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Re: Deflation in China [Re: Bob_Iowa] #7945058
09/06/23 12:21 AM
09/06/23 12:21 AM
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yukonjeff Offline
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China has big problems.

They sell apartments before they are built there, and many companies have defaulted and never built but took payments. People are not happy. Ther housing bubble is about to collapse.

Foreign manufacturing never came back after covid, I guess locking down for two years might be bad for business.

Also since their one child policy. They only have sons and no daughters for the sons to marry.

Those same youth have a 21% unemployment rate.

They had floods this year that were disastrous for the grain crop.

They have bought up and stored half the worlds grain. Worried about starvation maybe.

They are starting to openly protest now. Things might get interesting for the CCP soon.

Re: Deflation in China [Re: Bob_Iowa] #7945061
09/06/23 12:25 AM
09/06/23 12:25 AM
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Armpit, ak
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Dirt Offline
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The current chairman was appointed by Trump and reappointed by Biden. Senate confirms. 4 year term. Pretty common for chairmen to be appointed and confirmed by opposing parties and reappointed if following dual mandate.

Last edited by Dirt; 09/06/23 12:26 AM.

Who is John Galt?
Re: Deflation in China [Re: Bob_Iowa] #7945062
09/06/23 12:27 AM
09/06/23 12:27 AM
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Chancey Offline
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I actually think this country has even bigger problems headed for us than China does.


Resident Conspiracy Theorist
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Re: Deflation in China [Re: Dirt] #7945063
09/06/23 12:29 AM
09/06/23 12:29 AM
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Chancey Offline
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Originally Posted by Dirt
The current chairman was appointed by Trump and reappointed by Biden. Senate confirms. 4 year term. Pretty common for chairmen to be appointed and confirmed by opposing parties and reappointed if following dual mandate.


So, they are not separate and distinct from the government.


Resident Conspiracy Theorist
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Re: Deflation in China [Re: Bob_Iowa] #7945064
09/06/23 12:31 AM
09/06/23 12:31 AM
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Central Texas
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Chancey Offline
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How does Yellen fit into the current FED?


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Re: Deflation in China [Re: Chancey] #7945066
09/06/23 12:35 AM
09/06/23 12:35 AM
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Originally Posted by Chancey
How does Yellen fit into the current FED?


Yellen is secretary of treasury. She was not a good FED chairmen. Controllable hack. IMHO.


Who is John Galt?
Re: Deflation in China [Re: Bob_Iowa] #7945069
09/06/23 01:01 AM
09/06/23 01:01 AM
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KeithC Online content
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China lost a lot more of their older population to Covid than they have told the world. China chose to intentionally lock older sick people in their apartment complexes, with little food and medical care, to cull much of their no longer useful, retired population.

It's extremely reminiscent of the communist pigs sending the work horse Boxer to the glue factory, in George Orwell's "Animal Farm", after he could no longer work.

Keith

Re: Deflation in China [Re: Chancey] #7945071
09/06/23 01:39 AM
09/06/23 01:39 AM
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Steven 49er Online content
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Originally Posted by Chancey
We are in uncharted waters.


Uncharted waters?

Predictable! At least for a debt backed currency. The FED is and has been doing a very poor job.

Yellen was and is a hack, J Powell has some hope but I don't believe he'll stick to his guns. Rates need to go higher and remain there even in the face of that dastardly deflation.


"Inflation is always and everywhere a monetary phenomenon". Milton Friedman.
Re: Deflation in China [Re: Bob_Iowa] #7945297
09/06/23 12:10 PM
09/06/23 12:10 PM
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Last time there was deflation, the FED started QE. The FED will not allow deflation IMHO.


Who is John Galt?
Re: Deflation in China [Re: Bob_Iowa] #7945371
09/06/23 01:55 PM
09/06/23 01:55 PM
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white17 Offline

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Another view on China.



China’s Leaders Could Stem the Economic Slide. A Desire for Control Is Getting in the Way.


About the authors: Charles Dunst is deputy director of research and analytics at The Asia Group and the author of Defeating the Dictators: How Democracy Can Prevail in the Age of the Strongman. Kurt Tong is a managing partner at the Asia Group and former U.S. ambassador for Asia-Pacific Economic Cooperation.

As much of the world battles inflation, China’s policy makers are trying to beat back a specter that may be more worrying: deflation.

Should China slip into a deflationary spiral like that of Japan in the 1990s, consumers would ratchet back spending and focus on paying back debt. The resulting fall in prices would prompt consumers to postpone other spending, further weakening the economy. Productivity growth would falter even more than is already anticipated. The traditional drivers of China’s growth, domestic and foreign investment in manufacturing, would wither.

Top Chinese policy makers could probably stop this cycle before it takes root by enacting meaningful, if wrenching reforms. But China’s leadership has demonstrated a clear preference for maintaining state control over liberalizing the economy. That positioning makes substantial reforms unlikely. Without them, the country may soon plunge into a period of sustained deflation, a development that carries consequences for the rest of the world.

The numbers coming out of China make clear the problem at hand.

Gross domestic product grew by just 0.8% in the second quarter of 2023 from the previous one. Consumer confidence remains weak; China’s average household lost 20% of its wealth in 2022 alone. The nation’s $65 trillion property sector is heavily indebted, while property-related loans and credit comprise 41% of the assets in China’s banking system. The country continues to age, productivity improvements are slowing, and a distressingly high proportion of young Chinese citizens are unemployed. In July, consumer prices fell into deflation for the first time in two years.

China’s top policy makers seem to appreciate the problem. Less obvious is how they deal with it—without creating too many rips in the political fabric of the country’s top-down, Leninist governance.

They must decide whether to bail out property firms and take on more government debt, which would worsen the nation’s already enormous debt burden. They must figure out how to level the playing field between state-owned and private firms, unwind the government’s heavy-handed approach to technology and finance, and rebalance the allocative relationship between central government revenue and provincial government expenditure.

China has made some adjustments to interest rates and reserve ratios and is also considering infrastructure spending that could boost domestic demand, although the country is already overinvested in infrastructure. Some good luck in its most competitive sectors, like electric vehicles, might allow China to lean on exports to muddle through with solid growth for a few more years.

But Chinese policy makers’ preference for what they deem national security concerns over economic growth suggests that they will probably rely on Keynesian measures or monetary policy shifts to try to re-engineer growth. They won’t question the fundamental inappropriateness of their economic policy model for the next stage of China’s development.

As for which “grey rhino” could actually trigger a deflationary spiral, China’s huge debt—currently around 280% of gross domestic product, a higher proportion than that of either Japan or the U.S.—seems likely to eventually weigh down the economy with “zombie” firms and un-payable loans. A drop in housing prices looks inevitable too, causing many of the loans held by state-owned enterprises and property developers to go into default. That also would degrade the wealth of a significant proportion of the population, whose wealth is largely held in property.

Like Japan in the late 20th century, China has sufficient funds and political wherewithal to avoid a debilitating financial crisis or balance-of-payments crisis. Using those strengths, China may provide enough stimulus in the near-term to avoid a technical recession.

But the Chinese government’s fear of expanding credit when it is already overleveraged, coupled with the inherent difficulty of boosting domestic demand as more and more childless consumers approach a frightening retirement, means that mere fiscal and monetary policy stimulus will probably fall short of the mark. The result would be a period of prolonged deflation and even lower consumption and borrowing.

A deflationary cycle in China poses economic risks outside its borders. The U.S. economy is diverse and has strong fundamentals, but a severe slowdown in China’s imports would weigh negatively on U.S. economic prospects, and even more so on advanced economies across Asia and Europe that rely more on China-bound exports, such as South Korea and Germany.

A sustained decline in Chinese consumption and business spending would carry even more drastic consequences for developing economies that depend on exports and investment from China—countries as far-flung as Brazil, Malaysia, and South Africa.

Geopolitical planners will likely also worry about a slowing economy making Beijing’s leaders even more adventurous in international affairs, or at least prone to double-down on domestic nationalism and military modernization.

Ultimately, those most affected by China’s slowdown will be its own citizens. But economic trouble in China could mean trouble—economic and otherwise—across our still-interconnected world.

https://www.barrons.com


Mean As Nails
Re: Deflation in China [Re: Dirt] #7945383
09/06/23 02:18 PM
09/06/23 02:18 PM
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Steven 49er Online content
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Originally Posted by Dirt
Last time there was deflation, the FED started QE. The FED will not allow deflation IMHO.


Of course they won't stand for it. They will print money like we have never seen.


"Inflation is always and everywhere a monetary phenomenon". Milton Friedman.
Re: Deflation in China [Re: Bob_Iowa] #7945393
09/06/23 02:31 PM
09/06/23 02:31 PM
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white17 Offline

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After listening to most of what Powell has to say I have some hope that he will stick to his guns here.
Unfortunately he can't stop Congress and the executive branch from ramping up spending. That just makes the problem more difficult for the Fed to deal with.

Personally, I think we still need higher rates for a lot longer.


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Re: Deflation in China [Re: Bob_Iowa] #7945413
09/06/23 03:04 PM
09/06/23 03:04 PM
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Neither consumers nor producers are growing in China.

Re: Deflation in China [Re: Chancey] #7945427
09/06/23 03:19 PM
09/06/23 03:19 PM
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Originally Posted by Chancey
Originally Posted by Dirt
The current chairman was appointed by Trump and reappointed by Biden. Senate confirms. 4 year term. Pretty common for chairmen to be appointed and confirmed by opposing parties and reappointed if following dual mandate.


So, they are not separate and distinct from the government.

I thought the fed was privately owned?

Re: Deflation in China [Re: Bob_Iowa] #7945430
09/06/23 03:26 PM
09/06/23 03:26 PM
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white17 Offline

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Nope. The Fed is " owned " by the member banks of each of the twelve Federal Reserve districs


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Re: Deflation in China [Re: white17] #7945454
09/06/23 04:09 PM
09/06/23 04:09 PM
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Originally Posted by white17
Nope. The Fed is " owned " by the member banks of each of the twelve Federal Reserve districs


I think he meant not owned by the gubbemint

Originally Posted by white17
After listening to most of what Powell has to say I have some hope that he will stick to his guns here.
Unfortunately he can't stop Congress and the executive branch from ramping up spending. That just makes the problem more difficult for the Fed to deal with.

Personally, I think we still need higher rates for a lot longer.


He should have stuck to his guns in 2019. I agree that rates need to go higher and hold for some time.

Can you ever see that being a possibility?




"Inflation is always and everywhere a monetary phenomenon". Milton Friedman.
Re: Deflation in China [Re: Bob_Iowa] #7945465
09/06/23 04:23 PM
09/06/23 04:23 PM
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white17 Offline

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I'll admit it is a long shot but we might get one more 25 bp hike this year. IMO we need to be over 6% now just to try to undo the damage from things like the chips act and the IRA fiasco.


I misunderstood his comment. The fed structure is such that it is easy to mischaracterize it. The term "owned" shouldn't even be used IMO.

The only real connection to the government is that the board of governors is in fact a government entity and answerable to Congress.

The reserve banks themselves are organized as non-profit corporations.


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Re: Deflation in China [Re: Bob_Iowa] #7945541
09/06/23 07:07 PM
09/06/23 07:07 PM
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The way I understood the article White is that the CCP needs to become more capitalist view, but the writer of the article has the belief that they will return to a more strict form of communism, which I can see happening and in that situation they will reduce the burden of their aging population though some disturbing means. One point in that article that worries me the most is when they talk about China turning to international affairs which to me means a war, as history has shown in this country that a major war can spur on the economy mainly the manufacturing sector and that’s what’s been driving their economy lately.

Re: Deflation in China [Re: Bob_Iowa] #7945629
09/06/23 08:44 PM
09/06/23 08:44 PM
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Re: Deflation in China [Re: Bob_Iowa] #7945661
09/06/23 09:16 PM
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"The size of China’s debt problem is truly staggering. At last measure, debt of all sorts – public and private and in all sectors of the economy — amounted to the equivalent of $51.9 trillion, almost three times the size of China’s economy as measured by the country’s gross domestic product."

Source Forbes



"As for which “grey rhino” could actually trigger a deflationary spiral, China’s huge debt—currently around 280% of gross domestic product, a higher proportion than that of either Japan or the U.S"

Looks like all debt in the U.S. is 94 trillion. GDP of U.S. is 26 trillion. Source: Fred The debt in the U. S. would appear to worse than China. Our debt must not be truly staggering?


Who is John Galt?
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