Ye Tan: Is Inflation Related To China After The Republic Of China?

Inflation after the Republic of China is related to the United States.

Decoupling from the US dollar, and its own banknotes lack credit and support from economic strength.

The deflation of China in the 30s of last century and the inflation in 40s were all related to the Silver Purchase Act of the United States.

In June 1934, the United States passed the Silver Purchase Act, which authorized the US Treasury to buy Silver in the domestic and foreign markets until the price of silver reached US $1.29 an ounce, or the Treasury's reserve value reached 1/3 of the gold reserve.

This led to a surge in global silver prices, when the largest practical silver standard country was completely deflated.

The United States is trying to raise the price of silver to make China's dream of export market shattered, because China's economic depression has destroyed the domestic demand market and the external demand has become a tree without roots.

Since 1934, a large number of China's silver reserves have begun to flow.

The real economy is down and asset prices are sluggish, in 1934, Shanghai.

The silver standard can not be maintained, and the credit currency will be accepted.

This is the result that western countries want to decouple from gold and increase the international purchasing power of Chinese people.

They forget that when China fails to create wealth and feed itself, currency appreciation does not bring about active trade, but universal famine.

The silver system was soon destroyed. In November 4, 1935, China's monetary system reform was formally implemented.

At that time, the national government had negotiated with the United States, Britain and Japan for many times, and all countries hoped that China's newly issued credit currency would be linked to their respective currencies, so that China could become their currency subsidiary and export base.

The national government at that time won the first battle of the monetary war, but failed to win the key battle of the substantial war that supported the currency.

The policymakers represented by Kong Xiangxi and Song Ziwen managed to raise sufficient reserves from Britain and the United States, instead of linking the legal tender to any currency, but directly realized the market floating exchange rate. The policymakers' "maintaining currency convertibility and exchange rate stability became the basic policy of the National People's government". At the same time, the government implemented a strict balanced budget and raised people's confidence in the new currency.

This is a rare success in currency reform.

But in the real economy, the Kuomintang government has been miscalculating.

The first is the huge military expenditure to depreciate paper currency.

During the war of resistance against Japan, the total issue of legal tender amounted to 556 billion 900 million yuan due to increased fiscal expenditure, which was about 396 times higher than the eve of the war.

The last blow was during the war of liberation. The French currency was completely out of control. By August 1948, the issue amount of the French currency increased to 604 trillion yuan before the issuance of gold dollar certificates, which was 1085 times higher than that when Japan surrendered, which was 30 times more than that before the war of resistance against Japan.

The law is no longer able to maintain, and the only move is to recuperate and restore monetary credibility.

But policymakers at that time were on the contrary, nationalized and competing with the people.

Economic nationalization is manifested in two aspects: financial institutions and real economy. Temporary nationalization during the war of resistance against Japan has become a long-term measure.

By 1947, more than 90% of the total bank deposits were controlled by state-owned financial institutions.

According to the records of the history of Cambridge, the biggest difference between pre war industry and the pre war industry is that the state-owned enterprises play a leading role in the wartime industrial system.

Although only 656 (17%) of the registered factories are "public", they are equivalent to 69% of the total capital. Compared with private factories, they are larger, have more mechanical power and control the production department (especially chemicals, metal products and machinery).

After the war, the state-owned system was strengthened.

Japanese controlled factories and mines provide the foundation for an expanding state-owned industrial sector.

Under the auspices of the resources committee, the important part of the production of the means of production, the power and mining industry are placed under the control of the government.

At the end of 1947, the resource committee supervised 291 factories and mines, with a total employment of 223770 people.

In the consumer goods sector, in 1945, 69 Japanese and enemy textile mills (38 cotton mills, 6 Woollen Mills and 25 related enterprises) were confiscated and pferred to the newly established China textile construction company, a joint stock company controlled by the government, under the guidance of the Ministry of economic affairs.

In 1947, China spinning company controls 36.1% of China's spindles and 59.4% of looms.

Its factories produce 43.7% of yarn and 72.6% of cotton cloth.

The wealth consumed by war and the corruption after the war destroyed all the economic foundation and credit. When the government had to replace the French currency with gold certificates, it was doomed to go back to the vicious circle of inflation.

All the people are buying and speculating on gold and foreign exchange, and the government's tiger beating is a trifling matter because it is the interests of the group.

Sixty years of history.

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In the thirty years since China's reform and opening up, the currency is facing enormous pressure. The renminbi is asked to float freely, and the renminbi is decoupled from the US dollar.

China decoupled the RMB from the US dollar and tried to float the exchange rate step by step.

However, when the RMB is decoupled from the US dollar, the biggest obstacle is whether the real economy can be decoupled from the export. If the real economy is not enough to support RMB credit, the so-called decoupling of the RMB from the US dollar is an alternative expression of internal inflation.

Like sixty years ago, the renminbi faces two major obstacles in the process of becoming a universal credit currency.

First, the economy is based on inefficient enterprises, no matter what the nature of the enterprise will ultimately lead to the public paying for bad debts of enterprises and banks.

At present, if the strong state-owned economy is inefficient and corrupt, it will become the second deep bottomless trap of China's currency.

Second, whether we should compete with the people through monetary reform.

The last ten years have been the ten year of a sharp increase in China's currency. In this process, most people's wealth has not kept pace with the growth of the economy and money.

Milton Friedman, a monetarist of the monetarist, once said, "if it were not for the us to raise the price of silver, China would probably abandon the silver standard later than the actual situation for several years, and then make monetary reform when the political and economic conditions were relatively good.

The process of China's future will change, and maybe the vicious inflation in China will not be avoided at the end, but at least it will be postponed, so that the national government can win more time to recover its wounds from war.

Too radical to harvest wool from China, leaving no room for reform in China, will the United States repeat its usual mistakes in 1934?

They want to open up a new trading market, but let Japan make profits through silver smuggling and eventually destroy a promising emerging market.

Note: with the talent of song and Kong, if today, monetary reform will succeed.

Life is also fate.