China’s cities are on the verge of a debt crisis | Hacker News Reader

China’s cities are on the verge of a debt crisis

economist.com

33 pointsmfiguiere14 comments

The thing western economists simply don't understand, or can't relate, is that unlike in most places, the Chinese print money out of thin air without any central bank lending it to them. This gives them incredible flexibility. Also, it's why nobody really even knows how much Chinese money exists. I suppose they can't come out and say it because it would lead to very uncomfortable questions about why China can simply print money, but we have to get it from the banking cartel.

Sorry, but all the countries with own currencies do print money (from thin air if you wish, it's all banking now, forget the paper).

China has a central bank like most other countries. They control the central bank and printing, like the US EU, etc also do. No difference.

That’s factually incorrect. Demonstrably.

Can you demonstrate it for us?

https://www.investopedia.com/articles/investing/072815/how-d...

It’s all very easily checked on the Wikipedia. I can give you a quick rundown, as I did above, but I’d just be repeating myself.

Most countries borrow money in order to create it. It does NOT get printed out of thin air. But China simply prints up and destroys money as it requires. It makes it impossible for people to use the same rules about the economy that seem to work to some degree in other places.

No that's not how it generally works. Many countries create money out of thin air. Try again.

Isn't that a distinction without a difference?

The U.S. Fed creates money out of thin air and then lends it to the Treasury. Eventually the Fed gets it back from the Treasury and deletes it.

China skips the lending step.

The difference between the two is merely a matter of accounting and at the end of the day, the accounting difference doesn't impact anything.

The difference is that in one case you're supposed to return the money eventually.

In practice the debt just grows larger and larger and isn't paid off.

Wouldn't this give China a massive competitive advantage since they aren't saddling themselves with debt?

Why aren't other countries doing this?

How does this differ from non-Chinese banking systems? For example, in New Zealand banks can generate money for loans separately from the central bank; they don't borrow from the central bank. There are capital requirements which prevent them from creating infinite money but every time someone borrows money from a bank in NZ, the money is created from thin air.

> There are capital requirements

> The thing western economists simply don't understand, or can't relate, is that unlike in most places, the Chinese print money out of thin air without any central bank lending it to them.

Western economists have understood the concept of fiat currency for a very long time. The chinese have used fiat money since the 11th century - "Government-issued fiat money banknotes were used first during the 11th century in China".

https://en.wikipedia.org/wiki/Fiat_money

And fiat money has been the dominant form of currency since the 1970s. "Since President Richard Nixon's decision to suspend US dollar convertibility to gold in 1971, a system of national fiat currencies has been used globally."

Why you think western economists don't understand something so basic as fiat currency is beyond me. Especially since it was the western economists who created the modern global economic order.

> I suppose they can't come out and say it because it would lead to very uncomfortable questions about why China can simply print money, but we have to get it from the banking cartel.

What uncomfortable question? Everyone knows about fiat currency and we are taught why we have a "banking cartel" in every econ 101 class. Put "china" next to any mundane topic and people get unhinged. The modern chinese economy was created primarily with the help of western economists. Nothing about the chinese economy is a mystery. Especially to western economists.

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