Missing option: war
Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
51–60 of 121 posts
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#52Earlier quoted context omitted.
"...they can take as big hammer as needed to fix it." If you believe complex economic systems follow simple, well-known control laws, then yes. But I haven't seen much evidence for this.
Just study the War Economy in different countries during the WWII. Government can simplify and direct the economy if it has total control over it. For lighter control look at the post war economies in Europe, Japan and Korea. Tight control of the economy worked just fine to stabilize the system.
You can see that blind spot in the piece where the author states there are only four ways out. There is actually a fifth, which is currently the one being used.
At the moment Bejing discounts 'foreign currency' into Yuan and distributes it to factories that export. If foreign entities fail to buy that output Bejing can simply discount 'other assets' instead at the central bank, distribute it to the same firms and stick the output in a shed somewhere. The result is the same monetary circulation within China in Yuan.
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#53Earlier quoted context omitted.
I'm assuming the debt problems are the corporate defaults on bond payments [0] for 2018 until July, were close to equal to the entire year of 2016. There's also consumer debt stuff that's blowing up as well (the whole p2p loan companies going bankrupt was linked on HN recently). As for the what are they responding to is the engine for economic growth is stalling out from knock on effects behind whats going on above,…
I appreciate the answer. But I still don't see the connection between the proposed responses (the first four bullet points) and the stalling of economic growth. For example, how is "Reduce savings by letting unemployment rise" a response to slower economic growth, and how does this maintain economic stability?
Letting unemployment rise is the least desired outcome but is what will happen by default in response to a declining trade surplus. Wide spread unemployment doesn’t contribute to economic or societal stability and so China will attempt to avoid that.
The second option is wealth transfer through debt default; or government forced wealth transfer (taxes or inflation). China’s debt could be brought down from 300% of GDP to 100% of GDP overnight if creditors simply forgave 2/3rds of debt. That could happen though debt default (debtor bankruptcy) or taxing creditors and giving it to debtors. Having the bulk of your life savings disappear tends to make people angry and so China will attempt to avoid that.
The last option is to kick the can down the road and increase domestic debt which is what they have been doing for the last 10 years.
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#54Earlier quoted context omitted.
[flagged]
You are seriously arguing that consuming sugar is equivalent to mass murder ordered by the government, and that a totalitarian regime might be better than democracy? I think you have some errors in your logic.
One bomb dropped every twenty minutes for the last 30 years, mostly on innocent people.
Hell yeah, America has a mass-murder problem. Its just ignorant of the fact because .. you know .. nobody likes to know how their powerful military is really being used.
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#55Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…
There's a lot of truth in this. However, there is also the fact that their ability to keep the lid on things means they may also suppress feedback mechanisms which in a democracy may prevent wrong things from going on too long.
Something like this has been seen in the one child policy which went too far and the government is now scrambling. Also, the clumsy attempts to prop up the stock exchanges a couple of years ago have ultimately come undone. So we will see whether we have true resilience in the system, or is it actually brittle.
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#56Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…
> It's all about being practical. The soviets and Mao's regimes had ample powers to do what they wanted, yet it resulted in mass murder and complete catastrophe at unprecedented scale because they made very, very poor decisions. Having leverage does not mean it fits prosperity nor crisis. Look at how soviets encouraged the killing of Kulaks which led to the great starvation (dozens of millions of deaths) in Ukraine i…
Sure, only look at the result of their worst decisions. They're doing fine now.
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#57Studying economics for some time, I think economists often ask wrong questions. So let's say trade war occurs, and china will lose some of its exports. The main question is not whether savings would decrease or investment rise, the main question is how all the spare capacity left will be utilised. Yeah, if it won't be utilised then there will be unemployment, well pointed by the author. If domestic consumer will cons…
You can go through a simple two-stage exercise. But it comes down to how China can churn out tech and this is exactly why they are not allowing the Big Silicon Valley to do business there (and understandably so). To be honest, the tech baton will stay in the US until someone can put up a comparable education and research ecosystem. I don’t see that happening for at least another 50 years. China is at a crucial point…
>To be honest, the tech baton will stay in the US until someone can put up a comparable education and research ecosystem.
...
US in my eyes, evidently scores much, much, much less than China when it comes to public education. Both secondary and undergraduate tertiary level.
Only graduate school does well in US, just because high profile academicians tend to like working in high profile universities
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#58Earlier quoted context omitted.
> China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth Wrong. Fake GDP. It's estimated that 1/3 of their GDP is wasteful government spending. Many of their provinces also have confessed to 20-30% fake GDP, thus another 1/3 of their gdp is fake. https://www.bloomberg.com/news/articles/2018-01-19/this-is-h... https://www.investors.com/politics/editorials/new-study-shin... so…
Following this line of thinking, all or even more than all US GDP "growth" is attributable to wasteful medical and educational inflation.
Not all, but a good chunk. Definitely less than half. Somewhere around 18% of current US GDP is healthcare spending [1], growing at around 5% year over year. Education spending is somewhere around 5% of GDP [2]. It's hard to figure out how much actual growth is occurring there since most of the ridiculous increases have been specifically in college, not in K-12 which is the bigger share. Total increase seems to be somewhere below 3% year over year growth. We can even add in military spending and not get to half. Thanks to this year's absurd 9% budget increase [3], military spending is now above 4% of GDP again.
So, healthcare + education + military accounts for around 27% of GDP and about 5.2% weighted average growth for that 27%. US GDP is up 4.2% annualized for Q2 this year, so that growth in our 3 categories is only accounting for maybe a third of total GDP growth.
[1] https://www.advisory.com/daily-briefing/2017/02/16/spending-...
[2] https://en.wikipedia.org/wiki/List_of_countries_by_spending_...
[3] https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-m...
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#59I don’t get this article. China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth. Their wages are steadily increasing. Their internal market is the healthiest of any g20 economy. Investments both internally and internationally are up and their population has little dept. On top of that they haven’t touched retirement age, so they have a lot of leverage there.
I think Michael Pettis is probably worth quoting here :
"In most economies, GDP growth is a measure of economic output generated by the performance of the underlying economy. In China, however, Beijing sets annual GDP growth targets it expects to meet. Turning GDP growth into an economic input, rather than an output, radically changes its meaning and interpretation."
See http://carnegieendowment.org/chinafinancialmarkets/75355
Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers
#60Earlier quoted context omitted.
Those are examples of ideological action. Chinese have not been strongly ideological after Deng Xiaoping. Communist party is more like ruling aristocracy with privileges. Communist party is using communism the same way as aristocracy used religion to justify their divine mandate.
It has worked that way for several decades, but as you say, an authoritarian state can change direction quickly. There are some indications that Xi's ideology is very similar to Mao's: total domination of everything by the guy at the top. Will it be a surprise when everyone starts carrying around a little red smartphone?
The interesting thing is that Xi seems smarter and wiser than Mao ever was. Well, in matters of war, Mao was really smart, and hopefully, we'll never have to see Xi tested that way because if we do, it'll probably be during a world war. But in terms of economic decisions, I'd say he absolutely tops Mao. The question is whether there's any situation where he wins in the long run because the responsibility of running China is basically being dealt a really bad hand; the issues are perhaps more complex and risky than corresponding issues when running the US.