Recently, our country's central bank has announced the total monetary amount as of the end of November 2023. The broad money supply (M2) has soared to a staggering 291.2 trillion yuan, which is a significant increase of 10% compared to the same period last year!
According to our estimates, by that time, the total value of M2 is expected to successfully break through the 293 trillion yuan mark. What's more, it's not impossible to say that if the numbers are refreshed at the beginning of 2024, moving towards 300 trillion yuan could be a possibility!
Historically, the first month of each new year is often referred to as the "super strongman" month for deposit placements. For instance, at the end of January 2023, the increase in M2 compared to the previous month exceeded 7.4 trillion yuan. Such a rapid "leap" is not something that can be achieved in just a few months.
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So, what is broad money (M2)? In simple terms, it is an indicator used to measure the total size of the money supply. As for its annual growth rate, it is a method we use to gauge whether the speed of paper money printing is fast or slow.
Behind this number is not only the rise of China's economy but also a profound change in the global economic landscape. So, what does this number mean?
Before analyzing, let's briefly review the history of the issuance of the renminbi (RMB).
In fact, the earliest RMB was issued in December 1948, when the Liberation War had not yet fully ended. Soon after, the Korean War broke out, and both wars led to severe inflation.
Under these circumstances, the value of the currency depreciated significantly and became increasingly unstable, which was highly unfavorable for commercial transactions.
Therefore, when the second set of RMB was issued in March 1955, China implemented a currency reform, which is what we refer to as the monetary system reform.The exchange rate between the first and second series of the Renminbi is 10,000 yuan for 1 yuan, which also signifies a tremendous change in China's monetary system. In recent years, the total amount of China's currency is about to reach 300 trillion yuan. When did we start calculating this 300 trillion yuan that we are about to welcome?
In fact, this "1 yuan" was redefined in March 1955. At this time, China began to implement currency system reform, so we can also regard this "1 yuan" as a symbol of currency reform.
Since then, China's total currency has increased year by year, from 17.5 billion yuan in 1956 to 200 trillion yuan in 2020. The growth of this number is astonishing, but it also reflects the rapid development of China's economy.
So, why is the total amount of China's currency increasing more and more? This is mainly due to the rapid development of China's economy, especially after the reform and opening up, China's economy has developed rapidly, which has also brought about an increase in the total amount of currency.
In addition, with the continuous improvement of China's financial system, the total amount of China's currency has also been continuously increasing. Does more and more currency mean more inflation?
First, we need to make it clear that inflation and deflation are relative. In economics, inflation refers to the general rise in the prices of goods and services, while deflation refers to the general decline in the prices of goods and services.
However, in reality, we usually see the prices of some goods and services rise, while others remain stable or decline. Therefore, we cannot simply define inflation and deflation as the general rise or decline in the prices of goods and services.
Secondly, the acceleration of the growth rate of the total amount of currency does not necessarily mean that inflation is intensifying. In some cases, too fast currency growth may lead to deflation.
This is because too fast currency growth will lead to insufficient supply of goods and services, thus causing prices to decline. In addition, if people's income growth cannot keep up with the growth of currency, then people may reduce consumption expenditure, leading to a decline in demand, and then causing prices to decline.Finally, in recent years, China's price control target has always been "around 3%". The formulation of this target is based on a variety of considerations, including economic growth, employment, balance of payments, and other factors.
Therefore, despite some negative numbers in the CPI (Consumer Price Index), the authorities still deny the existence of deflation at present. This is because the authorities believe that the speed of money issuance is not slow, so it is not deflation at present, but some people have deflation expectations.
The total amount of money and the total GDP are always rising, so the CPI is currently hovering at a low level, which must be temporary, and will reach an appropriate position in the future.
In summary, the total amount of the renminbi is about to break through the 300 trillion mark, which means the continuous growth of China's economy and profound changes in the global financial system.
In economics, the total amount of money is usually regarded as a leading indicator of economic growth.
When the total amount of money increases, it means that the liquidity in the market increases, which will help promote economic growth. Therefore, the breakthrough of the total amount of the renminbi, to a certain extent, indicates the continuous growth of China's economy.
However, the increase in the total amount of money does not mean that everything is going smoothly.
Excessive money supply may lead to inflation, which will affect the stability of the economy. However, inflation has not followed.
This is due to the country's prudent and effective monetary policy. The central bank has maintained a reasonable and sufficient market liquidity through flexible monetary policy adjustments, avoiding inflation caused by excessive money supply.
At the same time, the country has also strengthened the regulation of prices to ensure the stability of market prices. This prudent monetary policy has provided strong support for economic development.Not only does it highlight the strong strength of China's economy, but it also gives global investors a reassurance, providing a more stable guarantee.
Don't feel bad just because the domestic inflation rate is temporarily low, after all, this situation is only temporary.
Because under the premise of sustained economic growth, inflation will sooner or later become an inevitable phenomenon, and it is long-term and stable; on the contrary, deflation (i.e., currency devaluation) only has a short existence period and is not the norm.
Over the years, the People's Bank of China has been cautiously controlling the supply of money, showing the country's firm determination to stabilize the exchange rate of the renminbi, narrow the wealth gap, eliminate excess backward production capacity, and promote economic transformation.
The above measures are the main reason for the slow recovery process of the economy in the "post-epidemic era". But this does not mean that we should lose confidence in the future.
In fact, the deposit interest rates that corporate banks can offer now are getting lower and lower, and as long as domestic funds flow slightly, they can have a earth-shaking effect.
Therefore, 2024 is likely to be a year of great counterattack for renminbi-denominated assets, equivalent to a historical bottom-fishing opportunity that is gradually unfolding.
Do you know, the more money is printed, the more it is, and if there is not a large enough reservoir to hold it, then when the money really has nowhere to go, price increases become an inevitable trend. This will bring immeasurable risks to the entire society.
Therefore, at present, the places that can accommodate a large amount of social mobile funds are only the stock market and the real estate market.
From a long-term perspective, we are actually standing at the "market bottom" point now, which means that for those with unique vision, now may really be a great investment opportunity.