The rise in pork prices this time is exactly the same as in past history, both caused by the issuance of additional currency. What we should really worry about at this time is the debt problem of local governments.
What happened to our pork? I was horrified to read the recent reports in our media. It seems that the price of our pork has doubled in a few days. Although the price of some pork has exceeded the price of beef, our careful study shows that the price of pork is rising steadily.
The four major reasons for the price increase are not established
Our media gave four reasons for the increase in pork prices: the first is insufficient supply; the second is swine fever; The third is the increase in feed prices; the fourth is the increase in other types of costs. Many people think that these four aspects can outline the real reasons for the rise in pork prices. In fact, these four reasons are not true.
The first reason is insufficient supply. The data we checked showed that 230 million pigs were sold in the first quarter of 2011, an increase of 2.5% over last year. From this, we have not found a shortage of supply.
As for the second reason, our research found that there were 452.8 million pigs in captivity in May 2011, and the stock in the same period in 2010 was only 430 million. Therefore, it is said that sick pigs caused a large number of deaths. Doesn't exist.
Third, the price of feed has increased. Taking the price of corn as an example, we did a very detailed calculation and found that there is a discrepancy in the 9.8% increase in feed prices stated by the spokesperson of the Ministry of Commerce. Corn prices in Northeast China increased by 14% year-on-year in June 2011. If we convert this 14% increase rate into pork prices, pork will increase by 7 cents per catty, which cannot explain the increase of 5 yuan per catty.
Fourth, other cost issues. In addition to feed, only 40% of the costs of raising pigs are other costs such as labor, water and electricity, etc. These costs would have to double or twice to cause the price of pork to rise by 5 yuan per pound. In fact, it is impossible to double the amount of water, electricity, and labor. Another data shows that more than a year ago, each pig could earn 100 yuan. In December 2010, it became 300 yuan, and in 2011, it became 600 yuan. If costs were driving pork prices higher, profits from pig farming should fall sharply, but we found that this is not the case.
Pork prices are real
The rise in pork prices today is not a problem with pork, but a decrease in your purchasing power. This is called inflation. CPI is the Consumer Price Index. It has many components, including a variety of consumer goods. Its entire calculation process is opaque. But the price of pork is different, which is very transparent. We compared the data from the Bureau of Statistics, the Ministry of Commerce and the data on the Pork Price Network and found that they are exactly the same, which means that the price of pork is real. The price of pork has increased by nearly 50% this year. Multiplied by its 10% weight in the CPI, it can explain today's 5% inflation rate.
Pork triggers government macro-control
What is the goal of the government's entire macro-control? Regulate the price of pork, not simply CPI. In China's economic fluctuations, pork prices have always had a relatively important significance. Every time the price of pork rises relatively quickly, it means that the economy may have reached an inflection point, and every rise in pork prices will trigger the government's determination to pay attention.
We have had four inflations in the past. The first of these four inflations was in 1985. In just a few years, the currency issuance increased by 63%, and the inflation was as high as 6%. The solution was to crack down on the massive infrastructure investment at the time to control inflation. The second and third times were in 1988 and 1995 respectively, both related to excessive currency issuance. The fourth time was in 2007 and 2008. It was also after the price of pork reached a historical peak that the government became determined to crack down. Therefore, strict macroeconomic control began in 2007 and interest rates were raised six times in 2007, which led to the June 2008 Twenty to thirty percent of private enterprises in the manufacturing industry in Guangdong, Jiangsu and Zhejiang have closed down. After the financial tsunami, the government launched a 4 trillion yuan investment plan, and the government's supporting package was 16 trillion yuan. The total of 20 trillion yuan could only rely on the central bank to invest currency, that is, to provide bank credit, thus causing the 2010 At the end of the year, our currency reached 73 trillion yuan.
You should really worry about local government debt
The rise in pork prices this time is exactly the same as in past history, both caused by additional currency issuance. What we should really worry about at this time is the debt problem of local governments. In 2011, due to the rise in pork prices, there is no doubt that the government is determined to control inflation, and I also believe that our government will carry out a severe crackdown like the past four times, including raising the deposit reserve ratio and bank interest rates, but there is not much room. big. Our loan interest rate is currently 6.8% and can only rise to 7.5%. This is why the central bank has only raised interest rates four times since 2010. According to statistics from the National Audit Office, as of the end of 2010, the balance of local government debt nationwide was 10.7 trillion yuan. The land transfer fee in 2010 was 2.9 trillion yuan. In 2011, it may only be 20% of last year. Banks that have paid off these debts The interest is already very high, let alone the principal. This is the local debt crisis, and it is what we are really worried about.