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Overdraft or overproduction, That is a problem Zhao Lei.

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Presentation on theme: "Overdraft or overproduction, That is a problem Zhao Lei."— Presentation transcript:

1 Overdraft or overproduction, That is a problem Zhao Lei

2 The puzzle of modern market economy Hamlet: To be or not to be, That is a question! ; Market economy: Overdraft or overproduction, That is a problem

3 The logic of Subprime mortgage crisis Inherent contradiction of market economy Insufficiency of effective demand Overproduction Overdraft consumption Rising of default rate Subprime mortgage crisis Reference: Zhao Lei,The Reflection of the Root of Subprime Mortgage crisis, ECONOMIC PERSPECTIVES,2008,11)

4 Classical crisis and Modern crisis The Classical crisis in market economy,for instance, the Great depression in 1929, directly appears that the effective demand is not sufficient and commodities cant be sold out The Modern crisis in market economy,for example, Suprime mortgage crisis, directly shows the flourish or excess of effective demand, i.e. eat ones corn in the blade, Overdraft consumption,etc; Essentially,both classical crisis and modern crisis are because of overproduction. The difference is that this trouble, like a ball, is kicked from sellers to buyers. That is, the explosion of inherent contradiction of capitalism is pushed from today to the future.

5 Overdraft consumption isn't the root of crisis The root of crisis Inherent contradiction of market economy Insufficiency of effective demand Overdraft consumption The avoidless choice is to release the insufficiency of effective demand.

6 An incompatible phenomenon One side, to blame it is not wisdom to lend money to people ; On the other side, to call on extend peoples consumptive demand.

7 The ways approbated by modern market economy Keynesianism: Extending government expenditure Supply-side school: Tax-reducing Policy Monetarism: Continuously lowering interest Overdraft consumption :Mortgage loan, Credit card, Subprime mortgage loan.

8 The limits of consumer coupon The limits of consumer coupon The nature of market economy: No Free Lunch; In the precondition of private ownershipFree Lunch doesnt continously develop.

9 Tragedy factors of Overdraft consumption Tragedy factors of Overdraft consumption Overproduction brings Overdraft consumption ; Overdraft consumption leads to financial crisis; Financial crisis restrains Overdraft consumption; A new overproduction appears again; Once society cannot afford to the burden of overproduction, Overdraft consumption will come back again!

10 Prediction Overdraft consumption and overproduction Recycle; Rise or fall; Perish with market economy.


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