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monetary easing stimulates asset bubbles, and fiscal easing stimulates economic growth.

only when the economy improves will asset bubbles gradually fill up. otherwise, it will just be another game of passing the news around, causing many latecomers to pay a heavy price.

now that monetary policy is in full swing, whether funds can penetrate into the real economy depends on how fiscal stimulus is used.

regarding fiscal stimulus, everyone's suggestions are not too "conservative."

for example, liu shijin suggested a 10 trillion stimulus plan; teng tai believed that 10 trillion was not enough and needed 15 trillion; li xunlei suggested 5 trillion per year for 10 years, a total of 50 trillion; liu yuhui suggested 5% of the annual economy it's exciting. if we do it for 5 years, it will be about 5-6 trillion per year and so on.

although a specific fiscal stimulus plan has not yet been released, it can be expected that the scale will not be small, because a small scale will not have much effect on economic stimulation.

in our economic system, it is not difficult to make money, nor is it difficult to spend money. what is difficult is how to spend money effectively.

all fiscal stimulus comes from the issuance of bonds. the main thing is that the zy government increases leverage, whether it is mmt, qe or other methods.

as we mentioned in our previous article,it is of little significance to only solve the problem of financing (finding money). the key to stimulating economic growth lies in investment (spending money).

it is obvious that wherever the government spends money, and such a huge amount of money (often 10 trillion or tens of trillions) is directed, it becomes hot; whoever is directed towards it will immediately turn around in wealth.

therefore, everyone should see clearly,this is essentially a great distribution of social wealth.。for example, the current stock market promotion is to distribute money to everyone. if you don't trade in stocks, you won't get the money.

so how should the government spend its money in a way that is both fair and effective?

let’s first look at some suggestions from economists:

1. the government completely takes the lead in spending money, and the direction is: improving people’s livelihood.

liu shijin believes: the focus this time is to make up for the shortcomings of basic public services.

first, we will vigorously improve the level of basic public services in affordable housing, education, medical care, social security, and elderly care for new citizens, mainly migrant workers in cities. the short-term focus is for the government to acquire unsaleable housing and convert it into affordable housing to provide it to new citizens.

the second is to accelerate the construction of small and medium-sized towns within the metropolitan area, drive china's second wave of urbanization, and form a high-quality, sustainable and modern urban system based on the integrated development of urban and rural areas.

its main logic is:in the past, we focused on economies of scale and agglomeration effects in production, but ignored economies of scale and agglomeration effects in consumption, especially service consumption.and this should be the underlying logic that we need to attach great importance to in expanding consumption at this stage.

to sum up in one sentence: if the people do not consume or do not have the ability to consume, then the state will consume for the people.

2. spend money in all aspects to support residents, small and medium-sized enterprises, real estate, etc.

liu yuhui’s suggestions are as follows:

1. in the next three years, the “five insurances and one housing fund” for private enterprises, especially small and medium-sized enterprises, will be reduced or exempted;

2. support the explicitness of local government debt, establish budget constraints, and significantly reduce the cost of debt rollover;

3. establish a national real estate collection and storage fund to support local governments in converting existing commercial housing into public utility assets (talented housing, public rental housing, health care assets, fertility incentives assets...);

4. establish an incentive national childbirth and childcare fund to fully subsidize the costs of childbirth and childcare for young families;

5. supplement the securities market stabilization fund. when the market goes down, through timely market entry actions, we can supply sufficient capital and purchase core assets, forming a long-term trend in which the bottom of core assets in the securities market continues to rise.

6. pay back all the project payments owed to suppliers for past government projects to prevent the company from spiraling;

7. maintain the normal operation of local government powers, reduce wage arrears in public service departments, and reduce the contractionary effects of tax and non-tax collection on the economy;

8. subsidize the normal operation of public utility service providers to avoid rising prices for water, electricity and other services, which would squeeze out the consumer side of residents.

in one sentence, the property market needs to be saved, the people need to be protected, the burden on small and medium-sized enterprises needs to be reduced, and the frictional costs of economic operation (such as government arrears to suppliers, non-tax collection, etc.) must also be reduced, etc. .

3. distribute cash subsidies or consumer vouchers to residents

this is teng tai’s suggestion, which is consistent with our views and is also practiced by developed countries such as europe, the united states, and japan.

let’s look at an example first:in 2020, when we faced the epidemic, our policy choice was to focus on production and expand investment. investment contributed as much as 90% to economic growth that year, but the contribution of consumption was negative.

everyone has seen the effect. although short-term investment boosted domestic demand, after one or two years, these investments formed new supply, creating a more serious oversupply.

certain companies made a quick buck, but ordinary people lost their spending power.

in europe, the united states and japan, how do their governments spend money? directly provide huge financial subsidies to the people.

according to statistics, of the more than us$5 trillion epidemic relief plan, the household sector received us$1.8 trillion, accounting for more than one-third; businesses received us$1.7 trillion, accounting for one-third. other relief plans are focused on medical care and industries severely affected by the epidemic, such as transportation.

did you see it?the money gained from mmt in the united states is 1/3 subsidized to the american people and 1/3 subsidized to american companies., and the rest will be spent on infrastructure construction and so on.

the money obtained by japan is similar to this, and almost all of the money is subsidized to the people.

of the 79 trillion fiscal expenditures, 22.1 trillion will be used to subsidize small and medium-sized businesses affected by the epidemic, 29.1 trillion will be used to subsidize electricity bills, gas bills, oil prices, etc., and 19.8 trillion will be used to subsidize children under the age of 18, etc.

with the economic rise of the united states and japan, the job market is booming. from the perspective of capital flow:

the central bank’s money—the japanese government—japanese consumers and some small and medium-sized businesses (to prevent them from going bankrupt)—consumers flow money to japanese companies through consumption.

through this capital cycle, the economies of the united states and japan rose.

therefore, if we also transfer money to the people on a large scale, and then let the people consume and then transfer the money to the companies, then our economy will rise again.

finally, everyone feels that how to spend this huge amount of funds, which can easily reach 10 trillion, 15 trillion, or 50 trillion?