Comments by "Luis Romero" (@LuisRomeroLopez) on "How CHINA hopes to avoid a SUBPRIME CRISIS - VisualPolitik EN" video.

  1. 15
  2. 9
  3. 1
  4. 1
  5. 1
  6. 1
  7.  Doddy Doncasper  Is Orlik the guy from the "Bubble that doesnt burst" book? (I got that recomendation đź‘Ť) This is a little long, but is full explanation: With the Soviet Union take into consideration that it didn't fell because they liberalize, but they liberalize because the economy already had problems. Keep in mind that state own companies (specially in higly centralized nations) basically don't (or even can't, sometimes) go into bankruptcy if the goverment really doesn't want it (you only have to mobilize more resources, which is something you might expect with militar industry on the Soviet Union... or housing in modern China). Centralized econmies are great achieving goals (like the development of Shenzhen) but they generally, they tend to develop problems (like the housing one), and since you have all resources of the state, you can keep the problems for years before the situation (which was originally unsustainable) becomes unbearable. So, tbh, I'm going remain skeptical of how the the central government is fixing the problem (if that had being the case for real, the local government wouldn't have keep the situation). And saving in banks can be good or bad idea depending on how thigs develop: If a crisis gets too bad or the renminbi devalues too fast, the goverment might suddenly put restrictions (Like has happened on Greece and Argentina), in addition to the fact that the saving aren't being invested somewhere. Remove the conditions that created the problem in first place (such as working to improve the stock market so you don't have to save by buying houses) should be a better measure that tight the banks loans. Consider that if shadow banking appeared in first place, probably is because THERE is a social necessity that the goverment isn't providing.
    1
  8.  Doddy Doncasper  > the liberalization didn't fix the problem it only cause more problems. But this is just false. The soviets had problems way before liberalization, and is well known that centralization will lead to this kind of problems. The problem with Russia was more political (and then they became an oligarchy). Also consider that the housing problem in China (just the problem, leaving aside the possible solutions) is what you will expect to see in a centralized economy eventually with problems like price calculation. On the other hand, there're plenty of examples of liberalization helping to improve the economy. And these are also quite varied (Poland, United Arab Emirates, Singapur, Estonia, Chile, South Korea, Vietnam, India, etc.) and also in different scales of degree. For example, the economic liberalization of Poland was really fast and aggressive. (Is even popularly known as “Shock Therapy”) > The central government cracked down on this by simply not giving the money to the bank that have too many underperforming loan Well, mostly don’t disagree with everything before this. But this doesn’t change the fact shadow banking is common should tell you that they’re doing something wrong (implying you consider shadow banking a problem, which seems to be for the chinese gov.) or you have a lot of incentives in place for this to happen. Hardly tight measures or less liberalization is going to solve the problem (and if it does, creates another problem)
    1
  9.  Doddy Doncasper  > And the government is working really well to tackle the current issue with housing and shadow banking too. Still skeptical of that. The point you should adress is that it was precisely tha system the one that created the ptoblem in first place. > South Korean economy almost collapsed Exactly: Almost. Remember when I said that centralized economies are good at reaching specific goals? Well, more liberalized economies tend to be more resilient. The fact that South Korean economy continues to thrive should speak about the resilience of the system. Consider that with the Soviet Union (and we agree that it presents problems similar to those of China) it was not an "almost", but a "it actaully happened". (Here you're almost falling in a kind of sharpshooter fallacy) > us can simply print their way out of recession This is impossible for every country. What the US has is the productivity to (back up and) endure more money, but Venezuela and Argentina are excellent examples of why is not possible to just print your way out of a recession. If it were that easy, the Soviets would have do it too. But even if they have tried, centralized economies tend to be not as productive, even China. > countries that liberalize their economy will be dependent All countries, (Liberalized or not) are dependent in foreing money, goods, products, and services. You can see that any country that closed to this eventually slows down (Like Japan, or China before the reforms) > the deleveraging has worked wel But certainly is not good enough yet if they keep building houses, and they keep building because people keeps buying, and if they're still buying it must be that... Just the existence of the situation is indicator that most likely the goverment needs to let go something somewhre.
    1
  10.  Doddy Doncasper  > the problem created and fixed by the system something that capitalist economy can't do Well, to talk about capitalism we need other factors, but a liberalized economy is an important one. Just notice that, now we agree that the problem was created by the chinese government, is it really a great success if the solved the problem they made in the first place? I mean, part of efficiency is solving your mistakes, but, not having mistakes would be even better, isn't it? > Considering chinese economy did well in 1998 and 2008 proves that the system is better run than south korean system. Well, I don’t think so either. Did the Chinese economy collapse? Think about what I wrote in the last post: What you’re really pointing to is that the South Korean economy is resilient. An“almost collapsed” is not a “Collapsed”, like the Soviet Union. It would be interesting how the chinese system and society responds if the housing problem explodes. > Like I said china have high level of saving while Korea is dependent on foreign investments China is also dependent in foreign products, and not only that, but also exporting raw materials. Remember when I mentioned that centralized economies (like the soviet and chinese) are not as productive as more liberalized ones? Well, certainly a good part of China has problems going from a secondary sector to the third one. We still don’t know if China is going to overcome the middle income trap (and certainly, the one child policy didn’t help) > American dollar is accepted world wide means that American can distribute its inflation to other countries (Sorry: This gave a small laugh) Argentina and Switzerland can distribute pesos and francs. What makes their currencies more or less valuable? > Not at all, some countries are dependent on foreign money because they simply don't have high saving rate Mmmm… I don’t think the saving rates have something to do when you print your one money or you don’t. (like having you economy dollarized) For example: Would you say that savings of bolivares and Zimbabwean dollars are useful in Venezuela or Zimbabwe? > and their people don't invest that much money this is one reason why countries are wary of foreign investments That’s actually another legit concern: If you’re right and chinese people save almost 40% of their income on average, that’s 40% of liquidity out of circulation that could have been invested in markets or small businesses. The chinese government clearly has some incentives in the wrong place here.
    1
  11. 1
  12. 1
  13. 1
  14. 1
  15. 1