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Except that means that if the debtor defaults, then the creditor loses all their savings. And the problem here is that what you have in large nations is a gigan
by woodandsteel 9y ago
Except that means that if the debtor defaults, then the creditor loses all their savings. And the problem here is that what you have in large nations is a gigantic, interlocked network where every creditor is a debtor to many other lenders.
The result is that a limited number of debtor defaults can start a chain-reaction that freezes the whole system. Then you have a financial crash, and history shows these usually take a decade or more to get out of. Or is it your view that there is something special about the Chinese such that that couldn't possible happen there.
- fspeech 9y agoI wouldn't say that it is impossible. The tendency is though to double or triple count negative things. Chinese economy has lots of inefficiencies. Very true. That is reflected in the low per capita income. People could live a higher standard of living given the amount of effort they put in if the system were more efficient. People's lives are a lot less free. Capital control for example. Bitcoin was okay and then it is not. Inefficiencies in the economy can brake contagions though. What is negative in one aspect can be a saving grace in another. Check out how coal price behaved. The party wanted to shut down capacity and they did. Even as coal demand dropped the price shot back up. Difference between coal and oil? Coal is much more local while oil is international.