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Yup, the investors are going to lose their money. So what. This won't start cascading bank failures though because the PBOC can print as much money as they wan

Yup, the investors are going to lose their money. So what. This won't start cascading bank failures though because the PBOC can print as much money as they want to recapitalize the banks without burdening the taxpayer. This is a fundamental difference between the western and european systems and is why China hasn't had a Japanese style deflation, even though it has been predicted every year since the early 90s. Analysts have been getting it wrong for almost 30 years, yet they refuse to question their models because credit cycles are believed to be physical laws of the universe, when really they are artifacts of western financial policy. Namely, fractional reserve banking and all money as debt which the Chinese government doesn't follow. I know what you're thinking now. "Fractional reserve banking" and "all money is debt" is a dog whistle for libertarians. Thus, this guy must be a gold bug, etc. No. I am saying that this is fiat currency, and that's ok. It's just not managed in the screwy boom-bust way that we have in the west that's specifically made to separate people from their assets every 8 or 9 years. Not everything China does is a good thing, but their financial system hasn't crashed in decades, so empirically it is a lot more stable.

matt4077 8y ago
This must indeed be first comment ever using the terms „fractional reserve bank“, „printing money“, „fiat“, „gold“, and „debt“, but not „inflation“. Which is really a shame because it’s the obvious result. And also a very good way to specifically separate people from their assets. And also pensions.
- neilwilson 8y ago
  Inflation issues are also down to another western belief - venerating 'price competition' as the only pure way to resolve resource conflicts. The Chinese don't work that way. If there is a conflict for resources, those with the power just take them. If there is compensation offered for that, those without the power just get given it - and probably consider themselves lucky. The Chinese show you can have a system where you set a price, even one as low as zero, and then use coercive power to force people to take that price. Those with power don't need to get into price competition. And if they don't get into price competition, then prices won't go up. Inflation is killed at source.
- narrator 8y ago
  Gold bugs and libertarians believe in the epically flawed quantity theory of money. Inflation can be controlled if it is used to build capital that increases efficiency and thus lowers the cost of oroduction. If newly created money flows directly into asset speculation via the western system of lending against assets to buy other assets, then this creates inflation. The western system also has the side effect of rewarding lazy money thst doesn't need to make anything to see itself grow. All it needs to do is follow the newly created money into whatever asset class is currently in fashion.

matt4077 8y ago

This must indeed be first comment ever using the terms „fractional reserve bank“, „printing money“, „fiat“, „gold“, and „debt“, but not „inflation“. Which is really a shame because it’s the obvious result. And also a very good way to specifically separate people from their assets. And also pensions.

neilwilson 8y ago
Inflation issues are also down to another western belief - venerating 'price competition' as the only pure way to resolve resource conflicts. The Chinese don't work that way. If there is a conflict for resources, those with the power just take them. If there is compensation offered for that, those without the power just get given it - and probably consider themselves lucky. The Chinese show you can have a system where you set a price, even one as low as zero, and then use coercive power to force people to take that price. Those with power don't need to get into price competition. And if they don't get into price competition, then prices won't go up. Inflation is killed at source.
narrator 8y ago
Gold bugs and libertarians believe in the epically flawed quantity theory of money. Inflation can be controlled if it is used to build capital that increases efficiency and thus lowers the cost of oroduction. If newly created money flows directly into asset speculation via the western system of lending against assets to buy other assets, then this creates inflation. The western system also has the side effect of rewarding lazy money thst doesn't need to make anything to see itself grow. All it needs to do is follow the newly created money into whatever asset class is currently in fashion.