"the way China subsides its own banking system in such a way that $3 Trillion in reserves is somewhat illusionary"
Care to expand on this a little bit? I don't quite understand
Care to expand on this a little bit? I don't quite understand
Ordinary chinese citizens save $1T in bank deposits.
Bank loans the $1T to mall developers, and high speed railway developers. The developers promise to pay the money back.
They don't pay the money back, because the mall is empty, and no one can afford the high speed trains.
The people worry that the bank can't pay them back, all rush to the bank to get cash.
The Chinese treasury uses $1T in USD reserves to stop the run on the bank.
So, what he is saying, is that the Chinese central bank is already on the hook for about $1 trillion in bad bank loans.
.. what does a rice farmer in Northern China do when the government gives him 1000 crisp dollar bills ("or their electronic equivalent")?
How does it do that? Do you mean the whole money is an illusion thing? And people only work when they have trust in the government backed bills? Cos this argument can work for any country too really..
Wrong. Chinese save in Renminbi. Mall developers pay builders in Renminbi. Banks potentially default on borrowers in Renminbi. Dollars are only for buying commodities, and external trade. There's 1/5 of the world's population in China who trade and do work for each other and they don't pay each other with dollars.