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US bond yield collapsing due to deficit spending, PRC bond outperforming US treasuries. Which is huge and not reported in western media. Queue western media pre

US bond yield collapsing due to deficit spending, PRC bond outperforming US treasuries. Which is huge and not reported in western media. Queue western media pretending PRC economy bad to drive treasury purchase in US. Reality, PRC growing at target 4-5% while PROACTIVELY deleveraging / unwinding bad economic sectors like real estate - PRC economy is doing fine, it has enough head room to do difficult economic rebalancing and maintain reasonable growth - it's not responding to exogenous economic calamity like GFC or SVB bank collapses. It's deliberately managing the economy. This is the difference between a household that decided to pay off loans and tightening belt while finances are fine vs one taking out more loans to plug bad household finances. The latter wants people to think the former is collapse, when fundamentals in former is better.

refurb 3y ago
> US bond yield collapsing due to deficit spending That makes no sense, yields go up with higher supply of bonds (i.e. more borrowing). > PRC economy is doing fine, it has enough head room to do difficult economic rebalancing and maintain reasonable growth PRC economy is seeing deflation right now which is typically a death knell for an economy. China is still a middle-income country. It's trying to avoid the middle income trap. People expect it to grow 7-10% annually, but now it's dropping closer to the growth rates of developed countries - which if sustained, means it won't ever escape the middle income trap. Add on top the demographic challenges and it's a very serious problem for China.
- dirtyid 3y ago
  Bond yield collapsing as in returns. China 10-15 index is making positive 5% returns, vs US long dated treasuries collapsing by -15%. PRC outperforming US treasuries by 20%, which does not happen to a system in catastrophic trouble. This isn't so much as PRC doing spectacularly as PRC doing alright but US bond doing very poorly. Hence incentive for media deflection trying to paint PRC economic collapse to drive more investment into US bonds. There's good and bad deflation. PRC deflating is largely due to domestic oversupply due to excess inventory due to global demand contraction. More broadly it's reflection of strength PRC industrial/manufacturing. Consumption indicators like car sales and others are fine. It's not great, but it's fine. Re middle income: PRC is potentially high income this year if not already (IMF April 2023 per capita estimate for PRC was 13,720 vs WB 2023 high income classification @13,205), they'll get there in a few years of moderate growth regardless. If the central bank strengthened rmb by ~1% vs USD they would be high income right away. But they'd rather deal with weakened rmb (5% this year) to hold on to exports. The incentive for the PRC is to stay statistically middle income for as long as possible due to WTO perks and rhetoric with the global south. People should ask themselves why PRC has managed RMB in the last few years to be just slightly below high income. Or if PRC is overreporting population then they've been high income for years. Note IMF's PRC per capita estimate in 2022 was 12810 vs WB 12720. IMF 2024 prediction range is 13970-14800 vs WB 2024 high income @13,854. We're reaching a point where trying to STAY middle income for PRC is unsustainable. PRC reaching high income is basically a done deal. Finally, escaping "trap" with respect to the original middle income paper is broader discussion than per capita GDP - it's really about not stalling in industrial development which in result stalls income potential, in which case PRC is basically the 2nd least trapped country (after US) in terms of having complete industrial chains. Essentially everyone except the US is more trapped than the PRC. The issue middle income trap argument vs PRC (or India) is stupid large population can still be stuck in per capita high middle/low high income even if they have escaped the actual "trap" of inability to continue industrializing/developing because you can only put so many bodies in high end sectors, and base effect of large popluation denominator simply drags down per capita indicators even if in aggregate a massive countries comprehensive power is significantly above small (like NL) / medium (like SKR) /even large (like JP) advanced economies.
  - refurb 3y ago
    > Bond yield collapsing as in returns. China 10-15 index is making positive 5% returns, vs US long dated treasuries collapsing by -15%. That's because US interest rates have climbed, depressing the value of existing bonds at low interest rates. Interest rates climbed because of inflation and an overheated economy. China interest rates are dropping, keeping bond yields high, because their economy is stalling. I'm not sure you could paint that as a good thing. > There's good and bad deflation. No, deflation is generally viewed as bad because it incentivizing savings and further depressed economic activity. > PRC is potentially high income this year if not already I mean sure, high income as in $13,000 per capital GDP, which is 5x smaller than USD GDP per capita. It's certainly not going to be in the league of highly developed countries any time soon. > The incentive for the PRC is to stay statistically middle income for as long as possible due to WTO perks and rhetoric with the global south. That's a ridiculous statement. Countries want low growth because of WTO perks? Really? What is the point of WTO perks other than increasing wealth? > PRC is basically the 2nd least trapped country (after US) You're talking about a different kind of trap than middle income trap if you're throwing the US into the bucket.
    - dirtyid 3y ago
      >bond PRC rates are basically steady and has been for past 10 years, vs US treasuries / bond market undergoing recent yield curve drama. The story isn't PRC bonds are spectacular, but PRC bond/banking is steady vs US whose currently not. The broader point being indicators reflect PRC is doing basically fine, it's not collapsing due to exogenous crisis like western MSM tries to paint. It's doing fine because she's proactively managing economy, including rebalancing problematic sectors. There's a fundmental difference between trying to pour out a 100 alarm fire when your house is ablaze due to negligance vs proactively doing controlled burning to prevent unexpected and potentially said catastrophic blaze. The western media presents the former, to build narrative of collapse. Reality is the latter, aka stable unwinding within economic controls, with comfortable headroom to be in ball park of expected growth of 4-5%, aka essentially still top performing among major economies despite, deliberately amputating parts of itself. >deflation generally GENERALLY. There's also analysis on deflation being fine, but it depends on type / cause of deflation. Deflation via improved productivity, i.e. PRC industry being able to bring value down in such analysis is not correlated with depressing economic activity. Especially not to the point of contracting. >It's certainly not going to be in the league of highly developed countries any time soon. That's literally the technical definition of high income, of course the western narrative bar is going to moved once PRC reaches technical high income, to but not advanced economy income, but that's officially WB high income. Relative to advacned economy high income, I am the first to state will not happen due to denominator effect, PRC has 600M on 1000rmb per month, aka 40% of the population contributes to 5% of GDP, they're going ot drag down per capita indicators until they die. There's reason Xi's China dream aims for modest IIRC 40k PPP by 2050. But the entire muh high income meme is distraction from broader point that geopolitical competition is about comprehensive national power. PRC doesn't need high per capita income when in aggregate she can outperform, i.e. she's closer to being on par with highly developed US in terms of actual capability than any other "advanced economy" who are frankly to small to even be in the race. >ridiculous WTO has preferrential rules if you're a developing country, and PRC enjoys exploiting technicalities. This isn't anything new, when IMF first worked with PRC to agree on per capita income, PRC insisted on 50% lower. PRC has every INCENTIVE to look weaker to multinational institutionals for perks. Current GDP / national accounting grossly deflates input of imputed rent, to the point of knocking 6-8% of GDP. And when PRC smoothes GDP, it under reports as much as it over reports. It should not be surprising PRC games stats to her benefit, but as I said, it's a card with limited shelf life that's ending. >different kind of trap than middle income trap No, this is quite literally the central thesis of the middle income trap paper. The TRAP is inability to move up value chains, the pain of the TRAP is being stuck in middle income, because no high value sectors = no high wage. PRC has no issue moving up value chains due to massive high skilled human capita pipeline. At PRC scale, some of PRC will have high value, highish income, somem being multilple advanced countries worth of people. That's enough to escape the industrial trap, but not enough to pull everyone to advanced economic standards. I'm throwing US in the bucket because PRC/US is top 2 rank with 3+ being distant, distant competitor. Very few countries have the aggregate talent pool and ability to coordinate said talent to competently dabble in every sector. Hence US and PRC are least trapped in terms of traps that prevent countries from moving up value chain. The caveate I added is middle income trap is a stupid way to assess economic progress for countries with as many people as PRC (again really PRC and India), because they can have low per capita indicators while in aggregate have significantly more national power. Which TBF the OG paper isn't framed in terms of geopolitical competition, but that's really what people are talking about when they dogwhistle PRC is stuck in middle income - that PRC will have the capabilities of a middle income country, when basically no one else has slight chance of being US peer competitor (as acknowledged by US). Hence PRC, by virtue of having reasonably developed core tech in almost every sector is as trapped as US (aka least trapped) if you apply the actual reasoning of middle income trap in a geopolitical context.
fomine3 3y ago
developing countries' bond outperforms developed's, any news?
- dirtyid 3y ago
  Long dated PRC gov bonds have been out performing US for a couple years now. https://imgur.com/a/sPbJKSz https://imgur.com/a/sPbJKSz Which is not really the important development. More broadly, PRC bonds pretty mid, but have been positive & stable for past 10 years vs movement in US treasury performance in the last few months - it's interesting all the PRC economy is collapsing again narrative started right when the yield curve went south.
- rhaway84773 3y ago
  Looks like the person you responded to doesn’t understand risk.

refurb 3y ago

> US bond yield collapsing due to deficit spending That makes no sense, yields go up with higher supply of bonds (i.e. more borrowing). > PRC economy is doing fine, it has enough head room to do difficult economic rebalancing and maintain reasonable growth PRC economy is seeing deflation right now which is typically a death knell for an economy. China is still a middle-income country. It's trying to avoid the middle income trap. People expect it to grow 7-10% annually, but now it's dropping closer to the growth rates of developed countries - which if sustained, means it won't ever escape the middle income trap. Add on top the demographic challenges and it's a very serious problem for China.

dirtyid 3y ago
Bond yield collapsing as in returns. China 10-15 index is making positive 5% returns, vs US long dated treasuries collapsing by -15%. PRC outperforming US treasuries by 20%, which does not happen to a system in catastrophic trouble. This isn't so much as PRC doing spectacularly as PRC doing alright but US bond doing very poorly. Hence incentive for media deflection trying to paint PRC economic collapse to drive more investment into US bonds. There's good and bad deflation. PRC deflating is largely due to domestic oversupply due to excess inventory due to global demand contraction. More broadly it's reflection of strength PRC industrial/manufacturing. Consumption indicators like car sales and others are fine. It's not great, but it's fine. Re middle income: PRC is potentially high income this year if not already (IMF April 2023 per capita estimate for PRC was 13,720 vs WB 2023 high income classification @13,205), they'll get there in a few years of moderate growth regardless. If the central bank strengthened rmb by ~1% vs USD they would be high income right away. But they'd rather deal with weakened rmb (5% this year) to hold on to exports. The incentive for the PRC is to stay statistically middle income for as long as possible due to WTO perks and rhetoric with the global south. People should ask themselves why PRC has managed RMB in the last few years to be just slightly below high income. Or if PRC is overreporting population then they've been high income for years. Note IMF's PRC per capita estimate in 2022 was 12810 vs WB 12720. IMF 2024 prediction range is 13970-14800 vs WB 2024 high income @13,854. We're reaching a point where trying to STAY middle income for PRC is unsustainable. PRC reaching high income is basically a done deal. Finally, escaping "trap" with respect to the original middle income paper is broader discussion than per capita GDP - it's really about not stalling in industrial development which in result stalls income potential, in which case PRC is basically the 2nd least trapped country (after US) in terms of having complete industrial chains. Essentially everyone except the US is more trapped than the PRC. The issue middle income trap argument vs PRC (or India) is stupid large population can still be stuck in per capita high middle/low high income even if they have escaped the actual "trap" of inability to continue industrializing/developing because you can only put so many bodies in high end sectors, and base effect of large popluation denominator simply drags down per capita indicators even if in aggregate a massive countries comprehensive power is significantly above small (like NL) / medium (like SKR) /even large (like JP) advanced economies.
- refurb 3y ago
  > Bond yield collapsing as in returns. China 10-15 index is making positive 5% returns, vs US long dated treasuries collapsing by -15%. That's because US interest rates have climbed, depressing the value of existing bonds at low interest rates. Interest rates climbed because of inflation and an overheated economy. China interest rates are dropping, keeping bond yields high, because their economy is stalling. I'm not sure you could paint that as a good thing. > There's good and bad deflation. No, deflation is generally viewed as bad because it incentivizing savings and further depressed economic activity. > PRC is potentially high income this year if not already I mean sure, high income as in $13,000 per capital GDP, which is 5x smaller than USD GDP per capita. It's certainly not going to be in the league of highly developed countries any time soon. > The incentive for the PRC is to stay statistically middle income for as long as possible due to WTO perks and rhetoric with the global south. That's a ridiculous statement. Countries want low growth because of WTO perks? Really? What is the point of WTO perks other than increasing wealth? > PRC is basically the 2nd least trapped country (after US) You're talking about a different kind of trap than middle income trap if you're throwing the US into the bucket.
  - dirtyid 3y ago
    >bond PRC rates are basically steady and has been for past 10 years, vs US treasuries / bond market undergoing recent yield curve drama. The story isn't PRC bonds are spectacular, but PRC bond/banking is steady vs US whose currently not. The broader point being indicators reflect PRC is doing basically fine, it's not collapsing due to exogenous crisis like western MSM tries to paint. It's doing fine because she's proactively managing economy, including rebalancing problematic sectors. There's a fundmental difference between trying to pour out a 100 alarm fire when your house is ablaze due to negligance vs proactively doing controlled burning to prevent unexpected and potentially said catastrophic blaze. The western media presents the former, to build narrative of collapse. Reality is the latter, aka stable unwinding within economic controls, with comfortable headroom to be in ball park of expected growth of 4-5%, aka essentially still top performing among major economies despite, deliberately amputating parts of itself. >deflation generally GENERALLY. There's also analysis on deflation being fine, but it depends on type / cause of deflation. Deflation via improved productivity, i.e. PRC industry being able to bring value down in such analysis is not correlated with depressing economic activity. Especially not to the point of contracting. >It's certainly not going to be in the league of highly developed countries any time soon. That's literally the technical definition of high income, of course the western narrative bar is going to moved once PRC reaches technical high income, to but not advanced economy income, but that's officially WB high income. Relative to advacned economy high income, I am the first to state will not happen due to denominator effect, PRC has 600M on 1000rmb per month, aka 40% of the population contributes to 5% of GDP, they're going ot drag down per capita indicators until they die. There's reason Xi's China dream aims for modest IIRC 40k PPP by 2050. But the entire muh high income meme is distraction from broader point that geopolitical competition is about comprehensive national power. PRC doesn't need high per capita income when in aggregate she can outperform, i.e. she's closer to being on par with highly developed US in terms of actual capability than any other "advanced economy" who are frankly to small to even be in the race. >ridiculous WTO has preferrential rules if you're a developing country, and PRC enjoys exploiting technicalities. This isn't anything new, when IMF first worked with PRC to agree on per capita income, PRC insisted on 50% lower. PRC has every INCENTIVE to look weaker to multinational institutionals for perks. Current GDP / national accounting grossly deflates input of imputed rent, to the point of knocking 6-8% of GDP. And when PRC smoothes GDP, it under reports as much as it over reports. It should not be surprising PRC games stats to her benefit, but as I said, it's a card with limited shelf life that's ending. >different kind of trap than middle income trap No, this is quite literally the central thesis of the middle income trap paper. The TRAP is inability to move up value chains, the pain of the TRAP is being stuck in middle income, because no high value sectors = no high wage. PRC has no issue moving up value chains due to massive high skilled human capita pipeline. At PRC scale, some of PRC will have high value, highish income, somem being multilple advanced countries worth of people. That's enough to escape the industrial trap, but not enough to pull everyone to advanced economic standards. I'm throwing US in the bucket because PRC/US is top 2 rank with 3+ being distant, distant competitor. Very few countries have the aggregate talent pool and ability to coordinate said talent to competently dabble in every sector. Hence US and PRC are least trapped in terms of traps that prevent countries from moving up value chain. The caveate I added is middle income trap is a stupid way to assess economic progress for countries with as many people as PRC (again really PRC and India), because they can have low per capita indicators while in aggregate have significantly more national power. Which TBF the OG paper isn't framed in terms of geopolitical competition, but that's really what people are talking about when they dogwhistle PRC is stuck in middle income - that PRC will have the capabilities of a middle income country, when basically no one else has slight chance of being US peer competitor (as acknowledged by US). Hence PRC, by virtue of having reasonably developed core tech in almost every sector is as trapped as US (aka least trapped) if you apply the actual reasoning of middle income trap in a geopolitical context.

fomine3 3y ago

developing countries' bond outperforms developed's, any news?

dirtyid 3y ago
Long dated PRC gov bonds have been out performing US for a couple years now. https://imgur.com/a/sPbJKSz https://imgur.com/a/sPbJKSz Which is not really the important development. More broadly, PRC bonds pretty mid, but have been positive & stable for past 10 years vs movement in US treasury performance in the last few months - it's interesting all the PRC economy is collapsing again narrative started right when the yield curve went south.
rhaway84773 3y ago
Looks like the person you responded to doesn’t understand risk.