The way all the bubbles burst -- by Liu Junhong
"Back in the 1990s the US staged a rousing production known as "the new economy" very much to the envy of the whole world. One of the prime reasons for this success was the support from an extensive and very sophisticated financial market, which enabled emerging enterprises to go public anytime they wanted with the lowest possible cost guaranteed. This is also one of the fundamental forces that drove Japan's financial system reform at that time.Nowadays, however, the system of direct financing is in a shambles and enterprises have to rely on the old ways for direct financing by borrowing mostly from banks. The problem is that the crisis is spreading deeper into the banking industry, crippling the banking market as well. The two pillar systems of securities and banking are both in big trouble, causing the whole financial system to go haywire.Back to where it all began, the root of the US financial crisis has stemmed from the loopholes in the US-led "financial capitalism" format, with the bursting of "the real estate bubble" serving as the fuse. The "reverse asset effect" created by the bursting of the real estate bubble directly caused the "bursting of the consumption bubble".
It is widely known that the biggest characteristic of the US economy is consumption in overdrive, to the point that people would rather bury themselves in debts than cut back spending. As of August this year, the total value of individual consumption in the US accounted for over 70 percent of the country's GDP. If that is not a pillar of the US economy, I don't know what is".
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