Chapter 226 Who is talking nonsense?
Tian Hao's face flushed with anger after hearing this: "Xiao Peng, who are you talking nonsense about? You know nothing!"
Xiao Peng spread his hands and said, "Brother, even though we're classmates, you can't be like this. You're the only one who understands things and no one else does? Xue'er, let me tell you something. After I went out, I discovered a problem: many things outside are different from what we know."
Han Xue nodded: "For example?"
Xiao Peng said, "For example, is the statement 'foreigners don't save' true? It's actually true. But it depends on the time. If we say this now, it's certainly true, but what about forty years ago? In the 1970s and 1980s, the US had the highest personal savings rate in the world. Can you believe this?"
Han Xue widened her eyes and shook her head: "I really can't believe this! Don't Americans save money?"
Xiao Peng said, "Look at the America depicted in Hollywood films before and after the 1980s. They don't resemble the same country. In the early 1980s, after they lifted credit controls, getting loans became incredibly easy. You know that thrill of waving a credit card? Spending money is fun, and spending money all the time is fun. So everyone had a credit card, everyone had a personal indenture—oh, that's a personal credit report. It was around that time that the gap between the rich and the poor widened in the United States, savings rates plummeted, and bankruptcy filings reached record highs. And there's no end to spending! Look at the market: no matter what you have, there are always better and better options to stimulate your spending. I don't dare use credit cards because I'm afraid I won't be able to control myself. Aren't there still many people in debt these days?"
Liu Baorong nodded and said, "There are many credit card addicts in China now."
Xiao Peng laughed, "But the national conditions are different. You can be a credit card slave in the United States. They actually encourage you to be a credit card slave to boost consumption. If you go bankrupt, they can help you apply for unemployment assistance and charity benefits. If you can't afford to eat, they can give you food stamps and free coupons. If you're homeless, they'll give you housing subsidies or let you live in a homeless shelter. In short, they want you to spend every penny. And they have a lot of insurance there, too. The average person has more than five policies. Medical care, retirement, education, and property are all covered by insurance. So even the poorest fifth of their people have a higher consumption level than the people in 90% of the world's countries! But can you do that in our country?"
Hearing this, Tian Hao said, "Doesn't what you said further illustrate my point? Foreigners like to spend money but don't like to buy houses!"
Xiao Peng shook his head. "You all know about the financial crisis back then, the so-called 'subprime mortgage crisis.' To put it bluntly, the root cause of that financial crisis was foreigners' love of buying houses."
Liu Baorong asked curiously, "What is the relationship between the economic crisis and housing?"
Xiao Peng smiled and said, "If you had asked me this question originally, I really wouldn't have been able to answer it. However, I have a few friends in France, and I can really learn a lot from chatting with them. Let me give you an example. Rongrong, you want to buy a house for 1.5 million yuan. You pay a down payment of 500,000 yuan, and owe the bank 1 million yuan, plus 500,000 yuan in interest. But you have to pay this back over 20 years. So, wouldn't that mean the bank will earn 500,000 yuan in 20 years?"
Everyone nodded in unison: "In theory, that's right."
Xiao Peng said, "But isn't earning 500,000 in 20 years too slow? The bank has a limited amount of money. Loans to ten people are fine, loans to a hundred people are fine, but what about a thousand or ten thousand? The bank has no money to lend either. What should we do now?"
Seeing everyone's puzzled expressions, he continued, "That's when the financial institution stepped in and bought the bank's IOU. Don't you owe the bank 1.5 million? I'll buy the bank's IOU for 1.05 million. This way, the bank has money to continue lending, and your IOU is in the hands of the financial institution. In essence, you owe the financial institution money."
"And financial institutions don't wait for you to slowly repay them twenty years later to profit from the 450,000 yuan you're owed. Instead, they package these IOUs into financial products, seek out institutional and individual investors, and promise investors that simply buying into these products will earn them 400,000 yuan in 20 years. So, you see, you own the house, the real estate developer gets the money to buy the house, the bank sells the IOUs, not only recovers the funds, but also makes 50,000 yuan as quickly as possible. And the financial institution sells the financial product, the investor earns 400,000 yuan over 20 years, and they themselves can quickly earn 50,000 yuan. This way, everyone gets what they want, and the economy prospers, right?"
Everyone listened to Xiao Peng's words and nodded, not quite understanding what he said.
Xiao Peng held up a finger. "But there are two prerequisites. The first is that Rongrong has the ability to repay the loan. The second is that even if Rongrong can't repay the loan, she can still get the money back by selling the house. So it's still okay. But after 9/11, the United States enacted a series of real estate policies to stimulate the economy. After all, hundreds of millions of people in the United States don't own a house, right? After 2001, they relaxed the credit requirements for mortgage loans. Even those without jobs could get loans, and even without a down payment could buy a house. So, a large number of blacks and Mexicans were desperately buying houses at that time. The whole process started all over again. But there was a problem: those buyers were extremely poor and couldn't afford to repay the loan. Suddenly, so many houses appeared on the market that even if the banks repossessed the houses, they couldn't sell them. So the result was that banks, financial companies, investment companies, and investors all jumped off the buildings in a row."
Shao Feng clapped his hands and said, "Isn't this trend already happening in our country? Look at the countless small loan institutions and financial institutions."
Xiao Peng laughed and said, "They can't make a big deal. The country can't just sit there and do nothing. We can't let America fall into the same pit we did on this issue! What happened before should serve as a lesson for future generations. How strict is our country's regulation of the financial industry? But through this incident, I can say responsibly: it's not that foreigners don't like buying houses, but that they can't afford them. As long as there's an opportunity to buy a house, they will do whatever it takes to buy one. They say that wherever we Chinese go, housing prices are high, but the reason is actually that we Chinese have the savings to afford it, not that foreigners don't want to buy."
At this point, he saw Tian Hao shaking his head and said, "So, Tian Hao, I won't comment on anything else you said because I don't understand, but if you say that foreigners don't like to buy houses? Come on, look at those foreign celebrities, which one doesn't live in a mansion? Some even buy several more when one is not enough. Come on, do they all rent houses?"
Continue read on readnovelmtl.com
