Bitcoin is a kind of virtual asset, invisible and intangible. It is a bit like the “atonement roll” issued by the Catholic Church in the Middle Ages. It is said that it can bless you to realize the illusory “financial freedom”. For ordinary people, it is always tickling to see the wealthy people spend huge sums of money to buy this kind of virtual wealth; they know that this is just the carnival of the rich, but it is often the destiny that finally “checks out” for the carnival. The financial bubble in history has generally been such a law. For example, in the tulip speculation wave in the Netherlands 400 years ago, it was ordinary investors who suffered the most in the end, not the initial speculators.
Bitcoin speculation is more powerful than tulips. There are many reasons, the most important are two: First, the global financial infrastructure and information construction, that is, the “interconnection” with the US dollar as the main currency asset trading platform, so that financial institutions and individual investors can lower the price. Cost and convenient transactions in the virtual economy around the world. Another important reason is that the wealthy people in developed countries have a general fear. Seeing that European and American central banks continue to print money to stimulate the economy, traditional industrial capital is worried about the devaluation of their currencies, so they are looking for a safe haven for assets globally. The “asset shortage” created a speculative frenzy in Bitcoin.
Transaction facilitation is a double-edged sword. For speculation, the real-time trading system of GCOM will greatly accelerate the accumulation of bubbles, just like the rise in the price of Bitcoin, much faster than the tulip “onion” 400 years ago; however, when the bubble bursts, it will only Will devour wealth more quickly. The world has no assets that only rise and never fall, and Bitcoin is no exception. Therefore, global financial institutions are predicting, when will the Bitcoin bubble burst? To be more direct, when will the central banks of the developed economies of the United States, Europe and Japan shift their policies? When will these “tasting the sweetness” of the central banks stop their excessively loose monetary policy?
As far as traditional money and banking are concerned, the only necessary condition for tightening monetary policy is inflation. You must know that in addition to Bitcoin, the global prices of basic industrial metals such as copper and aluminum have also skyrocketed in the past year: the prices of copper and iron ore have risen by 100% after bottoming out in March last year; aluminum; Prices have also risen by more than 50% this year, and before and after the Spring Festival, the price of iron ore, copper and aluminum has increased in an accelerating trend. Global central banks attach great importance to: Is the shadow of inflation coming?
In 2021, inflationary pressure is indeed huge, and the monetary policy environment for financial investment is not suitable for investors to use leverage and speculate for profit. As a financial veteran who experienced the subprime mortgage crisis in 2008, the author feels the risks of the financial crisis just like 14 years ago: continued loose monetary policy, the myth that wealth will only rise but not fall, the optimistic atmosphere that everyone makes money, and the trading style Mainstream financial institutions that are “forced to unify”.
The speculative surge in Bitcoin was caused by these mainstream financial institutions in the “prisoner’s dilemma”, just like the tulip “onions” of the year and the 2007 US real estate junk bonds. In order to rescue the crisis, the developed economies did not fundamentally dismantle the financial system that was too large to fail. Instead, they overdrafted their country’s fiat currency credit and concealed bad financial debts by issuing more dollars and euros. Therefore, many European and American people of insight continue to question the US government and the Eurozone central bank. After the financial tsunami in 2008 and the European sovereign debt crisis in 2011, why are systemic financial institutions more monopolized in the financial markets of European and American countries? Why can several major financial groups in the United States kidnap the US economy even more?
The U.S. government for the past four years cannot shirk its blame. As a speculative politician, Trump relied on the “America First” isolationism and upheld trade protectionism to try to transform the internal contradictions of bad financial debts in the United States; and the sudden new crown epidemic gave the Fed an excuse to continue printing money. You must know that the national debt of Germany and France has long been negative interest rates, and banks are forced to borrow money from the government for blood transfusion. The proliferation of currencies and “asset shortage” finally made Bitcoin stand out.
Everyone knows that Bitcoin is not a real currency, nor can it replace fiat currency, but it has a high reputation, a bit similar to a well-known contemporary art. It is the carnival of rich people who “play collection” and the carnival of developed economies whose currencies have global credit. This “Ponzi scheme” is just waiting for those who pay the bill.
So, how should the Chinese economy, which has also been hit by the epidemic and is recovering and rising, respond to this speculative frenzy of global currency proliferation in 2021? In the author’s opinion, China’s response is rational and should be based on its own global comprehensive competitiveness. In other words, although “Made in China” has become famous all over the world, the Chinese government has decisively responded to the sudden epidemic and made China the only country with positive economic growth in 2020, but the global competitiveness of Chinese financial institutions is still limited. The process of renminbi internationalization still faces many challenges, and it is far from time for the renminbi to challenge the hegemony of the dollar. Moreover, due to the demand for “stabilizing growth and fighting the epidemic”, China’s economy has been forced to accumulate a lot of invisible debt. Whether it is local governments or the pan-real estate financial sector, the debt risks of these “shadow banks” are accumulating.
Therefore, 2021 is a rare window of time for China’s finance. It will learn from the lessons of the subprime mortgage crisis in the United States and promote the reform of the financial market in a down-to-earth manner: allowing more hidden debts and bad debt institutions to “explode”, thereby smoothing the central bank’s monetary policy. Transmission mechanism, promote the unification of the bond market, liberate those financial institutions that can only “serve themselves and earn money from the central bank” in the cracks of credit risk, and achieve the strategic goal of supply-side structural reform of financial deleveraging. On the regulatory side, strengthen the cross-border settlement risk control of virtual digital currency transactions, prudently respond to the irrational frenzy of global capital, and resolutely prevent the Chinese people from being the payers of the Bitcoin “Ponzi scheme”.