US $Eight Hundred Billion Thawing Credit Markets

The most serious problem in the credit market is the so-called liquidity trap, and the financial institutions' loans to businesses and consumers are at a standstill.

At this time, the US Treasury and the Federal Reserve must play the role of commercial banks unwilling to play a role in solving the problem of credit exhaustion, otherwise the US economy may face long-term growth stagnation or even negative growth.

The US Treasury and the US Federal Reserve announced on the 25 day that another $800 billion would be allocated to thaw the consumer credit market, housing mortgage loans and small business credit markets.

According to the plan, the Federal Reserve will spend $600 billion to purchase housing mortgage loans and related securities, and another $200 billion will be used to promote consumer credit activities.

The US Treasury allocated $20 billion from the $700 billion financial rescue plan introduced in October this year to support the Fed's actions.

Since the US government embarked on a large-scale rescue of the financial market in October, the US Treasury and the Federal Reserve have clearly declared two objectives of the rescue measures: first, it is impossible to let any financial institution that constitutes a systemic risk to the financial market go bankrupt, and two is to solve the problem of credit exhaustion caused by the credit crisis.

To this end, the US Treasury and the Federal Reserve launched a series of rescue measures including the $700 billion financial rescue package, which has played a stabilizing role in the financial market by means of interest rate cuts, injection of funds, direct intervention in commercial paper and monetary fund market.

After receiving capital injection from the Ministry of finance, the major financial institutions in the United States have improved their own funds, and the interest rate of interbank lending has returned to normal level. The problem of issuing commercial bills by large enterprises has also been alleviated.

It can be said that the first goal of the above goals has been partially realized.

However, financial institutions refuse to lend because of their own assets safety, and the situation of consumer credit market and housing credit market can not be improved.

First, the real estate market that triggered the credit crisis is still unable to rebound. The housing sales and sales prices in the United States have not improved significantly. As the financial crisis spread to the real economy, corporate profits plummeted and unemployment increased. The proportion of bad loans in housing loans increased, and commercial real estate problems also appeared.

As long as house prices continue to fall, assets related to real estate will continue to depreciate. This will further increase the bad assets of financial institutions, thus triggering a more severe credit crunch.

Secondly, the consumer credit market is deteriorating further.

Because of the credit crunch and the deterioration of the economic situation, the bad debt rate of the consumer credit market, including credit cards, auto loans and student loans, has increased and the cost of borrowing has increased.

As personal consumption occupies 2/3 in the US economy, credit contraction is a serious threat to the recovery of the real economy.

In addition, when financial institutions generally grudges loans, it is more difficult for small businesses that are most vulnerable to economic crisis to get loans.

Hong Pingfan, director of the United Nations global economic monitoring center, said in an interview with our reporter: "the most serious problem in the credit market is the so-called liquidity trap, that is, funds can not get out of banks, and financial institutions' loans to businesses and consumers are at a standstill."

He believes that this time, the US Treasury and the Federal Reserve must play the role of commercial banks unwilling to play to solve the problem of credit exhaustion, otherwise the US economy may face long-term growth stagnation or even negative growth.

Analysts are controversial about the role of the US Treasury and the Federal Reserve.

Jerry OConnell, deputy governor of the former Federal Reserve Bank of Dallas, believes that the scheme will stimulate the credit behavior of the real estate market, thus contributing to the stabilization of the real estate market.

Analysts also believe that the scheme will stimulate consumer credit, which is conducive to stimulating economic growth.

However, Lawrence White, a former White House economist and professor of business school at New York University, believes that although the scheme has injected a lot of liquidity into the market, it has not solved the problem of toxic assets held by financial institutions.

Chen Zhiwu, a finance professor at Yale University, is not optimistic about the implementation of this plan.

He said: "in the long run, the money supply is increasing, and the debts of the US government and the Federal Reserve are excessive. The long-term risks are great. With the inflation pressure increasing in the future, the government will have to face new problems."

Although analysts have different views on the effectiveness of the latest rescue package of the US Treasury and the Federal Reserve, the financial market has responded positively.

On the one hand, the US housing mortgage interest rate dropped sharply; on the other hand, New York stock market Dow Jones 30 industrial stock average price index and standard & Poor's 500 stock index also appeared for a long time, "three Lian Yang".