interest rates

and the other is yield curve control.

Those who are not familiar with it may feel that

it is deep and profound

the execution definitely is.

But looking at the underlying logic,

it is actually quite simple

Negative interest rates are to lower short-term interest rates.

The main purpose is to allow banks and financial institutions to

borrow money at almost zero cost.

Yield curve control .

to put it bluntly, it is to lower long-term interest rates.

This is linked

to the financing of our housing loan

companies financing, etc.

The borrowing costs for

almost all players

in the economy is almost zero

in order to increase the velocity of money circulation

and drive the economy

So if you compare

the yield curves of various countries,

you may find it very funny.

If you look at the interest rates of European and American central banks

it's like a roller coaster

but Japan

has been lying there.

Same goes with long-term interest rates.

So some people joke that

Japan has even flattened the yield curve

What has happened in recent years?

The United States has raised interest rates

so the rate increases

will cause Yet to

start depreciate against the US dollar

So you see, in 2022

inflation happened globally

and energy crisis,

and things priced in US dollars will start to skyrocket.

At this time, the yen depreciate

For Japan,

it's more expensive for them to buy imported goods

especially energy and petroleum.

This makes

the prices of goods that have

remained unchanged for 30 years,

ushered in inflation.

Some people joked about

the inflation that Japan has been dreaming of

for more than 30 years

was achieved by

Putin

But what's the problem?

Do you think this inflation

is a good thing for Japan?

That’s obviously not

The inflation that

Japan get with great difficulty is called

imported inflation.

It is not inflation based on increase in demand

that causes price to increase

It's suddenly one day

everything becomes expensive

and I couldn’t afford it anymore

Domestic prices have to rise accordingly

This sounds like a bad thing, right?

Look at the items that have

seen the biggest increase in price.

Food and commodity prices have been rising.

Food inflation has exceeded 8%

but the increase in our has been very limited.

From the actual purchasing power,

the wages may have actually declined.

things are expensive and wages do not increase

what will happen?

No more spending

money, consumption has declined

So Japan’s consumption

has never returned to

the level before the pandemic.

This is in sharp contrast to the United States.

We will talk about the United States in a moment.

Consumption can be said

to be the engine of a country’s economy

Assuming consumption picks up the pace,

it's okay if there's a little problem

here and there

but if consumption slumps,

it will be very troublesome.

In fact, this time global inflation may be

a major fundamental problem faced by

all countries except the United States.

Actually, it is the inability to afford consumption.

But

if you look at this imported inflation

it may seems like it is completely useless,

but for Japan,

everyone seems to be gradually starting to realize

that it is not entirely a bad thing

Although it suppresses consumption and suppresses the economy

it has at least achieved one thing

It has made Japanese people

slowly begin to realize

there is really such a thing as inflation.

This has been very difficult

in the past thirty years.

Over such a long time,

everyone has gradually formed a

deep-rooted concept

This thing

if it's 100 yen then it is 100 yen

it won't change

Wages will also not increase

You can put your money

in the bank or in a drawer

it's basically the same

as the interest rate is zero.

But for the past two years,

people's ideas

have slowly begun to change.

Japanese people really feel that

the price of this thing will go up.

If I don’t buy it today

Next year

it might really become more expensive

So I’d better do my best

it’s time to consume.

Everyone begins to accept inflation and adapt to inflation.

The velocity of currency circulation begins to accelerate

this demand was really

stimulated a little bit

Anyway, in general,

the imported inflation

that Japan is facing

does seem

to have inhibited economic consumption.

But what are its benefits?

It is that it finally gives the Japanese people

inflation expectations

which is actually very difficult.

Next

let’s talk about the Bank of Japan.

What should they do?

At this time, the Bank of Japan

is actually facing a dilemma.

If it does not raise interest

the interest rate gap between the Euro and the US dollar is so big

It is easy for the yen to continue to depreciate.

You see, in the past two years,

Japan has actually had a large amount of

private sector capital flowing overseas.

If this continues

it will definitely have

a great negative impact on the economy.

And what if inflation suddenly spikes

and not under control

it will change from deflation to high inflation.

At that time,

the central bank will make an emergency tightening and raise interest rates.

It will become very passive

and may bring

down the economy that

has finally improved a little.

This is a problem of not raising interest rates.

But on the other hand, if it raises interest rates,

the most direct way is to suppress the economy, right?

I have said countless of times

You see, the most depressed thing in Japan in the

past two quarters is consumption.

If you raise interest rates at this time,

it will put greater pressure on domestic demand,

right?

And let me tell you ,

the Japanese government

actually has a moral dilemma,

because you see

Japan's debt-to-GDP ratio is the highest in the world.

Even if the interest rate goes up a little,

the Japanese government

will have to spend a lot of money

to repay the interest .

Japanese government

actually has this incentive

to prevent the central bank from raising interest rates

And the most important thing is

that raising interest rates at this time

is equivalent to withdrawing from the original

very radical monetary stimulus policy

which

has great uncertainty

for Japan's overall economy.

Withdrawing from

cost-free borrowing environment

prices remain unchanged

with central banks covering everything

no one knows what will happen

One thing I find quite funny

is that

Japan

previous series of stimulus policies

are called unconventional policies.

But at least since I started working

it has been implementing this unconventional policy,

which makes me feel that

this is a conventional policy.

But in the past two years, it has been

calling for Policy Normalization

Policy Normalization

but it makes me feel a little abnormal.

It is like an animal that

has been in the zoo for a long time

if you return to

a normal wild living environment,

it is difficult to say

whether it can survive.

So how does the Bank of Japan do it?

It actually takes one step forward and look three steps ahead

extremely cautious

they just try to go by word of mouth first

to see how the market reacts.

For example, the Bank of Japan

has gradually relaxed

the upper limit of the ten-year government bond

interest rate since 2022.

Slowly increased it from 0.25

to 0.5%.

I looked both left and right

unexpectedly, there is a wave

of attacks on the market to short the yen

and short bonds

The Bank of Japan can only urgently

buy bonds and buy yen

and fight with these short sellers.

We've talked about this before.

When the market became a little more stable,

The central bank looked around again

and felt it was okay,

and raised the upper limit to 1%.

Although the market experienced a brief fluctuation,

it seemed to be relatively stable now.

Then the Bank of Japan

started to relax again

and said this upper limit was doesn’t have

to be strictly limited to 1%

but it also depends on the situation.

Look at the level of caution.

Isn't it a bit like

Tom Cruise doing the mission in "Mission: Impossible"

If you accidentally touched a trap

the market will likely to jump and bite you

The coming year 2024

is actually a

very critical time point.

I have read research reports from some relatively large

investment banks

such as JPMorgan Chase and Goldman Sachs.

They basically predict that

in 2024 the Bank of Japan will exit

the policy of negative interest rates and yieldcurve control,

the key point is

to decide whether the central bank should start pulling the trigger

and raise interest rates

What is the key point ?

The Bank of Japan should look around and see

what it wants now.

From a macro economic data,

the Bank of Japan is most concerned

about two things.

One is to see whether Japan's consumption

can pick up

the other is,

I think, perhaps the more critical

that decides whether Bank of Japan

should raise interest rates

or not

That is wages.

The Bank of Japan has made it clear

whether they should get rid of those

weird monetary policies

Of course, they did not say weird.

The most important thing to look at now is whether wages

can keep up with the rise

in prices.

Why?

Because prices are rising

In fact, there are fast and slow

before and after

In Japan, this time it is obvious that energy rises first

then some food and industrial products,

and then the service industry also starts to rise.

Usually ,

the last thing to rise

determines whether the economy

can complete the loop

is the salary

Bosses

generally

would opt to not raise wages

This does not mean that

the bosses are the source of all evil and

capitalism .

It is true that

the flow of talents in the economy

is relatively slow,

especially in countries like Japan.

No one likes to change jobs

so the lag in wage changes

is very strong.

Although

wages in Japan have begun to rise recently

but this

is far behind the pace of inflation.

In other words, real wages will be calculated based on purchasing power

From 2022 onwards real wages

has been experiencing negative growth

so the Japanese government is worried

and is trying its best

to get companies to raise wages for their employees.

For example, they have raised the minimum wage

and passed the tax bill

which means that as long as you raise wages for employees,

I will give you tax breaks.

The more you raise, the more tax deduction you get

It can be seen that wages are now at

the C position of market focus.

And let me tell you,

there is a very interesting thing in Japan.

Every year, its labor unions

hold a major negotiation

with employers called Shunto

It only happen once a year.

From the beginning of the year until March

they negotiate and decide how much employees wages

will be increased compared to last year

Many small companies

will refer to the results of the Shonto negotiation

when setting wages for their employees.

Of course, this is not a unified number.

The results of negotiations for companies of different sizes in different industries

are all different.

But generally speaking,

the result of the negotiations in 2023 is that

wages have increased by 3.6%.

This is already

the highest increase in Japan in the past 30 years

It is said that this year’s target will be 5%.

I don’t know if it is less

but this number will be very critical

Many of Japan's fiscal policies

and monetary policies

are basically hovering in mid-air,

waiting to see the results.

Japan's real economy

seems to be very tangled

but its stock market

is a completely different story.

Going bullish

from the beginning of 2023

to February 2024,

the Japanese stock market

had soared by nearly 50%,

reaching its highest point in the past thirty years.

Why?

At present,

there may be three major reasons.

The first is the weakness of the yen

and many Japanese stocks

is considered cheap for

US investors

Moreover the market generally believes that

if the yen falls to 150

it is basically the bottom.

If it falls further,

the central bank is likely to come to the rescue.

At this time, if you buy Japanese stocks,

it is equivalent to long the yen

and long the Japanese stock market

both of which have a lot of room for growth.

Because they kill two birds with one stone,

they have attracted a lot of foreign investment.

This is also a key reason

for the sharp rise in the Japanese stock market

for the past 3 months

The second point is after the pandemic

we know that the global supply chain began to

reorganize due to some geopolitical reasons.

Japan has always been

a big beneficiary as a major export country

Many high value-added supply chains

have been transferred to Japan.

One of the most prominent ones

is the chip sector.