The Government of Hong Kong puts a huge sum of money to purchase a great number of stocks from the market, aiming to stop the tumbling of the Hang Seng Index. This, in fact, is a very stupid action.
Presently, all the countries and their governments are using the stock market index, inflation and unemployment as parameters to judge the economic situation of one country and the achievements of its government, which, in my opinion, is not at all scientific. My argument is that, for judging the economic situation of one country and the achievements of its government, the best parameter is the living standards of the poor people in one country and the sufficiency of the first and second grade consumption goods. It was for the sake of this non-scientific standard of judgement that came into being the stupid reactions of the Hong Kong Government. For the purpose of stopping people's saying that the achievements of the Government are not good enough, the Government of Hong Kong uses a huge sum of money belonging to the people to purchase stocks to stop the declining of the Hang Seng Index. The Government sent voluntarily this huge volume of money that should have been spent on the citizens of Hong Kong to those who deal with shares, in another word, the speculators in the stock market. What a silly and miserable action it is! Possibly the Hong Kong Government will refutes that the intention of the Government's using such a huge sum of money to purchase stocks is to defeat those speculators like Soros who attempt to rig the stock market, rather than to stop people's saying bad things to their achievements. Because those speculators try to control the stock market in their hands by using unfair means, this will lead to a great loss of other stock dealers. If this is the interpretation, the Government of Hong Kong is even more stupid. It is because stock dealers, whether they want to control the market or not, are all speculators. Why does the Government send the money of the Hong Kong people to those gamblers who might suffer a loss just in order to defeat those gamblers who want to control the market? Is such a measure a wise action? In my opinion, if those who intend to rig the market are using illegal means, the Government should take legal actions against them; if what they do is legal, let them play such a gambling game among themselves. The Government of Hong Kong should never use such a huge amount of money to help those gamblers who are likely to lose their money.
Why do I argue that we should use the living standards of the poor people in one country and the sufficiency of the first and second grade consumption goods as the criterion to judge the economic situations of one country and the achievements of its government? It is because I have established a complete theory on economics as well as a brand-new model of economic growth. It is very clear in my theory that the social economic growth will necessarily bring about the upgrading of the living standards of the people, especially the low-income people. To measure the living standards of the people in one country, we should certainly base on the living standards of the low-income group rather than the high-income citizens. How to measure the living standards of the low-income people? It is stated in my theory that people's living standards can be divided into four grades. The first grade is necessary consumption of clothing, food, housing and transportation. The second grade is ordinary consumption, which means buying some more clothes and purchasing TV sets and washers, etc. The third grade is extravagant consumption, which means going to hotel and restaurants, taking cars and going to dancing-halls, etc. The fourth grade is over-extravagant consumption. All these theories and the new model of economic growth can be found in My Homepage at <http://www.geocities.com/~juchang/>.
According to my theory, the development of social economy will necessarily be accompanied by bankruptcies of companies, unemployment and inflation. Therefore, even if bankruptcies, unemployment, inflation and devaluation of bank notes happen to one nation, we can't surely say that it encounters an economic crisis. In fact, these factors can hardly tell the real economic conditions of the country. To see whether a country has an economic crisis, we must find out whether this country has sufficient supply of consumer goods of the first grade. For example, when the oil resource ran off, the whole world would suffer energy shortage, the production for consumer goods of the first grade would be badly insufficient and the living standards of the people would decline sharply. In such a case, we could say a real economic crisis had taken place.
In case the stock and the stock exchange index drops sharply in one country, we should never say that this country is in a crisis. As it is known to all, most of the stock dealers are speculators. It is these speculators who use a great deal of capital to buy a huge amount of shares that leads to a great rise in stock price and stock index, and, as a result, leads to a great gap between the real value of the shares and their market price. For instance, a share that values at HK$10 may be sold at the market at a price of HK$1000 or even higher. Therefore, the stock market is something like a legal gambling place managed by the Government. The gamblers are stock investors. When these gamblers buy in shares in big quantity, the index will rise; however, when they sell out in big quantity, the index will decline. The aim of their buying the shares is not for possessing them, their real aim is to sell the share out for profit when there comes an increase of the stock price. As there exists a very large gap between the real value and the market price of the shares, the higher the price of the shares and the more the money that the gamblers should pay, the greater the opportunity for them to sell the shares out. Once they sell their shares out in great quantity, the stock price and the index will collapse. If we take such a situation as a economic crisis, we are really ridiculous and silly. A government must be silly enough to take money out of his pocket to purchase huge amount of shares to stop the tumbling of price index, because this government gives the public money to the gamblers freely, which will only makes the gamblers feel more excited and pleased.
In the third stage: the stage of state intervention and state regulation from my article "On the Development of Social Economy" <http://www.geocities.com/~juchang/thirdaa.html>, I pointed out that the investment of the government in the expressway may also cause inflation, in another word, devaluation of bank notes. Therefore, we may say that the development of social economy may sometimes cause inflation and devaluation. The inflation and devaluation in such a case is normal and there is nothing horrible. We can't say there appears an economic crisis. For maintaining the consumption of the first grade of the low-income people, the government sometimes may issue relief funds, which will sometimes cause financial deficit, inflation and devaluation. The inflation and devaluation in such a case is also normal, with nothing horrible, and, for the same sake, we may not say there is an economic crisis. During the Second World War, the Government of Hitler needed great deal of bank notes to purchase war materials for launching a war. If the German Government had no enough bank notes in its hands, it would have started the printing machines to produce more bank notes and used them to purchase materials for the war. In such a case, the German currency was doomed to inflate and devaluate. Should we say that Germany had an economic crisis then? We may not say that the Germany was in an economic crisis because the devaluation and inflation were caused by war rather than any other economical reasons. Besides, the corruption of the government officials will also cause extra governmental expenses and great waste of governmental funds and so lead to devaluation and inflation. For the same reason, we may not say there is an economic crisis, as they are caused simply by the corruption of the governmental officials and have nothing to do with economical operations. However, the devaluation and inflation caused by war and corruption will trigger social disturbance and thus should be stopped resolutely, and those who cause the war and corruption should be punished severely.
To conclude, I hope all the governments of the world should pay more attention to the elimination of poverty rather than economic crises. Only when poverty is eliminated, may we say that the social economy is developed. Only when the living standards of the low-income people is improved, will we be able to take just and accurate measurement of the economic growth of a country. It is unscientific and unfair to use Harrod-Domar Growth Model to calculate the economy growth rate of a country and use this rate to measure the economic growth of a country. I do hope the governments and their people of all the countries in the world will adopt my economic theory and economic growth model as soon as possible to direct the economic development of their countries and use the living standards of the low-income people as the key factor to measure the economic development of a country. Only in this way, will the social economy be able to develop healthily and quickly.
-- Sincerely, Ju-chang He
SHENZHEN, P.R. CHINA Welcome to visit My Home Page at <http://www.geocities.com/WallStreet/Exchange/3058/> or <http://www.geocities.com/~juchang/>