The impact of the subprime mortgage crisis on the global economy. Bankers of the world's major central banks have been concentrating on preventing the shortage of liquidity in the money market caused by the subprime mortgage crisis in the United States, and have injected a lot of cash. Not only that, the Fed also lowered the discount rate. These efforts have achieved initial results, and the money market has stabilized. However, many bond products, especially asset-backed securities, are still depressed. In addition to worrying about the chaos in the credit market again, central bank governors are most worried about the impact of the credit market turmoil on the global economy. It is generally believed that the United States, the birthplace of the subprime mortgage crisis, will be the most affected. At first glance, the American economy has not been affected by the subprime mortgage crisis: the economic growth in the second quarter was very strong; Business spending seems to be very active; Wage growth is very stable; The price of gasoline, which reduces consumer spending, is falling. But on closer analysis, the prospect is not so bright. The latest issue of The Economist pointed out that the strong economy in the second quarter was attributed to one-off factors such as the company's inventory adjustment to some extent, while the consumption growth dropped sharply during the same period, and the downturn in consumption expenditure in some areas continued into the summer. Statistics show that car sales in July fell to the lowest point in nine years. More importantly, the weakest link in the American economy, the real estate market, is worse than many people realize. In July, the pace of new housing construction dropped sharply, second-hand housing sales fell for the fifth consecutive month, and house prices continued to fall. According to S&; P/Case-Shiller house price index, in the past year as of June, the average house price in major cities in the United States 10 decreased by 4. 1%. The bursting of the real estate bubble made the American economy vulnerable before the credit market turmoil in August, and the credit dilemma made the real estate market worse. Therefore, it is not surprising that analysts have lowered their expectations for the US construction industry and housing prices. Economists in JPMorgan Chase now predict that by the end of 2008, the pace of new housing starts will be further reduced by 30%, and the average house price will be reduced by 7.5% to 15%. Economists at Goldman Sachs believe that house prices will fall by 15% to 30% in the next few years. The bursting of the real estate bubble will continue to hinder the growth of production. The bigger question is, what impact will the factors that affect the double-digit decline in house prices have on the United States, because American consumers borrowed heavily at the peak of the real estate bubble. Optimists get some comfort from the rebound in consumer spending, but this may be a mistake. The double-digit decline in house prices will make more and more mortgage borrowers fall into financial difficulties. Other consumer debts have already gone wrong. For example, the credit card default rate is rising, and lending institutions are likely to face a more difficult situation. As homeowners feel poorer and poorer, consumer spending is bound to be curbed, especially when the stock market continues to fall. According to the quantitative economic model analysis conducted by UBS economists, if the stock price and house price both fall by 10% and there is a credit shock of rising capital cost by 1 percentage point, the economic growth of the United States will be lowered by 2.6 percentage points next year, and the American economy will fall into recession. So why do many Wall Street analysts still insist that the damage caused by the difficulties in the credit market is limited? The main reason is that they expect the Fed to cut interest rates to save the market. Financial futures prices show that investors expect the Federal Reserve to cut the federal funds rate by 75 basis points to 4.5% by the end of this year. However, UBS's analysis shows that it is impossible to alleviate all the pain by cutting interest rates, and the US economic growth rate may slow down by more than 1 percentage point next year. Although UBS's analysis is not impeccable, if US housing prices face a double-digit decline, even if the Federal Reserve loosens monetary policy, the US economy is doomed to fall into weakness. Fang Ming, a senior analyst in the global financial market department of Bank of China, said in an interview that the US economy will be affected to some extent, but it will not fall into recession. The data shows that US GDP is mainly composed of private consumption, private investment, government consumption and investment, net exports and private inventories. In 2006, private consumption, private investment, government consumption and investment accounted for 69.9%, 16.7% and 19. 1% respectively. In 2005, the proportion of American construction industry to GDP was 5. 1%, and the proportion of real estate and corresponding leasing industry to GDP was about 10. 1%. Therefore, Fang Ming believes that even if the decline in real estate sales will affect the US economy, its impact can only be within the range of 15.2%. "The decline in US real estate sales will only lead to a certain slowdown in the US economy. The GDP growth rate in the third quarter may fall below 3%, and the annual growth rate is 2.5% to 3%. However, the US economy will not fall into recession because of the slowdown in real estate and the credit crisis in the real estate financial market. " He said. As for the impact on the economies of other parts of the world, The Economist thinks it may be very serious. In fact, at present, many people expect the global economy to withstand the slowdown in the United States. The reason is that the economic growth in the United States has been weak for more than a year, but the global economic growth has been strong. The Economist said that this optimism may have underestimated the spread of the subprime mortgage crisis to other countries. One of the transmission channels is financial communication. From Canadian to China, there have been losses of investment subprime loans all over the world. The widespread spread of losses is easy to digest, but the tension and risk aversion that spread at the same time are not so easy to eliminate. In the past financial turmoil, emerging market economies were the biggest victims. But this time it may be different. Developed countries, especially European countries whose banks are deeply involved in the US subprime mortgage crisis, may be more anxious. Many emerging market economies have benefited from huge foreign exchange reserves and current account surpluses, and can well withstand the test of large-scale withdrawal of investors. In developed countries in Europe, the investment losses of subprime loans and investors' nervousness may force banks to tighten their belts and weaken the growth of domestic spending. In August, Germany's Ifo index reflecting business confidence fell for the third consecutive month, and consumer confidence also declined. Before the credit market turmoil in August, the European Central Bank had signaled that it would raise interest rates at its regular meeting on September 6. But judging from the current situation, the central bank is likely to have to wait for some time. Even if the direct financial contagion is controlled, the subprime mortgage crisis in the United States may produce psychological contagion, especially the revaluation of housing prices. Although the scale of reckless lending to high-risk borrowers in the United States is larger than that in other parts of the world, house price inflation has been more serious than that in the United States, and countries such as Britain and Spain are more vulnerable to the bursting of the house price bubble. In addition, The Economist also pointed out that the ability of the global economy to resist the weakness of the US economy should not be exaggerated. Although the current account deficit in the United States has been declining, it still accounts for about 6% of GDP. Because Americans consume far more products than they produce, Americans are still one of the biggest sources of demand in other parts of the world, and their sharp decline in demand will inevitably damage the economies of other regions.