Chinese Economics Thread

[Jiang ZeminFanboy]

Look at his cartoons. He is advocating higher deficit spending and more debt. He doesn't really know what he wants.

I understand what he is asking for though. He wants a government stimulus to push consumption. Which is this Western trope over the past three years. But that is directly opposite to incurring less debt.

I mean, are we sure we need to deleverage? Deflation makes the company sentiment in China atrocious. The real estate has already fallen to about 18% of GDP from 25% and we don't need any more deleveraging in real estate. The floor sold is below the replacement level, so it will grow a bit higher anyway when the prices stop falling. And if we do stimulus we don't need to put it in real estate.

Years before I was advocating that more public debt is bad along with the Austrian School of Economics thought etc. however when I started reading more and more about the MMT theory and looked at its results, I said, damn, how the heck it's working, and the real-life show that's its working. If its working then do it.

Europe went with Austerity and its results are atrocious, The USA goes with "dollars go brr" and even though total debt is growing, as a debt percent of GDP is falling or staying the same.

My conclusion is that fiscal Austerity is not a good answer for China.

 

[Michaelsinodef]

@Jiang ZeminFanboy is using the economic meaning of deleveraging to mean reducing debt. That will take time. Give China 3-4 years.

It will take longer to do (although we start seeing the deleveraging more clearly around 5-10 years).

 

[N00813]

Europe went with Austerity and its results are atrocious, The USA goes with "dollars go brr" and even though total debt is growing, as a debt percent of GDP is falling or staying the same.

Just want to note that the USD is a currency with global demand --> hence US inflation associated with currency debasement is relatively low, since the additional printed USD can be "spread" amongst global demand for USD.

When the UK tried this, it resulted in a panic in financial markets:

The idea was fairly simple: the UK economy needed a shock to stimulate investment, and that shock would be a series of tax cuts.


If the Truss government had asked the OBR for an assessment of its plans – as all UK governments have done

Please, Log in or Register to view URLs content!

– it would

Please, Log in or Register to view URLs content!

that £45 billion of unfunded cuts would not meet the government’s

Please, Log in or Register to view URLs content!

on borrowing and public debt.


What Truss had in mind though was

Please, Log in or Register to view URLs content!

, one in which the tax cuts would pay for themselves by convincing investors to put more of their money into the British economy.


So she decided to go ahead

Please, Log in or Register to view URLs content!

. But instead of flocking to the UK economy,

Please, Log in or Register to view URLs content!

.


If the UK was not on track to meet its rules, it might be facing a period of instability – and investors tend to avoid instability. The

Please, Log in or Register to view URLs content!

, British companies became less valuable and UK pensions funds were

Please, Log in or Register to view URLs content!

.

Please, Log in or Register to view URLs content!

 

[Michaelsinodef]

Just want to note that the USD is a currency with global demand --> hence US inflation associated with currency debasement is relatively low, since the additional printed USD can be "spread" amongst global demand for USD.

When the UK tried this, it resulted in a panic in financial markets:

Please, Log in or Register to view URLs content!

The global demand is lessening though (and it will only get faster as the US prints more/issues more bonds).

 

[pbd456]

I mean, are we sure we need to deleverage? Deflation makes the company sentiment in China atrocious. The real estate has already fallen to about 18% of GDP from 25% and we don't need any more deleveraging in real estate. The floor sold is below the replacement level, so it will grow a bit higher anyway when the prices stop falling. And if we do stimulus we don't need to put it in real estate.

Years before I was advocating that more public debt is bad along with the Austrian School of Economics thought etc. however when I started reading more and more about the MMT theory and looked at its results, I said, damn, how the heck it's working, and the real-life show that's its working. If its working then do it.

Europe went with Austerity and its results are atrocious, The USA goes with "dollars go brr" and even though total debt is growing, as a debt percent of GDP is falling or staying the same.

My conclusion is that fiscal Austerity is not a good answer for China.

US uses dollar -- the reserve currency. it does not care about budget deficit and trade balance because it can print dollars. other countries cant. so using US as an example does not mean anything

 

[proelite]

I mean, are we sure we need to deleverage? Deflation makes the company sentiment in China atrocious. The real estate has already fallen to about 18% of GDP from 25% and we don't need any more deleveraging in real estate. The floor sold is below the replacement level, so it will grow a bit higher anyway when the prices stop falling. And if we do stimulus we don't need to put it in real estate.

Years before I was advocating that more public debt is bad along with the Austrian School of Economics thought etc. however when I started reading more and more about the MMT theory and looked at its results, I said, damn, how the heck it's working, and the real-life show that's its working. If its working then do it.

Europe went with Austerity and its results are atrocious, The USA goes with "dollars go brr" and even though total debt is growing, as a debt percent of GDP is falling or staying the same.

My conclusion is that fiscal Austerity is not a good answer for China.

You're forgetting US has the world's reserve currency. Is there another example than the US?

 

[Iracundus]

Couldn't China do the same? It can create more RMB to exert upward pressure on inflation to counter the deflation, depreciate the RMB, and use that RMB to pay off debt and deleverage a bit. Furthermore, could China not also convert some of the USD from maturing US treasury bonds to RMB in order to appreciate the RMB as a way of fine tuning the value of the RMB?

 

[HighGround]

You're forgetting US has the world's reserve currency. Is there another example than the US?

Russia 2008-2009. Russia sold government holdings to plug the budget deficit, devalued its currency, and bailed out banks. Some taxes and tariffs were dropped.

Russia was had one of the best recoveries post-GFC relative to some of its European peers who embraced "low inflation" and "austerity".

 

[Overbom]

All this garbage, and Gatekeeper, an actual economist, was the one who got banned. Congrats

 

[9dashline]

All this garbage, and Gatekeeper, an actual economist, was the one who got banned. Congrats

Dude was a professor too... tells you all you need to know about the real powers that behind this site.