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It appears you've confused China with a dollarized economy, like Panama or Ecuador. China bails out its banks with Reminbi, which the people's bank of China pr
by narrator 16y ago
It appears you've confused China with a dollarized economy, like Panama or Ecuador. China bails out its banks with Reminbi, which the people's bank of China prints electronically -- not with dollars.
- jcampbell1 16y agoThere is still some sort of Ricardian equivalence that will play out through inflation and exchange rates and employment. Being able to print money, doesn't stop major problems when bad loans are made. Bad housing loans were made in the US, and it ended up increasing the US debt significantly, even though the US governement can print money. China faces the same issue, and it will reduce the reserves significantly.
- narrator 16y agoChina's national debt is 4% of GDP and they have balanced trade. They don't need to borrow when they have 3 trillion in reserves. Totally different animal we're talking about here.