Overdraft or overproduction, That is a problem

1. Overdraft or overproduction,That is a problem Zhao Lei

2. The puzzle of modern market economy • Hamlet: “ To be or not to be, That is a question! ”; • Market economy: “ Overdraft or overproduction, That is a problem ” 。

3. The logic of Subprime mortgage crisis • Inherent contradiction of market economy ——Insufficiency of effective demand ——Overproduction ——Overdraft consumption ——Rising of default rate ——Subprime mortgage crisis （ Reference: Zhao Lei,The Reflection of the Root of Subprime Mortgage crisis, ECONOMIC PERSPECTIVES,2008,11)

4. Classical crisis and Modern crisis • The Classical crisis in market economy ,for instance, the Great depression in 1929, directly appears that the effective demand is not sufficient and commodities can’t be sold out； • The Modern crisis in market economy,for example, Suprime mortgage crisis, directly shows the flourish or “excess” of effective demand, i.e. “eat one’s corn in the blade”, “Overdraft consumption”,etc; • Essentially,both classical crisis and modern crisis are because of overproduction. The difference is that this trouble, like a ball, is kicked from sellers to buyers. That is, the explosion of inherent contradiction of capitalism is pushed from today to the future.

5. “Overdraft consumption” isn't the root of crisis • The root of crisis： Inherent contradiction of market economy——Insufficiency of effective demand； • Overdraft consumption ： The avoidless choice is to release the insufficiency of effective demand.

6. An incompatible phenomenon • One side, to blame it is not wisdom to lend money to people; • On the other side, to call on extend people’s consumptive demand.

7. The ways approbated by modern market economy • Keynesianism: Extending government expenditure； • Supply-side school: Tax-reducing Policy ； • Monetarism: Continuously lowering interest； • “Overdraft consumption ”:Mortgage loan , Credit card, Subprime mortgage loan.

8. The limits of “consumer coupon ” • The nature of market economy: No Free Lunch; • In the precondition of private ownership：“Free Lunch” doesn’t continously develop.

9. Tragedy factors of “Overdraft consumption ” • Overproduction brings Overdraft consumption ; • Overdraft consumption leads to financial crisis; • Financial crisis restrains Overdraft consumption; • A new overproduction appears again; • Once society cannot afford to the burden of overproduction, Overdraft consumption will come back again!

10. Prediction Overdraft consumption and overproduction： ——Recycle; ——Rise or fall; ——Perish with market economy.