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Your post doesn't make a lot of logical sense. Government finances are subject to the private financial industry in China. If the PBOC keeps printing money, it

Your post doesn't make a lot of logical sense. Government finances are subject to the private financial industry in China. If the PBOC keeps printing money, it sinks the Yuan and effects international trade, capital inflows/outflows. You can't escape economic realities. China has been allowed to do so largely because its growth rate has been astronomical...that is no longer the case. People made similar nonsensical claims about Japan in the 80s.

conistonwater 11y ago
Not just the growth rate, but also the very high savings rate, which is a consequence of demographic policies as well as restricted available investment options, allows those banks and SOEs to borrow much more cheaply - who knows how long that will last.
narrator 11y ago
China has strict capital controls. You can only get $50,000 per year in and out of the country. Otherwise all the bank money would flood out of the country into hard assets since it doesn't always have to be paid back. The borrowers would also leave the country, knowing that bank fraud isn't treated lightly by the authorities in China. They actually prosecute people for things like illegal loans in China.[1] http://www.scmp.com/article/625045/23-arrested-probe-93b-yuan-illegal-loans http://www.scmp.com/article/625045/23-arrested-probe-93b-yua... >"The audit office found that the banks had lent money to fictitious individuals and companies with insufficient capital." >"They also lent more money to certain developers than they were entitled to, it said." Can you ever imagine arrests and hundreds of employees of a bank disciplined for something like that in a western country? Inflation is not caused by money printing. Inflation is caused by poor capital investment or capital destruction. Central planning can cause this if the planners are not careful to make bad investments fail on a regular basis and free up goods of higher orders for alternative investment. Japan has a western financial model where the government is on the hook for bank bailouts and has to borrow money from a central bank to fund spending so it obeys the western "economic realities" which are an artifact of that system.
- georgeglue1 11y ago
  I'm confused. What do you mean $50,000 in and out of the country? Firms and individuals regularly move a lot more both in and out. (Is such behavior only quasi-legal?)
  - Asbostos 11y ago
    Converting RMB to USD is restricted. Individuals can only exchange $50k per year from RMB to USD legally, though there are guys parked outside banks with piles of USD they can sell you.
- partiallypro 11y ago
  >Inflation is not caused by money printing. That is...completely an utterly false. You just disqualified yourself from discussing this topic and be taken seriously imo. Inflation is a monetary phenomena. There is more to it than just money printing, but an excess amount of cash/liquidity in markets is what causes inflation. The velocity of money is also important. Seriously, there's even an equation for this and none of it involves whatever you just said. This is something that every major school of economics, both left and right agree upon since the 1960s (and it has roots way before then.) I honestly have no idea where you got this idea from. Even Keynesians, who once denied it, now acknowledge it but with their own methods.
  - narrator 11y ago
    If you print 10x as much money, but it all goes into capital investment such that 10x as many goods are produced because of higher efficiency of production thanks to said capital you won't have rising prices. This is why the price of semiconductors and other mass produced goods have fallen even though the money supply has expanded significantly in recent years. Similarly, if you destroy a country's infrastructure in a war and keep the amount of money the same, you'll have rising prices for what production is available. The problem with most monetary systems is that the increased money is not well invested enough causing the supply of goods relative to the supply of money to become imbalanced thus raising prices. This is the difficult problem that the Chinese have to solve in their monetary expansion: channeling the money into productive uses instead of hoarding or capital consumption (e.g burning the furniture to keep warm).

conistonwater 11y ago

Not just the growth rate, but also the very high savings rate, which is a consequence of demographic policies as well as restricted available investment options, allows those banks and SOEs to borrow much more cheaply - who knows how long that will last.

narrator 11y ago

China has strict capital controls. You can only get $50,000 per year in and out of the country. Otherwise all the bank money would flood out of the country into hard assets since it doesn't always have to be paid back. The borrowers would also leave the country, knowing that bank fraud isn't treated lightly by the authorities in China. They actually prosecute people for things like illegal loans in China.[1] http://www.scmp.com/article/625045/23-arrested-probe-93b-yuan-illegal-loans http://www.scmp.com/article/625045/23-arrested-probe-93b-yua... >"The audit office found that the banks had lent money to fictitious individuals and companies with insufficient capital." >"They also lent more money to certain developers than they were entitled to, it said." Can you ever imagine arrests and hundreds of employees of a bank disciplined for something like that in a western country? Inflation is not caused by money printing. Inflation is caused by poor capital investment or capital destruction. Central planning can cause this if the planners are not careful to make bad investments fail on a regular basis and free up goods of higher orders for alternative investment. Japan has a western financial model where the government is on the hook for bank bailouts and has to borrow money from a central bank to fund spending so it obeys the western "economic realities" which are an artifact of that system.

georgeglue1 11y ago
I'm confused. What do you mean $50,000 in and out of the country? Firms and individuals regularly move a lot more both in and out. (Is such behavior only quasi-legal?)
- Asbostos 11y ago
  Converting RMB to USD is restricted. Individuals can only exchange $50k per year from RMB to USD legally, though there are guys parked outside banks with piles of USD they can sell you.
partiallypro 11y ago
>Inflation is not caused by money printing. That is...completely an utterly false. You just disqualified yourself from discussing this topic and be taken seriously imo. Inflation is a monetary phenomena. There is more to it than just money printing, but an excess amount of cash/liquidity in markets is what causes inflation. The velocity of money is also important. Seriously, there's even an equation for this and none of it involves whatever you just said. This is something that every major school of economics, both left and right agree upon since the 1960s (and it has roots way before then.) I honestly have no idea where you got this idea from. Even Keynesians, who once denied it, now acknowledge it but with their own methods.
- narrator 11y ago
  If you print 10x as much money, but it all goes into capital investment such that 10x as many goods are produced because of higher efficiency of production thanks to said capital you won't have rising prices. This is why the price of semiconductors and other mass produced goods have fallen even though the money supply has expanded significantly in recent years. Similarly, if you destroy a country's infrastructure in a war and keep the amount of money the same, you'll have rising prices for what production is available. The problem with most monetary systems is that the increased money is not well invested enough causing the supply of goods relative to the supply of money to become imbalanced thus raising prices. This is the difficult problem that the Chinese have to solve in their monetary expansion: channeling the money into productive uses instead of hoarding or capital consumption (e.g burning the furniture to keep warm).