(a)
10 years, a crisis.
This weekend 10 years ago, a crisis changed the United States, China, and the whole world.
is really thrilling. The stock market is collapsing, enterprises are closing down, Wall Street is shrouded in the doomsday, the US government is also in a panic, a large number of Americans have lost their houses, jobs, and savings. People don't know what will happen next.
This is a classic photo: a white-collar worker on Wall Street who just lost his job walked out of the magnificent skyscraper, rolled up his sleeves in his white shirt, and his left hand was all his personal supplies, and he took off his suit with his right hand...
was in tears, which was the most true portrayal of Wall Street at that time.
The United States, which was once at its peak, once again became the source of the international financial crisis. Corresponding to the Great Depression in the 1930s, people later called this crisis the Great Recession .
I don’t know whether it was luck or misfortune. I worked in the United States at that time and experienced this crisis throughout the process. I had various inquiries and appointment calls from Beijing almost every hour. People on the other end of the phone often forgot that there was still a time difference.
Everything is like a movie. The protest outside the White House, the anxiety in the Treasury building, the look of each other on Wall Street, and the wailing and crying of the general public... I was so impressed. So late at night when Obama was elected in the winter of 2008, college students from Washington gathered excitedly on Pennsylvania Street outside the White House, shouting that Bush, who was still in the White House, got out early.
This is a comprehensive crisis, and the source is this weekend 10 years ago, when Lehman Brothers went bankrupt.
On that weekend, then U.S. Treasury Secretary Paulson called home from the office. He was exhausted by working overtime for several days, and he said to his wife Wendy: "Everyone is looking at me, but I don't know the answer."
"I'm really scared!" Paulson said.
Wendy, who had just returned from a church prayer, comforted him and said, "You should not be afraid, your work reflects the infinite mind of God, and you can rely on His power."
Paulson had reason to be afraid. It was with his sidelines that Lehman Brothers, who is ranked fourth in Wall Street investment banking, came to the end of the road, and the financial tsunami swept Wall Street, which was a foregone conclusion.
Sunday, September 14, 2008. The title of a report in the US Newsweek is: Sunday, a bleeding Sunday.
On Monday, September 15, the stock market opened and the financial tsunami began.
(II)
is a bloody lesson.
Americans today are very clear that the tragedy of Lehman and the entire US economy is closely related to the previous US real estate bubble. But pushing time forward, Americans are more excited about the real estate boom than fear.
In June 2006, when I first came to work in Washington, a Chinese friend told me regretfully that the villa he bought for $600,000-700,000 per house had increased to about $1.5 million at that time. If I bought one more, it would be great!
, but unfortunately, this optimism did not last long. It was also since 2006 that the US housing market began to decline after many years of hot weather, and then it turned sharply.
house prices plummeted at 20%, 30%, or even 50%, or 80%.
Please pay attention to these data, 20%, 30%, 50%, 80%, there is nothing impossible in this world. Don’t think that housing prices cannot fall, as they will plummet when they fall.
Home buyers and builders have become landlords. As the most direct daily experience: Since 2006, a unique landscape next to the streets of the United States has become more and more real estate advertisements. Price reduction promotions and gift vouchers are used by home sellers, but there are still few home buyers. In the capital Washington, many newly built properties have to advertise "temporary rental" after poor sales.
When describing the US housing crisis, I have cited an example of this many times in my report:
, a real estate agent in Arizona, USA, who has been in the industry for 15 years, met a female client who was seriously out of control.
"She kept weighing her phone from left hand to right hand, as if she was playing with a knife, and then suddenly hit me. I flashed and a pit was left on the wall behind me." He said.
Lady is also crazy, why? It turned out that Brooks told her that her house had shrunk by another $60,000. 60,000 US dollars is also a considerable amount for Americans, and it is related to the cost of survival.
When housing prices rise, no matter how you take action, it is an opportunity; but with the bursting of the bubble, previous decisions have become a nightmare in life.
, which continues to decline, not only "buy" Americans who are excited to buy houses at high prices; those who are trapped immediately include American mortgage companies, especially subprime mortgage loan financial companies with higher risks.
On April 2, 2007, New Century Financial, the second largest subprime mortgage supplier in the United States, declared bankruptcy. The subprime mortgage company, whose assets in early 2007 were more than US$1.7 billion, shrank to less than US$55 million in just three months.
The next day, CNN disclosed that throughout 2006, subprime loans in the United States reached US$640 billion, about twice the size of three years ago. Subprime loans accounted for 20% of the total scale of the national mortgage market in the United States. The total value of subprime mortgage bonds in financial companies and hedge funds reached US$1 trillion.
is a bubble that will always burst. According to statistics from industry insiders, 13% of subprime loans had formed bad debts at that time. So, in the spring of 2007, the US subprime mortgage industry began to collapse completely, and the market was full of killing sounds, with more than 20 subprime mortgage suppliers declared bankruptcy, suffered huge losses or sought to be acquired.
From this, the US subprime mortgage crisis, which is known to the world, has gradually become more and more prosperous. The Chinese name of
subprime mortgage crisis should also be the earliest named by my colleagues and I.
In the United States, "secondary" is relative to "discount level". The so-called subprime mortgage is a loan issued to lenders with lower credit. Unlike ordinary mortgage loans, the simple process of subprime mortgage loans is as follows: people with lower credit obtain loans from subprime lending institutions; lending institutions sell mortgaged claims to the investment bank and re-lending them with income; investment banks repackage the claims into bonds and issue them in the capital market. Compared with "preferential" loans for high-credit customers,
has high interest rates and large returns, but large leverage and high risks.
But when the U.S. housing market was booming from 2001 to 2005, buying a house was the most profitable business. People wanted to buy a house, and mortgage companies were also willing to issue subprime loans to achieve high returns. Many companies have increased their leverage and even launched loan methods such as "zero down payment" and "zero documents" to attract lenders.
House prices plummeted, subprime mortgages became bad debts, and financial giants that once called for trouble are now in a desperate situation.
On June 7, 2007, Bear Stearn, the fifth largest investment bank on Wall Street, announced that its two hedge funds would stop redemption. This is just the prelude to the bigger storm. On March 14, 2008, Bear Stearns' stock price plummeted 45.9%. Under pressure from the overall deterioration of liquidity, Bear Stearn had to apply for emergency loans from the Federal Reserve.
Two days later, in order to prevent a catastrophic plunge in the financial market, under pressure from the Treasury Department and the Federal Reserve, Bear Stearns sold himself to JPMorgan Chase at a "jump price" of $2 per share. The Federal Reserve provided about $30 billion in guarantees for the merger.
For this merger and acquisition case, many media described it as "Marriage at the Gun" , meaning that although Bear Stearn was helpless, in order to survive, he could only commit himself to JPMorgan Chase.
is followed by the IndyMac Bank of the United States. On July 11, 2008, the bank closed down due to huge losses and runs, which was the fourth largest bank collapse in US history. Then the nightmare was Fannie Mae and Freddie Mac, the two giants in the U.S. housing mortgage market.
"Two Houses" are authorized by the US government, and foreign governments have purchased up to $1 trillion in "Two Houses" bonds. Once the "two houses" collapse, all investments, including China, will be lost. Paulson later recalled that at that time, Russia and China had contacted senior officials and demanded that the two countries jointly sell "two-house" bonds, in order to force the United States to implement emergency authorization and take over the two major companies. The sell-off in
will exacerbate the U.S. crisis and put U.S. Treasury debts in crisis. Paulson quickly communicated with China, and then he quickly made a decision to nationalize the "two houses" to ensure the confidence of outside investors in the United States. China's investment has finally been safe and has been protected.
But the "two-house" crisis is just an episode of the entire crisis. In the bitter wind and rain, the Lehman Brothers also reached the end of the road, and a greater crisis is still behind.
(Wednesday)
Saturday, September 13, 2008, surrounding Lehman's fate, the "secret room politics" on Wall Street began in the heat and ended in the cold.
Lehman Brothers, who started out as a cotton brokerage agency in Alabama, has a history of 158 years. As the fourth largest investment bank on Wall Street, Lehman has continuously expanded leverage and expanded rapidly in the US housing bubble in the past few years, which has caused Lehman's business to expand rapidly. Now, it is time to break down.
On September 10, 2008, Lehman announced that he would lose $3.9 billion in the third quarter of 2008. On September 11, Lehman's stock price, which had previously plummeted continuously, plummeted 42% again within one day.
As a member of Wall Street's "too big to fail", Lehman will have a far-reaching impact once it goes bankrupt. In order to save Lehman Company, Paulson, known as the "Hank of Wind", tried all his strength.
Under the request and arrangements of Paulson, then chairman of the Federal Reserve, Ben Bernanke, and then president of the New York Fed, the financial tycoons on Wall Street held a meeting in New York to negotiate on Lehman's future.
In view of the urgent situation, Paulson issued a warning: a solution must be found because Lehman bankruptcy poses risks to everyone.
Regarding this closed-door talk, a US federal official sighed that this is actually ", the largest card game in the world, ."
But Paulson also drew the bottom line. The government would not rescue Lehman because he was afraid that taxpayers would attack him for the country and save a Wall Street boss who spent money like money.
If the US government does not take action, how dare other companies take risks? Lehman Brothers Chairman and CEO Ford called for help one after another, but no one paid attention to it. He lamented afterwards: "This kind of pain will accompany me for the rest of my life."
's accusation of not saving him, Paulson responded that if he could save him at that time, he would definitely help Lehman. After all, one of his younger brothers was also working in Lehman.
But in hindsight, Paulson lost completely, and he underestimated the market's reaction. The market panic dragged the entire Wall Street into the abyss, and the United States fell into the worst economic crisis since the Great Depression in the 1930s.
Franklin Roosevelt There is a famous saying: The only thing we fear is fear itself.
But at that time, the market was completely shrouded in fear, and the financial tsunami became more and more fierce, and what we saw was the destruction of destruction.
On Monday, September 15, 2008, Lehman Brothers, the fourth largest investment bank in the United States, announced bankruptcy, which is also the largest bankruptcy case in US history.
On the same day, Merrill Lynch, the third largest investment bank in the United States, was acquired by Bank of America.
At Tuesday, September 16, rating agencies Moody and Standard and Poor lowered the ratings of troubled insurance giant AIG (AIG), and AIG's stock price began to plummet.
On Wednesday, September 17, the Federal Reserve was forced to provide up to $85 billion in emergency loans to AIG to prevent the company from falling into bankruptcy.
On Thursday, September 18, Paulson, Bernanke and some heavyweight lawmakers held emergency consultations and asked Congress to pass a $700 billion rescue plan to purchase non-performing assets of financial institutions."If we don't do this, we may not have the U.S. economy on Monday."
On Friday, September 19, Paulson announced a financial $700 billion financial rescue plan. George W. Bush later recalled, "(my) major economic advisers told me that we may be in a worse situation than the Great Depression."
Saturday, September 20, the U.S. government formally submitted a rescue plan to Congress.
On Sunday, September 21, the Federal Reserve announced that it would approve the largest investment bank in the United States, Goldman Sachs, and the second largest investment bank, Morgan Stanley, to implement business transformation and become a bank holding company, or ordinary commercial banks.
On the evening of September 25, US regulators took over Washington Mutual, the largest savings bank in the United States, and sold part of its business to JPMorgan Chase.
At this point, the subprime mortgage crisis has wiped out all the top five investment banks in the United States. Wall Street has experienced a "century reshuffle". Reuters commented that an era of is over.
Many American media use the same word when reporting: BLOODY (bloody) - this is a bleeding week and a bleeding month on Wall Street.
(IV)
American media once published a cartoon:
After the financial tsunami, Paulson asked the survivors of Wall Street: What's going on? The survivor asked: I should be asking you this.
Among the five major investment banks, Goldman Sachs, which Paulson once held, is in a relatively best condition. Some members of Congress accused Paulson of actually knowing the seriousness of the crisis for a long time, but because of his own interests, he failed to take effective and tougher actions in a timely manner. The accusations of
by lawmakers may not be true, but in this financial crisis, it is still an entanglement of "greed and fear". Wall Street's greed is an important source of the overall worsening of the crisis.
Speaking of this crisis, Pieter Bottelier, a professor of economics at John Hopkins University, told me that the decline of the US financial market to this extent is related to the strong speculation of American financial institutions. In addition, due to financial innovation, a large number of financial derivatives have been introduced to the market, and many investors are actually not clear about the risks of these financial instruments, which lays a major hidden danger.
U.S. President Bush, who was plagued by the crisis at the time, mercilessly accused Wall Street of being "drunk" and that was "still in a hangover. The question is how long it will take to wake up and no longer use those strange financial tools." The disaster of financial derivatives is a bubble that expands a bubble in one field to the entire economic fundamentals. Lin Yifu told me that this crisis exposed the hidden dangers of US financial innovation. Financial derivatives are becoming more and more complicated, and supervision has not kept up, which has caused the bubble to expand and eventually led to a serious financial crisis.
The bubble of real estate, the bubble of financial derivatives, the bubble of debt, and the panic mentality after the bursting of the bubble made the United States fall into an almost doomed place and dragged the world into an international financial crisis.
Former U.S. Labor Secretary Robert Reich pointed out that there is opacity in the U.S. financial system, and borrowing from financial institutions and individuals has greatly exceeded the speed of economic growth, which will inevitably lead to problems.
Between 2002 and 2006, US household loans grew at a rate of 11% per year, while financial institution loans grew at a rate of 10% per year, which far exceeded the overall economic growth rate.
When the US real estate bubble burst and housing prices plummeted, many people were in a situation where they were unable to repay their loans. The subprime mortgage crisis broke out, and the crisis continued to expand, finally dragging areas into disaster one by one.
But in the hot real estate fanaticism, how many people will rationally realize that the crisis is coming.
Buffett Later, he also sighed that everyone made the same mistake at that time, believing that housing prices would rise endlessly. "Basically, four or five years ago, almost every American had such a concept in his head. Whether it was formal or informal, he believed that housing prices could not fall sharply..."
(V) The rules of
are always unbreakable, just a little earlier or later.
does not have a market that only rises but not falls. Whether it is stocks or houses, if the price is out of reality, the market will eventually react. The madness of the Japanese housing market in the last century and the booming US housing market at the beginning of this century eventually turned into disastrous consequences. The
crisis has also caused widespread doubts on the US economic model. The financial crisis, the Afghan War, and the Iraq War made the US recession inevitable. At the same time, the overall rise of the BRICS countries, and the G20 summit became a routine, and China approached the center of the world stage.
Ten years of reincarnation.
But ten years later, we have seen some progress, but in fact it is more dangerous.
The Financial Times recently said in an editorial reflecting on the crisis:
According to certain measurement standards, the next crisis seems to be coming. 2007-08 A major cause of the financial crisis—too much debt—has got worse.
Despite governments’ austerity policies, especially in Europe, global debt is now about $250 trillion, 75% higher than when Lehman went bankrupt. Undoubtedly, ultra-loose monetary and quantitative easing have helped repair banks' balance sheets and stimulated economic activity. But they amplify the debt problem. Using low interest rates to encourage investors to buy assets with higher yields has spawned a new bubble. The stock market is close to historical highs. Real estate in major cities around the world has reached record multiples of house price-to-income ratios.
From this perspective, the US stock market is now facing greater risks. It is a little ironic that at least the Chinese stock market is still healthy, even though it is so healthy that Chinese people want to forget it.
Moreover, in the past, there were more debts now. Don’t forget the Greek debt crisis, don’t forget the struggles of Argentina and Türkiye now. Debts always have to be paid back.
In addition, the United States is no longer that United States. The United States, once an advocate of free economy and globalization, is now the biggest enemy of free economy and globalization. In the words of the Financial Times, the nationalism and protectionism of the United States are weakening the international cooperation system that helped curb the previous financial crisis, which could make the next worse.
At the most urgent time of the international financial crisis, many American officials' catchphrase was that "the United States and China are on the same boat", and China's 4 trillion plan has indeed greatly helped the United States, but now the United States has begun to turn against each other again.
is coming out and you always have to return it.
Another terrible reality is the real estate bubble all over the world. House prices in first-tier cities in China have far exceeded those in the United States and the Japanese. When working in the United States, a US government statistics expert heard that the housing prices in Beijing were even more expensive than those in Washington, and was so surprised that he couldn't speak and kept saying something incredible.
What is incredible is this American. That was a few years ago. He probably heard about the current housing prices in Beijing and must have thought that Washington was a backward area.
has institutional statistics. As early as 2016, the top 50 cities with the highest total market value of residential housing in China had a total market value of more than 200 trillion yuan, reaching 219 trillion yuan, which has exceeded the total market value of residential housing in the United States by 200 trillion yuan. No wonder the leader has to shout out loud: houses are for living, not for speculation.
There is a joke online saying: In the real estate trading center, one group of people sold their houses and were preparing to buy at the bottom of the stock market. Another person was trying to cash out of the stock market and was about to sweep the house. The two teams passed by, glanced at each other, and recited a word in their hearts, SB... will the new bubble of
end with tears? Time will tell everything, although the results are often extra cruel.
I hope that such a crisis will never come again!
Extra
This morning, Huanhuan (ID: huanqiu-com) exclusively reported Swedish police incident of rude treatment of Chinese tourists: the Ministry of Foreign Affairs suddenly reminded the cause of the sudden safety reminder! Swedish police actually threw the old Chinese couple into the cemetery in the middle of the night!
The father of a Chinese tourist Mr. Zeng was dragged out of the hotel by Swedish police.
Mr. Zeng and his parents were thrown by Swedish police on the side of the road.
Huanhuan will closely monitor the progress of the situation and conduct follow-up reports as soon as possible.
