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In China they use debt-free newly printed money to recapitalize banks. The reason this doesn't create moral hazard is lending is very tightly controlled and su
by narrator 4y ago
In China they use debt-free newly printed money to recapitalize banks. The reason this doesn't create moral hazard is lending is very tightly controlled and subject to regular decrees about who they can lend to and for what.
- alchemist1e9 4y agoYes no moral hazard. Sure. That’s why China has the most distorted property market in the world creating ghost cities. Are we actually at the point where Chinese absurd practices are talked about as something to emulate? What did you mean by this comment?
- narrator 4y agoThe creation of money should be a government function though. The weird hybrid system we have where we privatize the gains and socialize the loses is what causes these kinds of disruptions. With how much control China exercises over the banks, it is essentially almost a government function. I would be for getting rid of bank money creation. It just makes too many problems and creates the boom bust cycle.
- alchemist1e9 4y agoOr how about we remove governments from money business and move to private currency. It’s looking more and more likely we are headed in that direction.
- belter 4y agoOnly the official loans. The problem is China is calculated to have at least 40% of the lending, via the shadow banking system with massive risk of contagion. And yes, it's true the Chinese administration has been trying to curb this risk. "The Rise of Shadow Banking in China: The Political Economy of Modern Chinese State Capitalism" - https://iems.ust.hk/publications/thought-leadership-briefs/tsai-rise-of-shadow-banking-in-chin https://iems.ust.hk/publications/thought-leadership-briefs/t... "Shadow banking in China" - https://en.wikipedia.org/wiki/Shadow_banking_in_China https://en.wikipedia.org/wiki/Shadow_banking_in_China