China's central bank paper: Innovate the monetary system and vigorously develop digital currency based on human values

Author: Zou Pingzuo, Chief Researcher of the Financial Research Institute of the People's Bank of China

Source: Securities Times

Editor's note: The original title is "People's Bank of China Paper: Research on Market-based Coordination and Big Data Mechanism of Monetary Policy"

The effectiveness of macroeconomic policies depends on the level of information. The information wave caused by the scientific and technological revolution has had an impact on the previous macroeconomic control model, and even a revolutionary effect. Under the dual effects of "market failure" and "government failure"[i], the global economy is in turmoil. The amount of information generated by the information revolution has increased exponentially, resulting in the so-called "information explosion", which has posed a serious challenge to the government's macroeconomic control. On the positive side, if a government is good at managing and mining information, it will significantly improve its efficiency. On the negative side, the huge amount of information will cause the government to "information drown"[ii], resulting in extreme chaos in macroeconomic management and a sharp increase in various risks. The information revolution has caused a change in the value function. This change has changed the law of value and the law of economic growth, and has destroyed traditional economic theories and models. If the government cannot quickly adjust its macroeconomic management methods, macroeconomic control will fail and an economic and social crisis will occur[iii].

2020 is an important turning point.[iv] Both the traditional liberal monetary theory and policy implementation framework and the government-led monetary policy framework have encountered challenges from the technological revolution. The global economy experienced dramatic fluctuations at the beginning of the year due to the coronavirus, the US election, and the breakdown of oil negotiations. Uncertainty is looming. The Chinese economy is also shrouded in mystery and risks are increasing. Central banks, mainly in the United States, have begun to drive monetary policy to regulate the economy. The emergence of digital currency has given rise to the myth of money, which is full of mystery and unknown charm.

As can be seen from Figure 1, China's M2/GDP index is significantly higher than that of other countries. Many people mistakenly believe that China's currency is over-issued, or even that China's financial efficiency is very low, and advocate monetary tightening. This data is very important as a major economic indicator of national macroeconomic regulation and needs to be deeply understood and grasped. In summary, the following three questions need to be answered: The first question that needs to be answered is what is China's GDP? [v] The second question is how to obtain accurate, timely and sufficient GDP data? The third question is, in the face of huge uncertainties, where will China's monetary policy go? This series of questions, like the "Goldbach Conjecture" in monetary finance, are questions that urgently need to be answered, and are also questions that people who care about money, wealth and growth are concerned about every day [vi].

The key is how to solve these problems. The development of information technology and technology finance under the background of scientific and technological revolution has provided us with a way to solve this problem. That is to establish the micro-foundation of monetary policy through market-oriented methods, give full play to the information discovery function of the market, use the Internet, big data, blockchain and other technologies to establish a market-oriented micro-model of monetary policy [vii], and achieve the accuracy, timeliness, completeness and scientificity of monetary policy; manage income big data, wealth big data, consumption big data and investment big data. These data are themselves means of production. The marketization process of this digital asset will make macroeconomic data clearer, more complete, timely and accurate.

More importantly, the function of money is expanded, making monetary finance a tool and means to create value. Money becomes a tool to create value. It not only has the function of a value scale, but also unifies money and the value scale. The process of money creation is the process of value creation. Inflation and deflation no longer occur. Money, monetary theory and monetary policy have entered a new era and a new world. This is an epoch-making revolution. No matter which country recognizes it first, it will evolve first and become strong and competitive, just like Shang Yang's reforms enabled Qin to unify China, realizing super institutional dividends.

The first question is, are the GDP figures of the National Bureau of Statistics of China accurate? This question is related to the overall macroeconomic policy. My research shows that the data released by the National Bureau of Statistics cannot accurately reflect the real amount of GDP, and there are still large errors; due to differences in statistical caliber and different national conditions, the GDP of different countries is not comparable. If the traditional monetary policy model is applied dogmatically, there will be obvious "monetary policy failure". Therefore, the data of the National Bureau of Statistics cannot be used as the only basis for decision-making, but a GDP big data model should be established, and market-oriented, micro-oriented and dynamic management should be realized.

The issue of China's GDP is indeed a matter of right and wrong for macroeconomic regulation, and there is no room for ambiguity. In 2015, the International Monetary Fund (IMF) predicted for the first time in its latest report that the "American era" is coming to an end, and China's GDP calculated by purchasing power parity will surpass that of the United States in five years, and 2016 will become the "first year of the Chinese century." This news was like a "blockbuster bomb" that caused controversy in Western countries, and media from various countries have expressed doubts, anxiety, and sighs. In fact, this algorithm is not scientific. The key to calculating the RMB exchange rate using purchasing power parity lies in the selection of commodity targets. From the current situation, some Chinese commodities are overvalued and some are undervalued. At present, the prices of major agricultural products and durable consumer goods in China are higher than those abroad when calculated by PPP. The IMF's conclusion is not valid[viii].

On the other side of the coin, we should see that China's GDP is different from that of any other country. The actual statistical data is far underestimated. This is an important aspect of the so-called Chinese characteristics. Macro managers must have a clear understanding of the problem of "GDP statistical leakage". Otherwise, "government failure" will become the norm and macroeconomic management will be like a blind man groping in the dark.[ix]

China's GDP distortion (also known as underestimation) can be discussed logically and empirically, and can be studied from five aspects.

First, China's economic structure is very complex. The economic cells are mainly families, and there are also a large number of state-owned enterprises and central enterprises. This economic structure has a large number of "internal transactions". The economic entities between a family are often not paid. For example, a son working for his father does not have any income, and the income from the private plots of rural families is not counted in GDP. The transfer of assets between state-owned enterprises (non-listed state-owned enterprises) is also an internal transaction.

Second, China's marketization is low, and a large number of products and services have not entered the transaction process due to unclear property rights, and are not yet commodities. The market is to discover value and information. The statistical quantity of a country's GDP is proportional to its marketization level. First, a large number of intangible assets in China, such as intellectual property, artworks, and antiques, do not have clear property rights. In addition to affecting their efficiency, most of these intangible assets cannot be traded, and the number is very large. Second, a large number of service products in China cannot be formed into commodities, such as legal services and social services. Third, China currently has a large number of means of production, such as rural land, which do not have clear property rights and cannot be traded.

Third, China is a country with public ownership of the means of production. The means of production traded are mainly the right to use, such as land, mines, real estate and other real estate. These assets will inevitably affect the output price of goods and are bound to be lower than the ownership assets. The impact of this on GDP varies from asset to asset.[x]

Fourth, China has a large number of public goods[xi], which not only seriously underestimates GDP, but also changes China's consumption rate, because most public goods are only counted as investment but not consumption. China's public goods are different from those in Western countries. First, the huge government system and its affiliated institutions' own consumption are of the nature of public goods and the amount is astonishing. General government departments have a large amount of consumption and service expenditures, including insurance, housing, food, transportation, services, medical care, education, and even health care, travel, going abroad, entertainment, fitness, etc. for civil servants and so-called "in-system personnel" such as degree holders, which are all paid by the state or free of charge. For example, all government agencies have free canteens, and some even have kindergartens. Government staff are still allocated housing. Civil servants' medical expenses are still reimbursed, and some units have barber shops, hospitals, stadiums, cinemas, etc. Second, China's state-owned enterprises produce a large number of products and facilities that are public goods and "quasi-public goods". This amount is very large, with tens of trillions of yuan every year, such as roads, parks, squares, water conservancy, gymnasiums, etc. Third, a large number of Chinese service industries are provided by the government, such as security, education, culture, law, etc., and the degree of commercialization is far lower than that of market economy countries. The outbreak of the new coronavirus in 2020 further reflected the huge number of public goods in China.

Public goods often only have investment statistics but no consumption statistics, which has led many economists to believe that China's consumption is insufficient. They have introduced policies to encourage consumption, which has led to a sharp increase in Chinese household debt in recent years. In fact, China's consumption data is seriously distorted. A considerable number of people can live without spending their wages. This means that whether it is the output method or the income method, China's GDP is seriously underestimated, and the total consumption is seriously underestimated, and the consumption rate is seriously distorted[xii].

Fifth, China’s statistical system is not sound. There is a large amount of gray economy that is not included in GDP, and the tax system cannot play a role in data verification. The statistical errors are large, the planning is strong, and the objectivity is weak. It is difficult to use the data of the Statistics Bureau to do economic analysis, and it has almost no important reference value. China’s economic composition is very complex. It is said that there are all kinds of economies in red, orange, yellow, green, cyan, blue, purple, gray, black, and white. [xiii] The statistical department is unable to collect comprehensive data, especially gray income and underground economy.

In general, the statistics of GDP and M2 in various countries around the world have their own particularities, and they should be treated differently in actual analysis and application [xiv]. To accurately grasp a country's GDP, it is necessary to conduct statistics through multiple channels and then revise them repeatedly. In countries with strict tax systems, tax growth is a very good reference indicator because the correlation between GDP measured by the income method and tax is very large. However, the correlation between tax and GDP in China is weaker because China's tax system is not yet sound. Other factors such as electricity consumption and transportation volume can be used as references.

The GDP indicators used as reference for monetary policy should pay attention to the following aspects: First, the output method should be mutually verified with the income method. Second, national statistics should be mutually verified with regional statistics. Third, GDP data should be verified with various related indicators such as taxation. Fourth, macro data should be mutually verified with micro data. Fifth, government data should be mutually verified with market data.

The second question is how to obtain accurate, timely and sufficient GDP data? Research and explore the micro-GDP data generation process of market-oriented big data, establish an economic analysis model with personal value function as a single variable, and use modern information technology to solve historical problems.

What needs to be innovated in current macroeconomic data is to establish a macroeconomic data industry. In the era of digital economy, modern information technology should be fully utilized to establish a scientific, dynamic, accurate and timely macroeconomic big data system, and turn this process into a value-creating process. The Fourth Plenary Session of the 19th CPC Central Committee has made it clear that data is a means of production and participates in the distribution of the national economy. Macroeconomic analysis models can be built on this basis to solve scientific, accurate and timely economic big data and realize the scientificity and timeliness of monetary policy.

First, we construct the big data of multivariable GDP and design four sectors: household (individual), enterprise, government, and foreign country. Assume Y=GDP, there are four value chain functions f(vf), f(vb), f(vg), and f(ve). Y=f(vf)+f(vb)+f(vg)+f(ve). We distribute data rights to various departments and solve GDP using the income method and expenditure method respectively. On the income side, we use labor income, profit income, tax income, and net foreign exchange income to represent it, and on the expenditure side, we use consumption expenditure, investment expenditure, government expenditure, and overseas expenditure to represent it. Use v to represent the value variable, and the value of each person is the basic variable of the value function. The total social value is equal to the sum of the values ​​of all people, and constitutes various value functions. Enterprises, governments, and foreign countries are a kind of value chain function. The value of a person V is the total objective function. And V=Y, the two can verify each other. Then:

Y=V=f(vf)+f(vb)+f(vg)+f(ve).

Secondly, the big data model is decomposed into single variables to establish the market subject and transaction structure of big data. The big data of each person is managed and confirmed, so that the relevant data becomes the assets of each subject, and the balance sheet and survival statistics are established. In order to make the model simple and practical, we take the individual as the only subject variable to measure the value of each person, manage the income and expenditure of each person, and make it easier to solve the total GDP. In this way, as long as the model can solve the value of each person, solve the investment and consumption of each person on the expenditure side, and solve the labor income and capital income of each person on the income side, it can simplify complex problems, realize the connection with digital currency, and unify with monetary policy.

Y=V=f(V), V∈(Vi), i=1, 2…n.

There are many difficulties in solving multivariable problems. In addition to the difficulty of statistics and calculation, there is a great deal of uncertainty in solving and decomposing the value function of multiple departments and units. However, multivariable functions enable us to understand the transmission mechanism and verification path of single variable functions.

The method of solving GDP with a single variable simplifies the economic analysis process and makes tax verification more feasible. In the overall research path, first of all, it is determined that the total value of people is the total social economy, and the time integral of the increase in human value constitutes the GDP of a period (this number automatically eliminates intermediate products and other noise). Secondly, this function model makes the goals and tasks of social production clearer. All human economic activities are ultimately for the service of people and to improve the value of people. In the past, we used commodities and currencies as target variables for economic development, which led to money fetishism and even misled the direction of social development, resulting in a widening gap between the rich and the poor and a moral crisis. Third, using human value as a single variable function to solve GDP makes human value data a real digital asset, and further combines blockchain technology to generate digital currency. This digital currency is not only a value scale, but also can create value. Once this goal is achieved, money and monetary policy will achieve a real leap forward [xvi].

Third, establish consumption big data and investment big data models and micro-operation systems

The important function of the market is to discover value and information. Here, we have established a consumer supply chain operation system and an investment value chain operation system, and handed these two systems over to the market.

In the first step, we establish the functional relationship between GDP and human value and between consumption and investment:

In the formula, V represents the total value of a person, and v represents the independent variable of the total value of a person, which is still the value of a person. The value of a person is divided into the value flow of a person, vI, and the value stock of a person, Vw. c represents consumption, i represents investment, rl represents labor income, and rk represents capital income. In this way, GDP represents the integral of the value of all people over a period of time, which is also equal to the integral of the investment and consumption functions calculated by the expenditure method, and is also equal to the integral of the two variable functions of labor income and capital income calculated by the income method.

Therefore, solving GDP requires solving each person's consumption and investment at the micro level. From the income approach, it requires solving each person's labor income and capital income.

Further research shows that the production function and economic growth function in Western economics also obey this formula. Therefore, this proposition is not inconsistent with traditional economics, and is also consistent with Marx's labor theory of value. If blockchain and big data can be used to solve the value of each person, the "Marx problem" will be solved. [xvii]

Next, we will analyze the relationship between the production function in Western economics and the economic growth theory of the Solow model and the human value function. Research has found that the human value function theory is consistent with these two theories. The difference is that the production theory and growth theory of the human value function have changed the economic analysis from multivariable to single variable. In other words, in the complex economic movement, there is actually only one variable in circulation. If we can solve this variable, economics will become scientific and concise. The development of information technology and the scientific and technological revolution have solved this problem for us.

Formulas 3 and 4 prove the production function and economic growth function with human value as a single variable. First, human value replaces labor and capital, and labor is regarded as the flow of human value, and capital is regarded as the stock of human value. In fact, there is another important significance in that it optimizes the economic analysis model and improves the irrationality of the original function[xviii]. Second, the single variable production function and growth function, the production and growth theory solved by blockchain and big data is more scientific and accurate, and it revolutionizes the shortcomings of traditional economics[xix].

In the second step, we need to discover the micro-mechanisms of the consumption function and investment function of the univariate big data and blockchain models [xx].

An important sign of the world economy's shift from a commodity economy to a digital economy is the shift from the traditional accounting value management model to the blockchain value management model. The economy is undergoing a fission, with the shareholding economy shifting to the token economy. The blockchain gives everyone a distributed account to manage and calculate the value of people, thereby achieving the democratization of the economic system. Stocks are a certificate for distributing dividends based on equity, but in the context of the digital economy, everyone's data has value and participates in distribution, so there is a token based on the value of people. It is a certificate of the value of people and is calculated using the blockchain. This shift has changed the human distribution system, giving everyone the right to participate in distribution. Everyone's big data is scientifically measured and essentially reflects a person's ability to create value. The token economy will make a big step forward in the civilization of human society[xxi], fully discovering the value of people, better managing the value of people, and creating more value for people. Under this system, everyone has a right to freedom based on personal value, and there is no more exploitation and inequality.

Here, Token V = block (C) + block (i). Big data company B hosts everyone's consumption data and investment data, and legally forms clear property rights through hosting and confirmation of ownership. This property right participates in the value distribution of big data company B. This process discovers accurate consumption data and investment data through Walrasian equilibrium and super accounts, and finally solves the accurate GDP[xxii]. Randall Knight's theory is still based on the idea of ​​utility value theory, and does not consider the revolutionary impact of modern information economics on value measurement and value models. The micro-marketization logic proposed in this article is that the macroeconomic model intervenes in the micro-market and creates value. The theory used is based on the human value theory of blockchain. Interestingly, Knight believes that money creates value, and the process of creation is to expand production by solving the problem of information asymmetry. This article also puts forward the view that money creates value, because money is value itself, and creating money creates value[xxiii]. On this issue, the United States has the means to create value globally and occupy the value of other countries. The world economy faces the possibility of being occupied and monopolized by the United States again.

Fourth, establish an income big data model and operation system. Through the personal value management system, study people’s stock value and flow value, and calculate their labor income and capital income. From the perspective of the production function and growth function of traditional economics, they are logically unified and continuous.

The above discussed the micro-marketization mechanism of monetary policy from the perspective of expenditure (c, i). Now we will continue to discuss the micro-marketization generation mechanism of GDP from the perspective of income (labor income, capital income, data income) and establish a market-oriented operation paradigm.

According to the univariate model of the production function, labor income, capital income, etc. are merged into the univariate function of human value y=f(v). Let V∈(V1, V2…Vn), V=f(rI, rk). Then,

Assume that everyone has time value, and everyone has a blockchain distributed account to manage personal value. Everyone can trade the right to use their future time and obtain income in the blockchain account. Capital income, as the time value of people in the past, can also be converted into the time value of people. That is to say, the labor value and capital value of people participating in the production process can create new value. This value can be traded as a token (a person's value certificate). After entering the market, it will eventually form national income, i.e. GDP, through the enterprise value chain and the commodity value chain. Therefore, the token economy will be very important. It is the most important target tool for the future market. Because of it and its market transactions, the data needed for monetary policy is discovered. More importantly, the process of generating this data is a micro-marketization process of creating value, and the token can be transformed into a currency issuance mechanism. This currency is completely objectively realized and discovered by market movements. Currency is the value of people, that is, the token.[xxiv]

Macroeconomic data measured by the expenditure approach and big data calculated by the income approach can be mutually verified. This process is a market-oriented process and is dynamic. The monetary policy framework built on this basis is timely and continuous. The central bank has deepened into the specific value discovery, management and creation process, which is an important feature of the digital economy era. The emergence of the new function of the central bank and currency depends on the continuous innovation of information technology generated by the scientific and technological revolution.

For China, the application of this model will be very important. It can quickly increase the per capita value of Chinese people. If the per capita value of Chinese people is equal to that of the United States, China's GDP will be 3-4 times that of the United States. The more profound significance is that this is a change, an epoch-making change[xxv].

The third question is, where is China's central bank and monetary policy going? The first step is to take full employment as the most important goal of monetary policy, vigorously develop the private economy and small and medium-sized enterprises, and create the world's best business environment and monetary environment for them; the second step is to gradually establish a dynamic, precise, macro-micro coordinated market mechanism to realize the value creation function of currency and make China's per capita value catch up with the United States; the third step is to innovate a digital currency system based on human value, gradually realize the goal of maximizing human value, and establish a modern and scientific currency governance system.

In 2020, China's economy and finance face a more complex situation and huge uncertainty. Since the beginning of the year, the new coronavirus has hit the world, and European and American stock markets have fluctuated dramatically. The US stock market has even seen multiple margin calls in a month. Global economic development is facing a huge crisis. In order to cope with the crisis, the United States has adopted an extremely loose monetary policy, lowered interest rates to 0, and launched a $5 trillion stimulus plan and other policies.

We can consider the following special risks facing China that should be paid attention to:

1. The extremely loose monetary policy of the United States may be a global risk. The US dollar is the world currency. Driven by zero interest rates, the United States will inevitably release a large amount of money to the world, acquire low-priced high-quality assets around the world, and quickly gather global resources to the United States and its multinational companies. This will greatly increase the material basis of the US dollar in the short term and form a new advantage for the US dollar. Relatively speaking, China will lose its competitive advantage and even face long-term crushing by the United States in the monetary and financial fields. If at this time, the Federal Reserve cooperates with Facebook to launch a digital currency based on the expanded US dollar, and this digital currency has cross-border payment functions, then this financial aggression will be fatal.

2. The possibility of the United States increasing its financial and monetary impact on China, combined with the above-mentioned "currency mutation attack", will inevitably hinder China's globalization process, and may even lose decades of export-oriented economic achievements. The global financial system controlled by the US dollar and the United States will be an economic disaster for any country. China must take precautions in trade settlement, monetary system, and digital currency, and cannot take any chances.

3. China's domestic risks are still relatively large, with "three major cliffs"[xxvi]. The "Munich Security Conference"[xxvii] has actually constituted a "divide-and-conquer strategy" of international anti-China forces. As the financial opening-up is promoted, the financial risk exposure is increasing. Economic and financial development faces many bottlenecks such as systems and structures, and the difficulty has never been greater.

Although China's economic and financial reform and development face huge uncertainties, it also has many advantages, some of which are not available in any other country. Therefore, for China's monetary policy, we must always implement the central government's various policies and guidelines, adhere to a prudent monetary policy, promote financial opening to the outside world in a scientific and prudent manner, and build a firewall for finance and currency step by step. In response to the possible problems of "government failure" and "market failure", possible external shocks, and the "three major cliffs", we can consider taking the following measures in steps in the near future:

1. Make "full employment"[xxviii] the most important goal of monetary policy and step up its implementation. Ensure the quantity and quality of full employment. Full employment is actually the maximization of human value. Once full employment is achieved, the other monetary policy goals can basically be achieved. Not only should the quantity of employment be increased, but the quality of employment should also be continuously improved.

Traditional monetary policy often focuses on economic growth and inflation targets. However, these two targets are increasingly prone to showing wrong signals. The reason is that under the influence of the scientific and technological revolution, the value function, production function, and growth function have changed from the original linear state to the "intangible, multi-dimensional" geometric series. It is obviously a wrong approach to control the growth rate. Coupled with the particularity of China's GDP statistics and the particularity of the M2 structure, it is easy to have an institutional and structural "digital trap", which will lead to the problem of "government failure".

In fact, the goal of economic growth is to maximize human value[xxix], and full employment is the only goal of economic growth[xxx]. Once full employment is truly achieved, other goals can be achieved. China has a population of more than 1.4 billion. As long as the value of China's 1.4 billion people is improved, there is no fear of any external shocks. Therefore, China's monetary policy should create the world's best monetary and financial environment for private enterprises and small and medium-sized enterprises.

China currently has huge room for full employment, and its economic development has serious "underdevelopment" problems. In particular, we must pay attention to the changes in the value function of people caused by the scientific and technological revolution. This issue requires in-depth research in the field of monetary policy from a theoretical and technical perspective. In the past, the practice of pegging monetary policy to GDP, M2/GDP, etc. actually caused huge "theoretical inertia trap losses[xxxi]". This problem has always been a global problem. China's economic development and monetary policy must get out of this misunderstanding. China's economic development still has huge dividends, and even the scientific and technological revolution can bring China greater institutional dividends than in the past 30 years[xxxii]. In real life, we also deeply realize that there is huge room for full employment. The actual value generated by each of us is far from the value we should have. The fundamental task of the social and economic system is to discover the value of people, manage the value of people, create the value of people, and maximize the value of people.

Therefore, if China's monetary policy is adjusted to achieve full employment with the maximization of human value as the standard, employment will be sufficient in both quantity and quality.

2. The second step is to gradually establish a dynamic, precise, macro-micro coordinated market mechanism to realize the value creation function of currency and enable China's per capita value to catch up with that of the United States.

In the future, the reform of the central bank will shift from the "credit currency era" to the "value currency era". Since the time when the central bank was established, it has assumed the task of creating money, but this process is always accompanied by inflation, so the central bank must both create inflation and fight inflation. Our evaluation criteria for a good central bank are: it creates more money without causing inflation. This process will show that the central bank has created jobs, so it has created human value, or it has imported value to foreign countries. Therefore, while the Federal Reserve has increased the issuance of a large amount of money, the US dollar index has continued to rise, indicating that the US central bank is a very successful central bank, because it has successfully imported a huge amount of value into the United States, and is a "blood-sucking machine" for the whole world [xxxiii]. This exploitative nature of the US monetary system must be recognized and exposed. Because China is a relatively independent economy, especially the blood vessels of the market and finance are not very smooth, the US "blood-sucking model" is not yet mature, so the United States still imposes economic sanctions and suppression on China in various aspects.

Therefore, China's rise cannot rely on the United States and the existing world monetary order. Under the existing monetary system, China's reform and opening up are full of risks. China must base itself on the domestic situation and make great efforts to enhance the value of the Chinese yuan.

In actual operation, it is necessary to establish the micro-mechanism and market-oriented mechanism of monetary policy. On the one hand, through the market-oriented mechanism, the information system of the central bank is established, mainly the blockchain and big data system. The composition of this system is multi-subject. Make full use of the digital asset mechanism under the digital economy to discover and manage the value of people, discover and manage consumption big data and investment big data, and use these two data as residents' property to participate in the distribution of enterprises and the state, give full play to the market's function of discovering information and value, so as to accurately measure full employment and GDP, and achieve the accuracy, timeliness and effectiveness of monetary policy big data. The central bank can purchase services from high-level domestic information technology companies and big data companies that meet the standards (such as Alibaba, Tencent, Baidu, Xiaomi, Zhongke Suguang, Quanjinlian, Ping An One Account, etc.). The construction of enterprise-oriented, market-oriented, micro-information systems and operation systems will establish a highly sensitive "central brain" for the central bank[xxxiv], which can discover value, manage value, create value, dynamically regulate finance, truly improve financial efficiency, prevent various financial risks and financial crises, and especially accurately measure international financial risk inputs, especially from the United States.

More importantly, the central bank’s money creation process has been transformed into a value creation process. By increasing the value of every Chinese person through monetary policy, continuously improving the quantity and quality of employment, and innovating institutional mechanisms, the average value of Chinese people will catch up with that of the United States in about five years. Then, China’s GDP will be three to four times that of the United States.[xxxv]

3. Innovating the monetary system and vigorously developing digital currency based on human values ​​will make important contributions to China and even mankind both in theory and in practice.

Neither the monetary school nor the Keynesian school realizes that "money can create value", and that this creation process is divided into two paths: intrinsic creation and extrinsic creation.

The monetary system studied along the direction of scientific value theory can create value, and the digital currency transmission mechanism is a market process of value creation. Currently, the digital currencies launched by central banks in various countries do not have this function. The main reason is the lack of correct and profound understanding of the laws of value, currency and economic growth[xxxvi].

The human value management industry may be the most profitable industry in the future, especially in the context of the industrialization, marketization and internationalization of the RMB. In the next 5-10 years, China will have a "value industry" based on blockchain technology. This industry is caused by the change in the value function caused by the scientific and technological revolution. Through the digital economy and token economy, it will drive China to the third civilization of mankind - the scientific society, triggering deep-seated social changes. This change may become a global benchmark.

The transmission mechanism of this monetary system has the following key points: 1) Use the super account of the blockchain to define the value of each person and generate big data of each person's value. This big data is mutually verified with the big data of each person's income function and expenditure function, and generates a token for each person through the market. The token of human value is digital currency. 2) The consensus mechanism of the blockchain is extended to the market to form a transaction process. Everyone can buy their own time usage rights in the market, referred to as "time rights". This time right is also a blockchain token with personal and time stamps. 3) Use "blockchain + human value" to innovate digital currency, making currency a tool for discovering value, managing value, creating value, and realizing value, so that the value scale function of currency is integrated with currency, and the value creation function of currency is increased, and inflation and deflation are fundamentally eliminated. 4) Implement a strict and scientific access system and regulatory system to prevent and resolve various possible risks and crises.

This monetary system negates the existing credit monetary system based on the US dollar from a mechanism perspective, freeing the world from the hegemony and "blood-sucking" of the US dollar. If it is promoted to the world by large Chinese technology companies, it will play a key role in the rise of the Chinese nation and make an important contribution to human development.

The new monetary system transmission mechanism is highly compatible with China's existing monetary system, economic system and social system and can be transformed by each other. It is feasible in both theory and practice. What is more important is to realize the maximization of human value in essence is to realize human wealth freedom, spiritual freedom and life freedom, and achieve harmonious development between man and man and nature. It is a system with universal values ​​that can resolve the ideological contradiction between China and Western countries.

2020 is destined to be an extraordinary year and a year of great turning point. The global new coronavirus that broke out at the beginning of the year is still in progress. It leaves people with a lot of reflection, and the most important thing is the reflection of values. It must be recognized that the theories, systems, markets, and society of the world and even China need to be reformed and opened up. We look forward to a new theory, an innovative currency and economic system, a new national governance system and social system, a harmonious, healthy and safe global values ​​and community of shared future, no longer spreading viruses, no longer economic and monetary plunder, no longer "blood-sucking hegemony", no longer economic sanctions and trade barriers. We look forward to a "new world".

The following sections are notes to the article:

[i] Market failure is also called market failure, which is defined as moral hazard, reverse selection and free-ride caused by insufficient information and information asymmetry, which makes the market pricing function and resource allocation function invalid. Government failure refers to the ineffectiveness of the government's macroeconomic policies when the government's information level is less than the market's information level.

[ii] Informatization causes the amount of information to increase rapidly, and the information entropy increases rapidly. If this information cannot be better identified and mined, the lack of systematic scientific value functions and objective functions will eventually sink into these information entropies, resulting in huge system chaos, resulting in the death of the economy. In reality, many people and enterprises are addicted to this.

[iii] The great crisis in 1929 was the change in the global economic structure and the disintegration of the gold standard, which changed the original value function. The Hoover administration believed that the free market mechanism at that time would spontaneously solve these problems, resulting in serious "market failure" and "government failure". The global financial crisis in 2007 was also the rise of the "BRICS countries", which changed the original value function and production function of the United States. In addition, the financial bubble produced "value function mutation", which led to the breaking of the commodity supply and demand chain and the financial chain, and a global crisis broke out.

[iv] The wave of informatization and value revolution caused by the scientific and technological revolution are profoundly changing the world. One world is entering an information black hole, sticking to traditional models, returning to vicious competition, and the world economy has entered the darkness; the other is the new world we are looking forward to, that is, human beings adapt to the scientific and technological revolution, researching and cognizing new economic and monetary and financial laws, and recognizing new value functions and value laws. The scientific revolution has brought mankind into the third civilization-scientific society. The first civilization is a primitive society, the second civilization is a class society, and the third civilization is a scientific society. The scientific society is a brand new world. The science here is the word Ology rather than the word Science in English. The former refers to a civilization state and ecology, while the latter is mainly metaphysical positivism.

[v] GDP refers to a country's GDP, while GNP is the global GDP of its own nationals. There are two ways to calculate GDP, one is the output method, which is the total domestic output minus intermediate products; the income method is the net income of all citizens for a certain period of time. In terms of calculation method, the traditional method is GDP=G+I+C+E (where G is government expenditure, I is investment, C is consumption, and E is net export). The income method is GDP=RL+Rc+RG.

[vi] It is quite difficult and complex to evaluate China's macroeconomic policy. Concentrating with several important variables and laws in monetary policy may be more conducive to in-depth discovery and solving problems. Other problems can only be gradually extended and studied solutions. On the surface, we have made various arrangements for monetary policy in an orderly manner based on various common sense, and the code is reasonable from the existing knowledge. Once we open up new value analysis and new information system, we will find new laws and value functions, and thus find many problems and solutions that need to be thought about, and the methods and results are too far from the new world. China has problems, characteristics and laws that are different from any other country. What needs to be solved is to discover these problems and find solutions.

[vii] Traditional monetary policy data mainly comes from the government's statistical system, but in the event of government failure, it is difficult for the government's statistical departments to obtain these data accurately. Especially under the current statistical system in China, the statistical error is quite large, which can easily lead to errors in macro decision-making. Therefore, we transfer the data collection work to market entities and combine this behavior with market competition behavior to make these data valuable, and the market will effectively, accurately and promptly discover this information, thereby improving the effectiveness of monetary policy.

[viii] From my research experience, I cannot basically adopt the IMF research conclusions and research methods. I have participated in the IMF's global central bank senior management training class. Many of the research methods they use are not suitable for China's national conditions at all. For example, the life cycle curve theory is a tool the organization often uses to analyze investment and savings rates, but they ignore the traditional habits and special economic structures of various countries. China is the basic cell of the economy, while the life cycle theory is modeled after developed countries such as the United States and the individual is the basic cell of the economy. The life cycle curve formed by these two structures is very different. One is basically normal distribution and the other is linearly upward. The savings rate of China and East Asian countries must be higher than that of Western countries.

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[x] The public ownership of means of production has a great impact on asset prices. It expands to the global model and affects its global pricing. We rarely see real estate companies in Western countries purchasing land in China. Foreign residents are rarely willing to buy houses in China. In addition, China's investment data is also different from that in Western countries. Because investing is only a kind of right to use assets. Similarly, the capital market is also difficult to price. As a listed company, the net assets are only a kind of right to use, and are more linked to the way of use and the years.

[xi] Public goods refer to government public facilities, provided to residents with services and consumption free of charge. In developed capitalist countries, this area belongs to fiscal budget payments and transfer payments. However, in China, a large number of state-owned enterprises are also involved in the production of public goods or the production of "quasi-public goods".

[xii] So far, the housing of civil servants in China's state organs is still in a separate house system. It is said that the canteen of Xinhua News Agency is very good. It can be said that the food in each meal exceeds the level of middle- and upper-middle-aged families in the UK. Therefore, millions of students in China apply for civil servants every year because there are too many differences within the system and outside the system. Many phenomena have formed the "noble class of the civil affairs department", and officials help each other and officials, which has enabled many families to enjoy government dividends for a long time and even for generations.

[xiii] Give a few examples around me. I often take taxis in Beijing. Through communication with drivers and self-inspection, it was found that there are about 70,000 regular taxis in Beijing, while there are estimated 150,000 informal taxis in Beijing, with a ratio of 1:2 in white to gray. If each black car earns 50,000 yuan per year, the total annual income should be about 8 billion yuan, which is not considered modified tricycles. Beijing’s bicycle roasted sweet potatoes is estimated to be 10,000; Beijing’s scrap purchases also have tens of thousands of people; small property rights housing purchases are even more amazing. There are data that says there are 6 billion square meters, which is equivalent to the total real estate development in the past 10 years. Recently, I went to Changsha for 3 days, and I took a black car in three of the 6 taxis. I chatted with the drivers. They said that there are six or seven thousand regular taxis in Changsha, and there are tens of thousands of black cars. There are 7 black cars in the small Orange Island.

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[xv] "Micro-Basics of Monetary Policy" is a book published by Fudan University Press in 2010, and the author is Chen Xuebin. "Micro-Basics of Monetary Policy: Research on Dynamic Simulation of Chinese Residents' Consumption and Investment Behavior" is a monograph on the study of "Dynamic Dynamics of Chinese Residents' Consumption and Investment Behavior". The book includes: dynamic optimization simulation of residents' personal life cycle consumption and investment behavior, theoretical research on time preference and risk preference in consumption and investment decisions, and analysis of consumption and investment simulation based on time-varying time preferences.

[xvi] Traditional economics treats commodity value or price variables as the main variables of the value function, and this function model violates the original intention of value. Value is a usefulness to people, and value is also created by people. The value function is a continuous function. This function changes the three breakpoints of the previous value function: the breakpoint between supply and demand, the breakpoint between market and society, and the breakpoint between man and nature. The greatest significance of the technological revolution and the information revolution lies in the value revolution, especially blockchain technology and big data technology, which enables everyone's value to discover, manage and innovate, and integrates currency with its fundamental function-value scale, thereby eliminating the possibility of inflation and deflation. Money can create value, what is the key? This may be the most important function and significance of the new digital currency.

[xvii] Marx's labor theory of value has two important problems. First, Marx's solution to value also starts with commodities, and believes that labor is a function of commodities. Second, due to the limitations of the times, Marx was unable to solve simple labor and complex labor, and adopted the average method to deal with it. It was this treatment that ignored the importance of human value differences and fell into egalitarianism. This was also one of the important problems faced by many socialist countries later.

[xviii] In the original production function p=f(I, k), the separation of labor and capital is hidden, and the correlation between these two variables is hidden. In the Western economics' processing method, the login exponential method is also used to convert k to I. This transformation increases the difficulty and uncertainty of economic analysis. If calculated according to a single variable of human value, this problem can be avoided, and the production function and growth function can be unified. A more in-depth study will also find that the revolutionary significance of the human value function model is that it no longer uses utility value theory to conduct the research on the Vallas equilibrium of microeconomics, but imports blockchain and big data based on the Vallas model, and solves the Vallas equilibrium and Phillips curve. This study is more interesting.

[xix] The important drawback of traditional economics is its non-scientific nature. The main reason is that its basic theory - the theory of utility value is subjective, and human feelings are irreducible. This theory introduces the research of human economics into a "century-year misunderstanding". Reflecting on many current theories, there are such problems and it requires serious reflection. Whether it is Adam Smith or Marx, they were great and valuable in the historical context at that time, but any theory is only a small part of a certain point in human society, and they are not enough to become the basis of dogma and metaphysics. These two theories are affecting the culture and models of China and the West, and they should be constantly developed and changed.

[xx] In this part, I have studied the "full gold chain" model, namely the global consumer supply chain and investment value chain model. This model is micro and market-oriented. Through market-oriented pricing and asset custody of personal consumption data and investment data, these data are turned into means of production, mobilizing the market's value discovery mechanism and incentive mechanism to solve macroeconomic data. In China, the government's central enterprises or state-owned enterprises should be intervened, or the government (People's Bank) should allow domestic large technology enterprises to intervene in the operation through service outsourcing. Small and medium-sized enterprises intervene as market makers.

[xxi] We call this civilization a "scientific society" because its operation logic is scientific and is the value calculated using highly developed information technology, blockchain technology, big data technology and artificial intelligence technology. From a historical perspective, humans will enter the "third civilization"-"science society. The first civilization is a primitive society, distributed by human physical strength, the second civilization is a class society, distributed by means of production occupied by humans, and the third civilization is a scientific society, and the value allocation of people calculated by science and technology + market. This value can be (blockchain + human value): token.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : From the perspective of game theory, this constitutes a currency equilibrium, and in most cases, both parties will give up trading. Monetary equilibrium makes everyone happier because trading becomes easier. At this time, the legal currency endogenously realizes positive value.

[xxiii] Therefore, we should pay more attention to the major changes in US monetary policy in 2020. On March 16, 2020, Federal Reserve Chairman Powell announced that in order to cope with the global COVID-19 virus and the stock market plummeted, a monetary policy combination of US$5 trillion and zero interest rates has been launched. Under the conditions of an open economy, these currencies will actually draw the "blood and sweat" of people all over the world and create huge value for the United States according to the viewpoint of this article. This is because the US dollar is the world currency. Under the new value theory, it will occupy the value of people in various countries around the world for free.

[xxiv] There are various explanations about tokens. The token defined in this article refers to the value certificate of people. The token economy has attracted the attention of countries around the world. Germany and the United Kingdom have issued national token economic strategies. After the launch of technical tokens such as Bitcoin and Ethereum, the United States is studying and launching digital currencies that replace the US dollar through Facebook. Combined with the current extremely loose monetary policy of the United States, it is very likely to use Libra as a platform to create human value tokens, create digital dollars, and dominate the world currency for another 100 years. In this model, more factors are beneficial to China because there are many Chinese people. Therefore, the future international competition is the value competition of people and the currency competition based on this. From this, it is thought that China's digital currency design must be combined with human value.

[xxv] If Shang Yang's reforms led Qin from a slave society to a feudal society, thus rapidly growing productivity and ultimately unifying China. Then, the reforms mentioned in this article will make China transition from a class society to a scientific society, and will definitely make great contributions to a community with a shared future for mankind.

[xxvi] The three major cliffs mainly refer to the huge gap between finance and the real economy, the value and price of the RMB, housing prices and people's real income.

[xxvii] While discussing the lack of the West, the Munich Conference actually attempted to build a policy to encircle China. Some European countries are also exploring how to reshape the West. For example, Swedish Foreign Trade Minister Holberg invited the trade ministers of Denmark, Germany, Finland, the Netherlands and the Czech Republic to meet in Stockholm on February 18. The background of this meeting is that France, Italy and even Germany are promoting the new European Commission to implement stricter trade defenses and looser subsidy policies, and cultivating more heavyweight "European champion companies" to confront China. These measures reflect the rising trend of trade protectionism, which has greatly impacted European liberal countries. Sweden's initiative is intended to reawaken Europe's liberal power.

[xxviii] China's monetary policy includes four major goals: economic development, full employment, price stability, and balance of payments. These four goals are interdependent and mutually restrictive.

[xxix] The core issue of economics is to study the value of humans or the value of commodities? This is an important question. Value is a usefulness to humans. Economics studies value, so economics studies human values ​​and prices. Once human values ​​or prices are solved, the price of commodities can be calculated. The key is to solve this problem, and both the production function and the growth function in economics can be solved. When Marx analyzed commodities, he also divided the value of commodities into use value and value. In fact, what people should study more is the use value. A major contribution of the information revolution caused by the scientific and technological revolution to mankind is that human values ​​can be accurately measured and managed! The change of this value function will have a profound impact on economic theory, financial theory, and monetary theory, and even have an important impact on the historical and historical research of human society!

[xxx] The objective function of the economic growth function is the value of humans rather than the value of commodities. The importance of this transformation lies in the ability of economic analysis to be continuous, that is, the production of commodities is to improve human value, and value is also created by humans. The new coronavirus that occurred in 2020 is an important significance for humans to achieve the transformation of this growth goal and the transformation of the value function. This transformation is of epoch-making significance. In the new value function, money and human values ​​are integrated, and there is no longer inflation and deflation. Moreover, once the value of humans is integrated with the value scale function of currency, full employment will enhance international competitiveness and achieve balance of payments.

[xxxi] Many tragedies in human society are because they put themselves in a "cage of mindset" and they are completely unaware of it, even for generations.

[xxxii] According to my research, China's economic development has six major dividends: institutional dividend, labor dividend, science and technology dividend, resource dividend, international dividend and ecological dividend.

[xxxiii] The US stock market plummeted due to the COVID-19 virus in early 2020. The Federal Reserve used this as an excuse to create a super loose monetary policy, which is a reshuffle of the world's wealth, and needs to attract the attention of countries around the world. The United States can take advantage of this opportunity to play the role of the dollar as a world currency and acquire global assets under the guidance of zero interest rates. This will be disastrous for other countries outside the United States. This point can explain why backward countries such as South America, Africa, the Middle East are always getting poorer (now the former Soviet Union has also entered this trap), that is, the United States can use market mechanisms and monetary mechanisms to occupy the value of these countries for free. In fact, the whole world is producing for the United States, but the current president of the United States is not satisfied. It believes that the United States is not exploiting enough, and it still tries every means to suppress these countries (just as cruel as slave owners treat slaves.).

[xxxiv] Many of our current "central brain" cells are transplanted, especially in theory, which are basically subject to the United States. They are blocked and even numb in the central nervous system. For example, the problem of difficulty and high cost of financing for small and medium-sized enterprises that we have always wanted to solve has not been solved because the neural center of this system is numb between the macro and the micro, and between the government and the market.

[xxxv] The information revolution actually rapidly improves the learning speed and labor efficiency of the Chinese people. The scientific and technological revolution can promote a profound "value revolution" in China, so that the average labor productivity of the Chinese people can quickly increase, and catch up with or surpass the United States within five years. The Chinese nation is a hardworking and intelligent nation, and it should be possible to achieve this goal. Therefore, China's economic development should not set a GDP upper limit target, or even no GDP assessment, but it must set a full employment target and per capita value target.

[xxxvi] As for the DECEP that China is about to launch, its function is still a credit currency, and it can only replace part of cash, it is just a digitization of a legal credit currency and cannot create value. This design is insufficient in terms of monetary theory and value theory and needs improvement.