mesbooks Chapter 624: Is debt a good thing? Zhang Chi's new economic thinking
Chapter 624: Is debt a good thing? Zhang Chi's new economic thinking
Chen Zhenchuan was the first to react and nodded:
"The President's idea... makes sense. If we simply give a 10% salary increase to civil servants, teachers, military and police officers—those with secure jobs—and if this expenditure is met entirely by increasing the issuance of currency...from the perspective of monetary aggregates, the risks are manageable."
As the central bank governor, he is a banker by profession and knows a lot about currency.
"Our Nanyang region is now larger, with a larger population, more factories, and more products being produced. The total amount of currency needed for social operations is already increasing rapidly.
"If we increase the money supply moderately and keep pace with economic development, and don't mess around with it, nothing serious will happen, and the money won't become worthless."
Chen Zhenchuan gave professional affirmation.
Zhang Guangsong also understood it completely and slapped his thigh:
"Great! Commander-in-Chief! Our current industry is too dependent on foreign countries! Many of our food, drinks, daily necessities, and machine parts are sold abroad in exchange for tools.
Your own family can't afford to consume the things you produce! Your strategy is to give money to the most stable group of people first, let them take the lead in spending, and drive up the internal circulation! "
On the other side, Bai Hongsheng, who had been thinking, suddenly came up with an even more radical suggestion:
"However, relying solely on the consumption of those with stable jobs is still a bit slow to stimulate upstream development. Can we learn from the White Eagle's strategy for dealing with the Great Depression? Develop large-scale infrastructure."
"Build roads, bridges, ports, and reservoirs by directly recruiting migrant workers and paying them wages. This money goes directly into the hands of industrial workers and migrant workers, and the stimulus effect is more direct and faster."
Zhang Chi laughed and pointed at Bai Hongsheng:
"Hey, Old White, I just said you were conservative, and now you turn around and become more radical. You changed your mind so quickly."
Chen Zhenchuan was more cautious and poured some cold water on the situation at the right time:
"Commander-in-Chief, Minister Bai's idea is good, but there is a problem. We also signed the Bretton Woods Agreement. The Nanyang dollar is theoretically linked to Daole."
"A small increase in issuance is not a big problem. But if you want to build large-scale infrastructure, the amount of money you print will be enormous.
It would be best if we had enough hard currency, such as gold or foreign exchange reserves, to act as a ballast. Otherwise, international confidence in our Nanyang dollar might be shaken."
These words calmed the lively atmosphere a little.
Zhang Chi touched his chin and fell into thought.
Where does the money come from?
An idea came to mind: borrowing large amounts of foreign debt? Or, opening up the newly opened Singapore Stock Exchange to capital from the White Eagle Group?
The benefits are obvious. It will definitely attract a lot of hot money, which will pour in. In the short term, the Nanyang economy will be able to take off, and infrastructure will be built as planned.
But the shortcomings are also fatal.
It is equivalent to handing over part of your own economic lifeline to someone else.
Just like some countries he had seen in his previous life, once the White Eagle capital was withdrawn, a financial crisis immediately occurred, the currency plummeted, and decades of work were in vain.
"Opening up through debt..." Zhang Chi pondered, "It makes money quickly, but it will cause serious consequences..."
He looked at the three people in front of him.
Bai Hongsheng's eyes were eager, and he was obviously a member of the infrastructure camp.
Chen Zhenchuan has a cautious expression and is a conservative person.
Zhang Guangsong was a little nervous, probably because he felt that this topic involved too much money and he felt a little dizzy.
Zhang Chi suddenly smiled and made a decision.
"Eat your food one bite at a time." He knocked on the table. "Let's start with the civil servant salary increase. Old Chen, you need to control the amount of money you print and keep the market stable."
"Infrastructure needs to be developed, but we can't expand it too much all at once. We should focus on a few key strategic highways and ports, as well as the areas around the capital Yangon, and start building first. As for funding..."
A gleam of brilliance flashed in his eyes. "We can borrow some foreign debt, and the stock exchange can gradually open up to foreign investment, but we must set thresholds and implement strict supervision. We must hold the initiative in our own hands. It won't be easy to fleece us."
"It's settled. Lao Bai will lead the detailed plan, Lao Chen will manage the financial risks, and Guangsong and your cabinet will be responsible for implementing the wage increase. Make sure the money gets distributed to everyone as quickly as possible."
The matter was settled, but Zhang Guangsong was still a little hesitant. He picked up his chopsticks and put them down again. Finally, he couldn't help but muttered softly:
"Commander-in-Chief, this...wage increases, infrastructure projects, money is being spent like water...I'm afraid our treasury will be in deep deficit. This...this mountain of debt makes me feel uneasy."
His words expressed the thoughts of the vast majority of people in this era.
Let alone Southeast Asia, looking around the world, the mainstream view now is that the government should live just like in daily life, spending within its means and budgeting carefully.
The best situation is to have neither domestic nor foreign debt, and a full treasury. That is a good government and good finances.
A mountain of debt? That means you're a prodigal son, financially out of control, and shameful to share.
Although Chen Zhenchuan and Bai Hongsheng supported the plan, their expressions became a little serious when they heard this.
Obviously, they also subconsciously share Zhang Guangsong's concerns.
Zhang Chi smiled, put down the soup bowl, and looked at the three people:
"Old Zhang, your idea is outdated!"
He attracted all three of them with just one sentence.
"You guys still think the government is a wealthy family, and that being in debt is a waste of money. That's not right!"
Zhang Chi leaned forward and began to explain in the simplest terms:
"What's the situation in Nanyang right now? It's like a newly reclaimed piece of wasteland. It's fertile, has good sunshine, and enough rain. Once you sow the seeds, they'll grow rapidly."
"But the problem is, we lack good hoes, good plows, and good roads to transport our crops. Private businesses are unwilling to invest in these things (infrastructure and education) in the short term, and they can't afford to invest because the returns are too slow.
So who will do it? The government has to do it.”
"The government's borrowing and printing of money to undertake these projects isn't just reckless spending, it's 'investing in the future.' It's paving the way for the entire Nanyang economy."
He gave an example:
"It's like I invested $1 million to build a road from the mining area to the port. It looks like I spent $1 million, but the deficit increased."
"But once the road was repaired, the mine's ore transportation costs immediately dropped by 30%, significantly increasing profits. The transport fleet's efficiency doubled, earning more. The port's throughput increased, and tolls increased."
"Will these extra profits eventually flow back to the government through taxation? We might not see the difference in the first two years, but in three to five years, the taxes the government receives from this road could far exceed the one million yuan originally invested in its construction."
"Can this be called a waste of money? This is a business that makes a lot of money."
Zhang Chi looked at the three people who seemed to be thinking deeply and continued:
"Let's talk about debt. As long as the money we borrow or print is invested in places that can generate future returns, such as building roads, ports, schools, raising civil servants' salaries and improving efficiency, then it's not a bad thing, it's a good thing."
"This is called a 'benign deficit.' It can activate the economy, get money flowing, and make society more productive."
"On the other hand, if we cling to the old rule of 'no domestic debt, no foreign debt,' and continue to be stingy, not building roads that need to be built and not raising wages that need to be raised, then we're doomed."
"When the economy is stagnant, factories can't sell their products, ordinary people are penniless, and tax revenues are low, that's the real end of the road.
By then, you won’t even be qualified to run a deficit if you want to.”
He concluded, "So, don't be afraid of deficits. The key is to understand how the deficits are generated and where the money is spent. As long as the money is spent in the right places, an increase in the deficit actually indicates a more vibrant economy and a brighter future."
Zhang Chi's profound and easy-to-understand explanation was like a key that immediately opened the minds of the three people.
It turns out that being in debt is not necessarily a bad thing, and spending money can also be an investment?
Although it may take some time to fully digest, the virtuous cycle of "spending money-development-more tax revenue" described by Zhang Chi does sound much more attractive than sticking to fiscal balance and causing the economy to stagnate.
"I understand, Commander-in-Chief, I was mistaken." Zhang Guangsong no longer had any worries and his face became relaxed.
Chen Zhenchuan and Bai Hongsheng also smiled at each other, their eyes full of admiration for the young commander-in-chief.
Following such a leader, not only will you dare to fight and struggle, but you will also have a set of new ideas for managing the economy that are unheard of but sound extremely reasonable.