4 ms·

> It will do the exact opposite. Hasn’t the Chinese government been doing this for years in one form or another to artificially stimulate the market?

QuesnayJr 7y ago
I don't understand this obsession with "artificial" stimulus. If the economy naturally grows at 2% a year, but "artificial" stimulus causes it to grow at 3% a year, why wouldn't you do it? It's like refusing to get vaccines because they are unnatural.
- bitxbit 7y ago
  In a way you’re assuming no inflation which has been the case for the past decade. BUT. What happens when China goes offline and takes low cost labor with it? For the record, I believe this situation will resolve within the month but it will certainly reveal global over-reliance on China (this is meant as a positive comment that China has been the single driving force behind economic recovery which they don’t get enough credit for).
  - notyourwork 7y ago
    The lost lives of their blue collar work force deserve the credit.
    - deleted 7y ago
      [deleted]
    - 01100011 7y ago
      Same with any country, I think.
- staplers 7y ago
  Because natural resources are finite. If you don't understand why runaway inflation is bad then you'll need to educate yourself.
  - glofish 7y ago
    but there is no runaway inflation - as a matter of fact the inflation is lower than typical
    - bitxbit 7y ago
      Inflation was low because of China. Production cost could easily triple in other parts of the world at the same quality and quantity even if we can move them instantaneously.
    - samsonradu 7y ago
      Globalization kept inflation at bay. Instead of upping prices due to increased production costs, enterprises in advanced economies moved production to China & co. This is not necessarily a bad thing of course, as China catches up and the ‘free’ markets work efficiently. Meanwhile the middle-class in the developped countries gets hurt, thus their economies see little inflation. Another argument for this would be that everything not outsource-able saw rather higher inflation than the CPI numbers. (Housing, education etc.) Inflation in China though hovers around 5% - https://tradingeconomics.com/china/inflation-cpi https://tradingeconomics.com/china/inflation-cpi
  - QuesnayJr 7y ago
    Runaway inflation is bad, but in a recession we're not employing the resources we have -- that's why people are unemployed.
    - staplers 7y ago
      Ah yes the great recession of 2020, record high markets, record low unemployment..
- NotSammyHagar 7y ago
  Because ultimately it's likely we build unneeded infrastructure that is wasted, including useless companies. Then you still have to pay off those loans slowing growth afterwards. That might be companies that fail or banks with almost failing loans, retarding growth like in Japan for now decades, as well as governments having to reduce spending (or not stimulate) in the recession period because they had so much stimulous during "good times". In the us it's extremely likely when the next recession comes, Republicans will rediscover their belief in avoiding deficit spending when they are no longer in power. We also will have less things to do to stimulate then in new ways because we already had been doing them. So many political groups want austerity when the economy is hurting instead of stimulous in recession.
  - QuesnayJr 7y ago
    This explanation doesn't really fit the evidence. China engaged in a giant stimulus in 2008-2009, and was rewarded with avoiding most of the impact of the financial crisis. I'm sure China builds some unneeded infrastructure, but they build needed infrastructure that's now beyond the ability of Western governments. New York can't even finish the Second Avenue Subway after 50 years.
    - 01100011 7y ago
      You're arguing with an incomplete explanation of how many economists believe stimulus spending works. I'm no economist, but a Keynesian would, I think, say that government stimulus is fine when the economy and demand are lagging. Doing it when the economy is strong encourages capital misallocation and the problems OP mentioned.
      - QuesnayJr 7y ago
        I don't disagree with that. But we're talking about a China that just experienced a big negative economic shock.
      - qqqwerty 7y ago
        The Uber vs Lyft market share wars are a great example of this misallocation. Due to all of the VC money sloshing around both companies are forced to raise and spend ungodly amounts of money in order to fight for market share. In a more rational monetary environment raising money would be more difficult and both companies would be more focused on profitability instead of market share. The primary risk of this misallocation is that if/when a recession hits, revenues are likely to drop (or grow more slowly), VC money will probably dry up, and raising prices will become more difficult. So the only way to survive will probably be to cut back on expenses (basically fire a ton of employees). And this of course would just compound the recession.
bitxbit 7y ago
Not at this level and this is effectively the gov’t signaling a “bank run” in my view.
grey-area 7y ago
The entire world has been doing it for the last decade, and there’s been another uptick recently. The US recently resumed buying treasuries. This is not isolated to China.
- notyourwork 7y ago
  My understanding was the US was not doing this to the extent China was. There construction projects to build ghost cities.
  - grey-area 7y ago
    The article is about injecting liquidity into markets. The US has done a huge amount of this in the last decade, in fact almost every major power has. Here is the latest US resumption of buying their own debt: https://www.bloomberg.com/news/articles/2019-10-08/powell-says-fed-to-resume-balance-sheet-growth-but-it-s-not-qe https://www.bloomberg.com/news/articles/2019-10-08/powell-sa... This has nothing to do with ghost cities (which can probably be blamed on bad central planning and an overheated property market in China).
    - notyourwork 7y ago
      I read the article. The topic of my comment was artificial market stimulation which can be done in multiple ways.
  - BurningFrog 7y ago
    As a Californian, I would love if we were mismanaged in a way that produced excess housing!
    - iso1210 7y ago
      In the Arizona Desert? Plenty of houses in Detroit
    - Fjolsvith 7y ago
      You might be surprised to learn why there's excess housing. Young men who are courting a lady need two or three houses to have any chance of winning her hand: Why 50 Million Chinese Homes are Empty - https://www.youtube.com/watch?v=f5SE47Xjx2Q&t=2s https://www.youtube.com/watch?v=f5SE47Xjx2Q&t=2s
dang 7y ago
We detached this subthread from https://news.ycombinator.com/item?id=22217934 https://news.ycombinator.com/item?id=22217934.

QuesnayJr 7y ago

I don't understand this obsession with "artificial" stimulus. If the economy naturally grows at 2% a year, but "artificial" stimulus causes it to grow at 3% a year, why wouldn't you do it? It's like refusing to get vaccines because they are unnatural.

bitxbit 7y ago
In a way you’re assuming no inflation which has been the case for the past decade. BUT. What happens when China goes offline and takes low cost labor with it? For the record, I believe this situation will resolve within the month but it will certainly reveal global over-reliance on China (this is meant as a positive comment that China has been the single driving force behind economic recovery which they don’t get enough credit for).
- notyourwork 7y ago
  The lost lives of their blue collar work force deserve the credit.
  - deleted 7y ago
    [deleted]
  - 01100011 7y ago
    Same with any country, I think.
staplers 7y ago
Because natural resources are finite. If you don't understand why runaway inflation is bad then you'll need to educate yourself.
- glofish 7y ago
  but there is no runaway inflation - as a matter of fact the inflation is lower than typical
  - bitxbit 7y ago
    Inflation was low because of China. Production cost could easily triple in other parts of the world at the same quality and quantity even if we can move them instantaneously.
  - samsonradu 7y ago
    Globalization kept inflation at bay. Instead of upping prices due to increased production costs, enterprises in advanced economies moved production to China & co. This is not necessarily a bad thing of course, as China catches up and the ‘free’ markets work efficiently. Meanwhile the middle-class in the developped countries gets hurt, thus their economies see little inflation. Another argument for this would be that everything not outsource-able saw rather higher inflation than the CPI numbers. (Housing, education etc.) Inflation in China though hovers around 5% - https://tradingeconomics.com/china/inflation-cpi https://tradingeconomics.com/china/inflation-cpi
- QuesnayJr 7y ago
  Runaway inflation is bad, but in a recession we're not employing the resources we have -- that's why people are unemployed.
  - staplers 7y ago
    Ah yes the great recession of 2020, record high markets, record low unemployment..
NotSammyHagar 7y ago
Because ultimately it's likely we build unneeded infrastructure that is wasted, including useless companies. Then you still have to pay off those loans slowing growth afterwards. That might be companies that fail or banks with almost failing loans, retarding growth like in Japan for now decades, as well as governments having to reduce spending (or not stimulate) in the recession period because they had so much stimulous during "good times". In the us it's extremely likely when the next recession comes, Republicans will rediscover their belief in avoiding deficit spending when they are no longer in power. We also will have less things to do to stimulate then in new ways because we already had been doing them. So many political groups want austerity when the economy is hurting instead of stimulous in recession.
- QuesnayJr 7y ago
  This explanation doesn't really fit the evidence. China engaged in a giant stimulus in 2008-2009, and was rewarded with avoiding most of the impact of the financial crisis. I'm sure China builds some unneeded infrastructure, but they build needed infrastructure that's now beyond the ability of Western governments. New York can't even finish the Second Avenue Subway after 50 years.
  - 01100011 7y ago
    You're arguing with an incomplete explanation of how many economists believe stimulus spending works. I'm no economist, but a Keynesian would, I think, say that government stimulus is fine when the economy and demand are lagging. Doing it when the economy is strong encourages capital misallocation and the problems OP mentioned.
    - QuesnayJr 7y ago
      I don't disagree with that. But we're talking about a China that just experienced a big negative economic shock.
    - qqqwerty 7y ago
      The Uber vs Lyft market share wars are a great example of this misallocation. Due to all of the VC money sloshing around both companies are forced to raise and spend ungodly amounts of money in order to fight for market share. In a more rational monetary environment raising money would be more difficult and both companies would be more focused on profitability instead of market share. The primary risk of this misallocation is that if/when a recession hits, revenues are likely to drop (or grow more slowly), VC money will probably dry up, and raising prices will become more difficult. So the only way to survive will probably be to cut back on expenses (basically fire a ton of employees). And this of course would just compound the recession.

bitxbit 7y ago

Not at this level and this is effectively the gov’t signaling a “bank run” in my view.

grey-area 7y ago

The entire world has been doing it for the last decade, and there’s been another uptick recently. The US recently resumed buying treasuries. This is not isolated to China.

notyourwork 7y ago
My understanding was the US was not doing this to the extent China was. There construction projects to build ghost cities.
- grey-area 7y ago
  The article is about injecting liquidity into markets. The US has done a huge amount of this in the last decade, in fact almost every major power has. Here is the latest US resumption of buying their own debt: https://www.bloomberg.com/news/articles/2019-10-08/powell-says-fed-to-resume-balance-sheet-growth-but-it-s-not-qe https://www.bloomberg.com/news/articles/2019-10-08/powell-sa... This has nothing to do with ghost cities (which can probably be blamed on bad central planning and an overheated property market in China).
  - notyourwork 7y ago
    I read the article. The topic of my comment was artificial market stimulation which can be done in multiple ways.
- BurningFrog 7y ago
  As a Californian, I would love if we were mismanaged in a way that produced excess housing!
  - iso1210 7y ago
    In the Arizona Desert? Plenty of houses in Detroit
  - Fjolsvith 7y ago
    You might be surprised to learn why there's excess housing. Young men who are courting a lady need two or three houses to have any chance of winning her hand: Why 50 Million Chinese Homes are Empty - https://www.youtube.com/watch?v=f5SE47Xjx2Q&t=2s https://www.youtube.com/watch?v=f5SE47Xjx2Q&t=2s

dang 7y ago

We detached this subthread from https://news.ycombinator.com/item?id=22217934 https://news.ycombinator.com/item?id=22217934.