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"China can make all the bad investments they want. Unlike any other western country, the government prints their own money debt free and can thus just bail out
by lingben 12y ago
"China can make all the bad investments they want. Unlike any other western country, the government prints their own money debt free and can thus just bail out all the bad loans forever."
wow, it has been a very long time since I read anything remotely as economically ignorant and facile as this statement.
for one, the implication that the Chinese hold US debt and that they in turn are not borrowers is categorically false.
second, the Chinese hold less than 7% of the US debt but if you listen to the general media and commentators it sounds like it is more like 70%. The fact is that the vast majority of the US debt is held by the Federal Reserve.
Credit bubbles, like every other economic bubble is disastrous because it is a gross mis-allocation of resources. The piper shall not be denied. He is a hellish collector that will break every bone in your body if you don't pay. But the thing is, he's a bit unpredictable because you never know exactly when he'll knock on your door to collect. But knock he will.
May I respectfully suggest that before you attempt to comment on something as complex as macroeconomics you take at least a single course in the discipline?
- joe_the_user 12y agoHmm, I reread the parent and I still couldn't find a single reference to US debt, which is all you discuss in your post. I have a degree in economics, the parent's argument seems fine - it might contradict your dogma but it's a fine rendition of current reality. Also, I'm sure no influential economist would say "In the long run, we're all dead," right?
- hueving 12y ago>I have a degree in economics, the parent's argument seems fine - it might contradict your dogma but it's a fine rendition of current reality. Except it ignores the fact that if the Chinese government has to print too much money in the face of a major issue, they will cause inflation or hyperinflation which will kill their economy anyway.
- lingben 12y agohere's the implied reference: "Unlike any other western country..."
- dang 12y ago> May I respectfully suggest that before you attempt to comment on something as complex as macroeconomics you take at least a single course in the discipline? That's not being respectful. Please stick to the substance.
- tiatia 12y ago"May I respectfully suggest that before you attempt to comment on something as complex as macroeconomics you take at least a single course in the discipline?" Did you? "Central banks can issue currency, a noninterest-bearing claim on the government, effectively without limit. They can discount loans and other assets of banks or other private depository institutions, thereby converting potentially illiquid private assets into riskless claims on the government in the form of deposits at the central bank. That all of these claims on government are readily accepted reflects the fact that a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit. To be sure, if a central bank produces too many, inflation will inexorably rise as will interest rates, and economic activity will inevitably be constrained by the misallocation of resources induced by inflation. If it produces too few, the economy’s expansion also will presumably be constrained by a shortage of the necessary lubricant for transactions. Authorities must struggle continuously to find the proper balance." Alan Greenspan
- lingben 12y agowhat does that prove? beyond buttressing my points and I suppose showing that you are capable of ctrl+c/v?