Recently, the three major political parties in Greece have failed to form a cabinet, and Greece has fallen into a political and economic deadlock. In addition, Spain and other sovereign debt countries have also erupted demonstrations against the government's fiscal austerity, making the prospect of solving the European debt crisis confusing. As a result, European stock markets, bond markets and the euro have been seriously dragged down. In the face of the increasingly tense European debt crisis, ECB officials have also openly talked about the possibility of Greece exiting the euro zone recently. This has led to a rapid rise in the yield of national debt in European countries such as Greece, Italy and Spain, which has once again led to an increasing borrowing cost. Why do some small countries that triggered the sovereign debt crisis in Europe (called pigs, that is, five silly pigs) change the fate of the entire euro zone and even the pace of world economic recovery? In fact, this is closely related to the natural defects of the euro, a super-sovereign monetary mechanism. We call this natural defect the new ternary paradox.
In fact, Mundell, the father of the euro, and Krugman, the Nobel Prize winner who studied the crisis, have long put forward the ternary paradox hypothesis that led to the collapse of the monetary system of a sovereign country. They believe that once a country opens its capital account to the outside world, it will not be spared the tragedy caused by the currency crisis, when a country continues to overspend its own currency to make up for the funding gap of the fiscal deficit and at the same time deliberately maintains the stability of the exchange rate system (for the purpose of fighting inflation and reducing exchange rate risks)! Today, the nature of the problems in Europe, Pig and Five Countries is different from that revealed by previous economists, but there is a new ternary paradox with similar nature:
First, the defects of the exchange rate mechanism. As a whole currency (that is, using one euro), the euro zone is still in a state of emergency March, so no matter how the economic fundamentals of Greece, Italy and Spain deteriorate, the euro can not be fully adjusted according to the deterioration of the fundamentals of these individual member States. Therefore, judging from the fundamentals of these indebted countries that hold euros, the euro should depreciate sharply today to improve the international competitiveness of these hardest hit areas. But unfortunately, the adjustment of the euro is not sufficient, and even if it is properly adjusted in the future, the economic recovery ability of Greece and other countries is still very limited, because the proportion of dependence on exports in their economic structure is very limited, and the tourism industry, which plays a pillar role, has been seriously dragged down by the weak economy in Europe and America. In fact, since the outbreak of the European debt crisis, the euro has repeatedly fallen, reflecting this kind of worry in the market! However, judging from the overall economic fundamentals of the euro zone, the euro should not depreciate so much. Because Germany, the locomotive of the euro zone, still relies on its own export competitiveness to maintain steady growth, its economic indicators once performed very well in the developed country camp. This is what we often see. The depreciation of the euro is intermittent, and it often rebounds quickly because of the strong German economic indicators. Therefore, a large number of hedge funds take advantage of the uncertain contradiction of the euro mechanism (the nature of the problem is equivalent to the unsustainable fixed exchange rate system described by the traditional crisis theory), and with the help of the right to speak of their own credit rating agencies, choose the right time to speculate (often when negative materials appear in indebted countries such as Greece), and successfully obtain a large amount of ill-gotten wealth in the European market by launching short-selling strategies, thus pushing the euro and its supported European economy into the abyss.
Secondly, the defects of macro-control mechanism. The unified and independent monetary policy implemented by the European Central Bank, that is, the monetary policy linked to the inflation rate; Fiscal policy lacks an effective income redistribution mechanism (rescue mechanism). Therefore, in the period of economic stability, the principle of single monetary policy has played a very positive role in enhancing the credibility and international status of the euro. At that time, the fiscal expansion of the five European and pig countries to maintain a high welfare pattern was not challenged, but in the state of abundant liquidity in the European market, the fiscal deficit of these countries further increased. However, when the debt crisis broke out, the European Central Bank failed to inject the necessary liquidity into the Greek debtor countries in time like the Federal Reserve, so as to reduce their worsening debt burden and continue to maintain the normal monetary policy of maintaining the stability of the euro, which made Greece and other countries lose the means of self-help monetary policy. In addition, Europe lacks the internal mechanism of fiscal self-discipline and fiscal coordination, that is, it is difficult for the political and social forces of creditor countries to form the consciousness of putting their taxpayers' funds into debt relief activities and helping other countries in time, and it is difficult for the political and social forces of debtor countries to accept the fiscal reduction policy that changes their lifestyles, which leads to more and more intense market panic, and the subsequent asset portfolio adjustment often shows the characteristics of overreaction. This is equivalent to the shortage of foreign exchange reserves needed to fight against market speculation in traditional crisis theory, and the herding effect of euro asset sales will also dwarf the rescue ability of European governments.
Finally, the defects of effective management mechanism. The infinite power of shorting the euro formed by the huge international financial market will aggravate the degree of the euro crisis and even cause the European financial industry to panic about the liquidity demand, thus further worsening the Greek financing environment that needs to solve the debt burden through normal financing in the market, thus rapidly forming the result of a vicious circle in which the Greek problem drags down the euro. However, if the European and American governments or the International Monetary Fund can form a strong regulatory force and effectively hinder the market short-selling force, then the vicious circle triggered by the euro crisis will converge. At this time, with an effective aid plan, the Greek problem and the euro crisis will be gradually alleviated. This is also one of the biggest reasons why French President Nicolas Sarkozy, the rotating president of the European Union, strongly advocated the imposition of strict asset transaction tax on the income from cross-border transactions recently!
In a word, if these three factors, namely, the defect of currency marching (currencies of all countries are tied together), the single currency principle linked to inflation (rigid monetary policy), the lack of self-discipline of fiscal expenditure and laissez-faire financial market transactions in all countries work at the same time, then the pattern of European stock market crash and euro crash will have all kinds of unexpected negative materials in the future (Greece, Spain and Italy may break out). In other words, as long as the euro zone fails to overcome one of its shortcomings, the euro will fall into the trap of the new ternary paradox, and the debt problems of Greece and other countries, the euro crisis and even the weak pattern of European economy will continue to be tied together and develop in a vicious circle. The longer the reform is delayed, the greater the cost. Eventually one day, no matter how big the aid plan is, it will not be able to repair this defect!
In fact, there is no exit mechanism in the euro zone today, which is the biggest reason why debt countries are still performing moral hazard farce. Although Greece and other debt-ridden countries withdraw, it will not only cause the risk of future decline in international competitiveness for the export-dependent German economy, but also may trigger a run in the short term. However, if there is no long-term monetary punishment mechanism (such as letting Greece leave the euro and then establishing a fixed exchange rate system after the new Greek currency depreciates against the euro; Or implement a special financial self-discipline system, which is likely to be strongly opposed by the domestic society), it is difficult for these problems living under the umbrella to have strong internal self-control and try their best to resolve the increasingly serious debt crisis risk.
In any case, we should be fully psychologically prepared. Due to the rapid deterioration of the situation in Europe, China's macro-economy will face the following severe challenges in the future: 1. The challenge of exchange rate fluctuation. The pattern of rising transaction costs and exchange rate risks caused by the sharp rise of the US dollar and the euro shock. 2. The challenge of hot money shock. In the process of building a new asset portfolio, international capital will increase the proportion of high-yield investment in emerging markets, including China. This will have a great impact on the price stability of China's foreign exchange market, capital market, real estate market and even the factor market composed of bulk commodities. 3. The challenge of shrinking wealth. The economic uncertainty in Europe and America and the price fluctuation in global financial markets will also seriously affect the structural adjustment and stable preservation of China's foreign exchange reserves.