Chinese Economics Thread

[gelgoog]

This is the right thing to do. Make sure people who paid for their houses get them, and wind down the property market's unsold inventory. Only after this happens will recovery properly start.

 

[Michaelsinodef]

Please, Log in or Register to view URLs content!

Mine on the earlier VC startup stats.

Also something else.

If people wants to have a laugh after some exercising.

Try and look up how many foreign US bonds and loans some of the Chinese RE companies made/did (such as Evergrande).

And then also try dig at the western articles basically screaming at the Chinese central cov to release the flood and save the RE companies lol.

 

[broadsword]

This is from Investopedia. Part 1

Read and dissect to determine what applies to China. Especially the part bolded.

Why Is Deflation Bad for the Economy?​

By

Please, Log in or Register to view URLs content!

Updated January 17, 2024
Reviewed by

Please, Log in or Register to view URLs content!

Fact checked by

Please, Log in or Register to view URLs content!

What Is Deflation?​

Deflation is when prices decrease over time. It stands in contrast from inflation, which refers to when prices rise. It can be driven by many different factors, including an increase in productivity and the abundance of goods and services; a decrease in total or

Please, Log in or Register to view URLs content!

; or a decrease in the supply of money and credit.
When deflation occurs throughout an economy, this typically means there is a

Please, Log in or Register to view URLs content!

and an increase in the

Please, Log in or Register to view URLs content!

of the currency.

KEY TAKEAWAYS​

• Deflation is when the general price levels in a country are falling—as opposed to inflation when prices rise.
• Deflation can be caused by an increase in productivity, a decrease in overall demand, or a decrease in the volume of credit in the economy.
• Most of the time, deflation is unambiguously a positive trend for the economy, but it can also under certain conditions occur along with a contraction in the economy.
• In an economy dominated by debt-fueled asset price bubbles, deflation can lead to a temporary financial crisis and a period of liquidation of speculative investment known as debt deflation.

Understanding Deflation​

Changes in consumer prices can be observed in economic statistics compiled in most nations by comparing changes in a

Please, Log in or Register to view URLs content!

of diverse goods and products to an index. In the U.S. the

Please, Log in or Register to view URLs content!

(CPI) is the most commonly referenced index for evaluating inflation rates. When the index in one period is lower than in the previous period, the general level of prices has declined, indicating that the economy is experiencing deflation.
This general decrease in prices is a good thing because it gives consumers greater

Please, Log in or Register to view URLs content!

. To some degree, moderate drops in certain products, such as food or energy, even have some

Please, Log in or Register to view URLs content!

on increasing nominal consumer spending. Beyond these basic staples, a general, persistent fall in all prices not only allows people to consume more but can promote economic growth and stability by enhancing the function of

Please, Log in or Register to view URLs content!

and encouraging real saving.

However, under certain circumstances, rapid deflation can be associated with a short-term contraction of economic activity. In general, this can occur when an economy is heavily laden with debt and dependent on the continuous expansion of the supply of credit to inflate asset prices by financing speculative investment, and subsequently, when the volume of credit contracts, asset prices fall, and speculative over-investments are liquidated. This process is sometimes known as

Please, Log in or Register to view URLs content!

.
Otherwise, deflation is normally a

Please, Log in or Register to view URLs content!

that reflects technological progress, increasing abundance, and rising living standards.

Deflation: Causes and Effects​

If, as the common saying goes, inflation is the result of too much money chasing not enough goods in the economy, then conversely deflation can be understood as a growing supply of goods and services being chased by a constant or slower-growing supply of money.
This means that deflation can be brought about either by an increase in the supply of goods and services or by a lack of increase (or decrease) in the supply of money and credit. In either case, if prices can adjust downward, then this results in a generally falling price level.
An increase in the supply of goods and services in an economy typically results from technological progress, the discovery of new resources, or an increase in productivity.

Consumer’s purchasing power increases over time and their living standards rise as the increasing value of their wages and business incomes allow them to purchase, use, and consume more and better quality goods and services. This is an unambiguously positive process for the economy and society as a whole.

​

The U.S. government targets an annual inflation rate of 2%.
At times, some economists have expressed fears that falling prices would paradoxically reduce consumption by inducing consumers to hold out or delay purchases in order to pay lower prices in the future; however, there is little evidence that this actually occurs during normal periods of economic growth accompanied by falling prices due to improvements in productivity, technology, or resource availability.
Moreover, the vast majority of consumption is made up of goods and services that are not easily deferred to the future even if consumers wanted to, such as food, clothing, housing services, transportation, and healthcare.

Beyond these basic needs, even for luxury and discretionary spending consumers would only choose to reduce current spending if they expect the rate of decrease in prices to outweigh their natural

Please, Log in or Register to view URLs content!

for present consumption over future consumption.
The one type of consumer spending that would suffer from falling prices would be items that are routinely financed by taking on large debts since the real value of fixed debt will increase over time as prices fall.

Debt, Speculation, and Debt Deflation​

Under specific conditions, deflation can also occur in and after periods of economic crisis.
In a highly

Please, Log in or Register to view URLs content!

economy, where a

Please, Log in or Register to view URLs content!

, another monetary authority, or the banking system, in general, engages in the continuous expansion of the supply of money and credit in the economy, the reliance on newly created credit to finance business operations, consumer spending, and financial speculation, results in ongoing inflation in commodity prices, rents, wages, consumer prices, and asset prices.
More and more investment activity starts to take the form of speculation on the price appreciation of financial and other assets, rather than profit and dividend payments on fundamentally sound economic activity.

Business activities tend likewise to depend more and more on the circulation and turnover of newly created credit rather than real savings to finance ongoing operations. Consumers also come to finance more and more of their spending by borrowing heavily rather than self-financing out of ongoing savings.

Gold is usually considered to be a good hedge against inflation but it can also be a good hedge against deflation.
To compound the problem, this inflationary process usually involves the suppression of market interest rates, which distorts decisions about the type and time horizon of business investment projects themselves, beyond simply how they are financed. Conditions become ripe for debt deflation to set in at the first sign of trouble.

At that point, either a real

Please, Log in or Register to view URLs content!

or a correction in market interest rates can put pressure on heavily indebted businesses, consumers, and investment speculators. Some of them have trouble revolving, refinancing, or making their payments on various debt obligations such as business loans,

Please, Log in or Register to view URLs content!

, car loans, student loans, and credit cards.
The resulting delinquencies and

Please, Log in or Register to view URLs content!

lead to debt

Please, Log in or Register to view URLs content!

and write-downs of

Please, Log in or Register to view URLs content!

by lenders, which start to eat away some of the accumulated supply of circulating credit in the economy.

Banks' balance sheets become shakier, and depositors may seek to withdraw their funds as cash in case the bank fails. A

Please, Log in or Register to view URLs content!

may ensue, whereby banks have over extended loans and liabilities against inadequate cash reserves and the bank can no longer meet its own obligations. Financial institutions begin to collapse, removing

Please, Log in or Register to view URLs content!

that indebted borrowers have become even more desperate for.
This reduction in the supply of money and credit then reduces the ability of consumers, businesses, and speculative investors to continue to borrow and bid up asset and consumer goods prices so that prices may stop rising or even begin to fall.

 

[broadsword]

Part 2

This reduction in the supply of money and credit then reduces the ability of consumers, businesses, and speculative investors to continue to borrow and bid up asset and consumer goods prices so that prices may stop rising or even begin to fall.

Falling prices put even more pressure on indebted businesses, consumers, and investors because the

Please, Log in or Register to view URLs content!

of their debts remains fixed as the corresponding nominal value of their revenues, incomes, and collateral falls through price deflation. And at that point, the cycle of debt and

Please, Log in or Register to view URLs content!

.

In the near term, this process of debt deflation involves a wave of business failures, personal bankruptcies, and increasing unemployment. The economy experiences a

Please, Log in or Register to view URLs content!

, and economic output slows as debt-financed consumption and investment drop.

What Is Deflation in an Economy?​

Deflation is when the prices of goods and services decrease across the entire economy, increasing the purchasing power of consumers. It is the opposite of inflation and can be considered bad for a nation as it can signal a downturn in an economy—like

Please, Log in or Register to view URLs content!

in the U.S.—leading to a recession or depression. Deflation can also be brought about by positive factors, such as improvements in technology.

Is Deflation Worse Than Inflation?​

It depends. Deflation can be worse than inflation if it is brought about through negative factors, such as a lack of demand or a decrease in efficiency throughout the markets. Deflation can be better than inflation if it is brought about by positive factors, such as improvements in technology that make the costs of goods and services cheaper.

How Do You Make Money During Deflation?​

To hedge against deflation, investors can purchase investment-grade bonds, consumer-staple stocks, dividend stocks, and keep their money in cash. A diversified portfolio can protect against a variety of economic scenarios.

The Bottom Line​

A little bit of deflation is a product of, and good for, economic growth. But, in the case of an economy-wide,

Please, Log in or Register to view URLs content!

followed by debt deflation when the bubble bursts, rapidly falling prices can go hand-in-hand with a financial crisis and recession.

Thankfully, the period of debt deflation and recession that follows is temporary and can be avoided entirely if the perennial temptation to inflate the supply of money and credit in the first place can be resisted.

All in all, it is not deflation, but the inflationary period that then leads to debt deflation that is dangerous for a country's economy. Perhaps, unfortunately, consistent and repeated inflation of this kind of debt bubble by central banks has become the norm over the past century or so.

At the end of the day this means that while these policies persist, deflation will continue to be associated with the

Please, Log in or Register to view URLs content!

.

 

[escobar]

Please, Log in or Register to view URLs content!

Mine on the earlier VC startup stats.

Also something else.

If people wants to have a laugh after some exercising.

Try and look up how many foreign US bonds and loans some of the Chinese RE companies made/did (such as Evergrande).

And then also try dig at the western articles basically screaming at the Chinese central cov to release the flood and save the RE companies lol.

the company's founder has made a statement

Please, Log in or Register to view URLs content!

 

[Overbom]

Huge!

Please, Log in or Register to view URLs content!

China raises retirement age by up to 5 years amid growing pressure from ageing population​

The top legislative body agreed the measures following warnings the pension system could run out of money by 2035

The retirement age for men will rise from 60 to 63 and for female office workers from 55 to 58 as a result of the decision by the Standing Committee of the National People’s Congress, the country’s top legislative body.


The biggest increase affects female blue-collar workers, who could previously retire aged 50 but will now have to wait until they reach the age of 55.

 

[daifo]

The lady on twitter behave like she found some giant secret of China collapsing. She probably thought "I FINALLY solved Uncle Gordo Theory of China Collpase"

https://twitter.com/i/web/status/1834520718882586625

 

[gelgoog]

Long overdue change to retirement age. There will be protests for sure but this is necessary.

 

[HighGround]

Please, Log in or Register to view URLs content!

Mine on the earlier VC startup stats.

Also something else.

If people wants to have a laugh after some exercising.

Try and look up how many foreign US bonds and loans some of the Chinese RE companies made/did (such as Evergrande).

And then also try dig at the western articles basically screaming at the Chinese central cov to release the flood and save the RE companies lol.

More on this

Please, Log in or Register to view URLs content!

Although I've been trying to google this, can you perhaps pinpoint towards what law change I should be looking for @tokenanalyst ? I've been trying to find it, but Google searches can sometime be hit and miss, plus I obviously don't speak Chinese.

 

[proelite]

@abenomics12345 Does this jive?

Please, Log in or Register to view URLs content!