A lesson from China?

[ishtat]

Lessons in orthodox policy from the great Communist State? In Monetary policy perhaps. As part of the response to Covid, the Reserve Banks of western nations, led by the US Fed adopted a policy of continued low interest rates, increases in government debt and printed a stack of money. China did not. They moved early to cut back the flow of cash - which in itself caused problems, particularly in real estate debt. But look at current inflation rates, US at 7%, UK 6%, and almost all western countries 5-7% at least. Inflation of food prices is significantly worse. China has a history of civil disturbance when there is food price inflation, so they were cautious. Their current and forecast inflation rate is 1 to 1.5%. America has mid terms coming up, France and Oz are in the middle of elections, so we will see just how independent their Central Banks are. Will they inflict the necessary corrective pain through increased interest rates and brakes on money supply? I think not: at least not yet

The Russian invasion of Ukraine will tend to dry up the export of wheat from both those countries (1st and 4th in world exports) One small comfort is that the major wheat importers, China and the Middle east oil countries will be paying top dollar to the remaining exporters (USA, France, Australia, Turkey) That will cause political turmoil in poorer nations whose people will go hungry.

Globalized economies and Nation based political ambitions are a poor fit.

 

[JohnnySavage]

How funny is it, that the world's largest capitalistic economy has to go the the world's largest communist/socialist economy with hat in hand, to borrow money so it can pay it's bills.

 

[ishtat]

How funny is it, that the world's largest capitalistic economy has to go the the world's largest communist/socialist economy with hat in hand, to borrow money so it can pay it's bills.

Japan holds about USD1.3 trillion in US Bonds and China about USD1.07 Trillion, but that is only 6% of the whole which is largely held within the USA in the Social Security Fund and various pension and investment funds. China's holdings however have almost doubled in the last 10 years and are still increasing.

 

[LupusDei]

Japan holds about USD1.3 trillion in US Bonds and China about USD1.07 Trillion, but that is only 6% of the whole which is largely held within the USA in the Social Security Fund and various pension and investment funds. China's holdings however have almost doubled in the last 10 years and are still increasing.

So the debt servicing payments told to soon overwhelm the federal budget are actually... just changing pockets on the same suit.