Chapter 2518: The Edge of the Cliff

When the cherry blossoms on Constitution Avenue and the magnolias in the Treasury compound are about to bloom, and when the sky in Washington, D.C. is getting clearer day by day, the 62-year-old Paulson feels that the really difficult days are coming.

In the past winter of 2007, the Federal Reserve cut interest rates several times. Although the relevant data looked better for a time, such a stopgap measure would not last long.

After entering 2008, as Pelosi, who does not understand economics at all, said, the Fed's two commonly used axes finally lost their effectiveness.

Although the US government has frozen the interest rate of subprime mortgage loans, lowered the discount rate for direct commercial loans, and continued to inject funds into the financial market by opening the discount window to investment banks and auctioning loans...

These have not prevented the situation from further deteriorating.

Data show that unemployment is rising further, while consumption is continuing to decline.

In the fourth quarter of 2007, the US economy fell by 0.2%, the worst performance since the third quarter of 2001. You know, at that time, the United States was the United States when the Internet bubble burst - the situation was so bad that it can be seen from this.

But the bad things are far more than that.

Not long ago, the National Association of Realtors, the largest industry association in the United States, with 720,000 members, 54 state associations, and 1,200 regional (city) associations, announced a set of authoritative data.

In 2007, the sales volume of old houses in the United States fell by 13%, the largest drop in 25 years; the median price of old houses fell by 1.8% to $217,800 per set, the first annual decline since relevant records were kept in 1968.

It must be added here that our urbanization still has a long way to go, but the United States has already completed urbanization.

Therefore, in the US housing market, the sales of old houses are the main force, and their sales account for about 85% of the total housing market sales. The quality of the old house market is almost equivalent to the quality of the entire housing market.

The data they released finally showed the situation of the great reversal of the US housing market without any cover or dispute to the world.

In the face of such data, even those guys on Wall Street and Capitol Hill who are always good at lying with their eyes open can't say that the US real estate market is still improving.

Those who live longer or are good at making comparisons can easily come to the conclusion that this is the first time that US house prices have fallen after many, many years.

The last time US house prices fell may have to go back to the "Great Depression" (1929-1933).

In other words, this is the first time in nearly 80 years that US house prices have generally fallen.

Just like when the country later regulated the real estate industry, it always had many concerns, because the real estate industry is developing or declining, which will have a direct impact on multiple fields of upstream and downstream industries.

In the United States, similar linkages are the same.

Now almost any business school student can come to the correct conclusion that the US economic report is a recession report.

Recession is like a virus, spreading from one industry to another in the United States - because the US real estate and financial industries are already infected with the virus, the manufacturing industry seems to be in danger...

And as the economic situation deteriorates, the job market is naturally doomed.

As a business school student, you will know how important employment is to the stable development of the economy.

If you only use one number to describe the state of economic development, employment will always be the first number. If it is zero, then no matter how good the following numbers are, it is meaningless.

And now, this number is getting smaller and smaller...

Paulson has calculated more than once how high the unemployment rate will be if the worst situation occurs.

But he has not completed the calculation once. He always stops when the unemployment rate exceeds 25% - he is a little afraid to continue the calculation.

In another sense, it is meaningless to continue the calculation, because as long as the unemployment rate reaches 25%, it will be another Great Depression.

And the difference from the one 80 years ago is that because the total economic volume now far exceeds that of 80 years ago, the power of this Great Depression will also far exceed that one, so the consequences will be more serious and the duration will be longer.

Paulson's feeling every day now is like watching a big abscess on the back of the US economy, it is always itchy, but he doesn't know when it will break.

And he knew that it would definitely burst.

The problem is that the abscess itself still feels good - all the institutions on Wall Street have unprecedentedly consistent statements to the outside world at this time: We are fine, we are very fine!

We suffered some losses due to subprime loans, but overall, those losses are not worth mentioning.

No one admitted that they had problems.

In addition to their unwillingness to tarnish their reputation, it is also because these Wall Street guys all understand a cruel truth: at such a time, whoever admits that he has a problem, then that problem will become a fatal problem.

Further evolution, it can also be said that when a financial institution on Wall Street admits that it may die, it will definitely die, and it will only die faster.

Because, not only will its peers no longer lend money to it to keep it alive, but they will also force it to pay its debts and scramble to divide its assets.

That is, the current situation is like this. Paulson knows that the U.S. economy has a boil that may burst today, tomorrow, or the day after tomorrow.

But the boil says, you worry too much, we are just a cute little pimple, and it will disappear after a while.

The problem is that many people don’t believe that the U.S. economy has a big boil, such as those guys on Capitol Hill.

These days, Paulson has been meeting with some leaders in Congress to prepare for the worst situation that may come at any time, but many people on Capitol Hill are quite indifferent to this, because the crisis has not affected their voters.

On the other hand, the American people may be aware of this big boil, but they have only one idea: let it burst, and burst it sooner.

Everyone is eager to see those guys on Wall Street get into trouble sooner.

Even at this time, many people still hold such a view that Wall Street is not short of money, how could Wall Street be short of money?

The reason why they say they are short of money is because they have hidden all their money.

So, break it, break it sooner!

But they didn't think of one problem. If those institutions on Wall Street were allowed to collapse, those unpleasant guys on Wall Street would naturally be punished, but in that case, all those who have invested in Wall Street or bought Wall Street bonds would suffer losses.

If Wall Street is allowed to collapse, then everyone in the United States will face a doomsday situation.

…………

At such a moment, most American people, in addition to believing that the relevant person in charge of the most powerful country in the world will definitely pull out a rabbit from the hat, resolve the crisis exaggerated by various experts, and bring them safely from the edge of the cliff to the road to Rome, they also cast their eyes on the well-known figures in the American economic community.

Warren Buffett remained silent, but some fragments of his letter to shareholders were disclosed.

In his email, he lamented that the decline in housing prices has led to the exposure of a large number of stupid mistakes. "Only when the tide recedes can you see who went into the water without pants. For some of the largest financial institutions in the United States, I can only describe it as horrible at this time."

The people did not seek comfort from him, but were poured a basin of cold water on their heads.

Wow, so cool.

Let's look at Bill Gates, the richest man in the United States. What he wants to express to everyone at this time is, "Our foundation has achieved very significant results in reducing malaria in Africa. Our next goal is..."

Many people are very excited at this time, and he often tastes malaria - at this time, can you first care about the suffering of the people in our own country?

Some people in Silicon Valley are also very high-profile in this process.

Bill Gates's other old rival, Oracle's Larry Ellison, jumped out and said, "Microsoft's stock price is normal, but why is our stock price falling? This makes no sense!"

"Our fundamentals are very good, our various data are also very good, our stock price should rise instead of falling..."

Everyone quickly turned their eyes away from him.

Even if your Oracle stock price will rise, so what? Do you still think that ordinary people have spare money to buy your stocks at this time?

It turns out that at this time, these guys can't be relied on.

At this time, there are still media on behalf of the American people, looking for Feng Yiping.

It was in a restaurant filled with the fragrance of flowers on the coast of Los Angeles. It was the second store of his high-end restaurant brand Man Ting Fang in the United States.

Facing the reporter's question, Feng Yiping's face was solemn, "I know that after I say this, I will definitely be widely criticized, but I still want to say that from now on, be ready to rescue financial institutions on Wall Street!"

Suddenly, public opinion was in an uproar.