(https://twitter.com/NathanTankus/status/1193727075942830081)
This is a key point and why, while China has a high degree of monetary sovereignty, it is not a good example of “MMT” because they hide fiscal spending through a complex chain of public banks, SOEs and local governments rather than “on balance sheet” https://twitter.com/Brad_Setser/status/1193706343485575169
1/N
Txioa aipatu
Brad Setser@Brad_Setser
2019 aza. 11
China’s decision to rely on local governments, and financing vehicles backed by the local government, rather than the central government for stimulus over the last ten years was (and is) a mistake. https://ft.com/content/36a1115a-002b-11ea-b7bc-f3fa4e77dd47
(Ikusi beherago)
Erakutsi haria
2019 aza. 11
erabiltzaileari erantzuten
They show large measured fiscal surpluses and low levels of government securities relative to GDP but hide losses from defaulted loans on the balance sheets of public banks. An MMT informed policy which highlighted the availability of physical resources would realize 2/N
Nathan Tankus@NathanTankus
those losses, assume province and local government debt ala Hamilton and introduce national social insurance. It would lead to a large increase in measured Federal public debt but wouldn’t actually increase the financial net worth or even “money holdings” of the private sector 3/N
Whether that’s politically feasible is an open question, but it may be and part of the motivation to not do this is clearly neoliberal ideas about the supposed benefits of low public debt.The other point here is for all the talk of central planning, China is decentralized here 4/4
(Below the mistake)
(https://twitter.com/Brad_Setser/status/1193706343485575169)
China’s decision to rely on local governments, and financing vehicles backed by the local government, rather than the central government for stimulus over the last ten years was (and is) a mistake.
Contractors hit as China local government defaults rise
Slowing economy puts strain on public finances and raises risk of social unrest
2019 aza. 11
erabiltzaileari erantzuten
a) The central government ultimately needs to step in and do a clean-up. Sooner rather than later.
b) It has biased the stimulus toward infrastructure rather than social insurance.
c) It has created the perception that China lacks fiscal space (central gov debt is 20% of GDP)
erabiltzaileari erantzuten
Call the loan from USA and spend
GIF (ikusi twitterrean bertan)
The U.S. doesn’t borrow Yuan from China. We buy goods from them in Dollars, and they put the Dollars in US Treasuries. https://twitter.com/netbacker/status/1163470966317387776
Txioa aipatu
Nathan Becker@netbacker
2019 abu. 19
@tayfrz @PethDerek eta 2beste erabiltzaileei erantzuten
This’s how it actually works:
1. China 1st accepts USDs when they sell us their goods & services.
2. So China ends up with non-interest paying USDs & the US with Chinese goods & services. Fair & even deal.
3. China uses USDs to buy USTs to earn interest & to peg their currency.
Gogoratu Warren Mosler, Txina eta finantzak:
“Warren Mosler on what it means that China buys our debt. China accumulates dollars at their Federal Reserve account because we run a trade deficit with them, so they get dollars when we buy stuff. They could sit on these dollars and do nothing, but they’d prefer to earn interest, so they purchase US Treasury bonds which are essentially savings accounts at the Fed.
These bonds are constantly maturing, and we are constantly paying them back, billions of dollars a week, by transferring the dollars from their savings account back to their reserve account. That’s it. We benefit enormously from this situation: we get real goods and services out of Chinese labor instead of American labor, and they only end up with numbers on an account statement.”
Funtsean inperialismo berrian dago koska: Nazioarteko ekonomia eta ‘Inperialismoa’
