Overdraft or
overproduction,
That is a problem
Zhao Lei
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 ” 。
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)
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 can’t
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 one’s 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.
“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.
An incompatible phenomenon
• One side, to blame it is not wisdom to lend
money to people;
• On the other side, to call on extend people’s
consumptive demand.
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.
The limits of “consumer coupon ”
• The nature of market economy: No Free Lunch;
• In the precondition of private ownership：“Free
Lunch” doesn’t continously develop.
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!
Prediction
Overdraft consumption and overproduction：
——Recycle;
——Rise or fall;
——Perish with market economy.