Chinese banks have slashed the 5-year loan prime rate by 25 basis points in a move that caught many by surprise. The Communist Party's initiative aims to reinflate asset bubbles amidst growing concerns over deflation. With China emerging as the largest exporter of deflation, the urgency to stabilize the fiat economy is palpable.
75 sats \ 1 reply \ @koqoo 20 Feb
bubbleconomics
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123 sats \ 0 replies \ @TomK OP 20 Feb
Keynesian commie paradise
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54 sats \ 3 replies \ @xz 20 Feb
When it's put that there's coordination to reinflate asset bubbles that doesn't sound great. Not sure whether FT is posturing that this is 'surprising move' is an act of necessity, as opposed to a controlled staged popping of asset bubbles.
I'm guessing that the truth is in the middle. If your economy is export driven, central, top down managed( and still pegged to the dollar?) Those adjustments might be fumbling around in the dark, but all within a given range of what happens to the trade partners fiscal policies.
I'm not sure how all this works in terms of deflation risk. I wonder if there's an aggressive element to the export of deflation in the same way US IR increases surprised global markets last year. A kind of fire and ice?
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0 sats \ 2 replies \ @TomK OP 20 Feb
yes then you have raised some important points. but i am looking at the moment, especially with regard to the reaction of the Chinese, at the bank balance sheets, which suffer massively with such asset price deflation. in this environment, the fiat money system, the entire credit impulse, must be damaged. the Communist Party cannot afford a recession.
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21 sats \ 1 reply \ @xz 20 Feb
Not sure I understand the ramifications of macro spillover, or as it used to be put, catching a cold and the world sneezing. But if I can believe the FR knows what it's talking about.
".. expansionary shocks to China’s credit lead to a decline in aggregate risk aversion, associated with a lower VIX, which elevates global asset prices and credit"
https://www.federalreserve.gov/econres/ifdp/files/ifdp1360.pdf [6/59]
Guessing this means that on the flip this would telegraph the opposite but then again we see a frequent about turn of interest rate policy.
I agree it's all about avoiding domestic discontent.
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10 sats \ 0 replies \ @TomK OP 20 Feb
you've described it quite well. basically, i have to say that i'm not a particularly big fan of macroeconomics. i tend to prefer microeconomic analysis, which has something to do with my background as a student. there's always a lot of hype about macro
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54 sats \ 1 reply \ @Coinsreporter 20 Feb
Does China still have a plan? IMO it would be better if the general public there sense it as a chance for revolting against communism and by winning it declare 'China a democratic country'.
I know it's a piper's dream but the world would be much much better if that plans out somehow.
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0 sats \ 0 replies \ @TomK OP 20 Feb
The Chinese Communist Party buys social peace through the promise of social and economic advancement. If this begins to falter, there could of course be a political revolution in this country one day. for the time being, the 5-year plan and a lot of creativity in the publication of falsified economic data prevail
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54 sats \ 1 reply \ @siggy47 20 Feb
Do you think this will force the hands of their trade partners?
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40 sats \ 0 replies \ @TomK OP 20 Feb
yes, that is quite possible. i am curious to see how the markets will react if the Chinese devalue the yuan. that is also still on the cards
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21 sats \ 1 reply \ @KeynesianClowns 21 Feb
So basically they are doing everything they can to dis-incentivize saving as well. Seems like there's nothing new under the sun whether you go east or west.
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0 sats \ 0 replies \ @TomK OP 21 Feb
Yes. People need to understand how the matrix works to free themselves
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