When shit hits the fan probably all delinquencies and spreads will go up, including mortgage.
As crazy as this sounds I think it makes sense - just admit honestly that the situation is fucked up, monetize, generate stagflation and eventual normalization.
It seems like demand should have increased when the government sold the bonds and spent the money.
I wonder if there's something about culture and having basic survival needs met. Most economic models assume effectively unlimited long-term demand: as productivity grows and people in existing sectors are thrown out of work, they will find new things to do, and the people who have reaped the financial rewards of productivity growth will find things that they want to spend money on, creating new jobs for the previously unemployed. What if this doesn't happen? What if instead of using money as a means to an end, people use it as the end itself, effectively treating it as a scorecard to be maximized without spending it? And what if on the other end, instead of people finding new ways to obtain money, they opt out of the economy instead, creating alternate games (literally - video games are apparently the main extra-economic outlet) to play. With basic survival needs taken care of by parents, there's no forcing function that makes them participate in the economy. You'd get a reality that looks fairly similar to our actual reality, in Japan and increasingly in other developed areas of the globe.
This line got me thinking about so many things from my own life. You opened my eyes to another view point I had missed for the past 10 years. I am truly thankful to you for posting this comment.
This is pretty much the definition of hyperinflation, so there's a template for what happens here, but not in the developed world.
I suspect that a lot of the demand for Bitcoin is also driven by fear of this scenario. In the world above, the incentive for savers is to simply not play in the established financial world; they'll take their savings and put it in assets that are not rapidly going to zero. If only there were a transferrable currency that's deflationary by design and immune to manipulations of supply & interest rates...
It comes from weakening the perceived future security of the currency, which reduces demand for it; once you monetize fiscal needs, your currency is perceived as one more at risk of being devalued to monetize fiscal needs, which itself devalues it.
[1] https://www.japantimes.co.jp/news/2019/08/23/business/econom...
Monetizing the debt overnight is like a dam braking.
IMO Americans are biased to overweight this. It doesn't matter as long as China can keep up appearances better than other countries for long enough. Investors will happily invest in a bubble believing that they are smart enough to get out before everyone else if things go south.
Bad bookkeeping doesn't keep the NBA and Activision from kowtowing to China, I don't see why it would keep people from investing there either.
2. The nba & activision are selling goods to China, or maybe they put a little money into real assets to reach that audience. They’re not investing in Chinese financial instruments which is what the entire thread is about
https://en.m.wikipedia.org/wiki/Chinese_accounting_standards
By all means, investors want to put money into China. It’s the amount of money you want to put into an immature market that is the question. And that’s not a dig and it’s not jingoistic, it’s just a fact, when you run a large market for over a century you kinda build solid foundations that can’t just be replicated on the spot. China’s market developing is a great thing but it’s just too young to seriously think it’s ready to be a reserve currency today.
It's complicated, its nation of nations. Still caste is a still is strong basis of political patronage. It has come a long way, but has long way to go!
India's Navy is a joke, Airforce is a flying junkyard and Army is an amalgam of bad ideas, and pension commitments.
I do not see India going anywhere. India has been hope of Asia since 1950s, and it will remain that way into 2050!
I'm not sure I agree with your math. Care to elaborate a bit further?
1. Japan's debt is 250% GDP (from GP)
2. At 2% interest rates, 100% of the tax haul will go towards servicing debt (from GP)
3. 2.5*0.02 = 0.05; Japans tax take is 5% of GDP?
#3 seems off by a factor of 6. So No clue what GP was suggesting.
When you sell a house and the buyer is paying via mortgage, do you get paid cash by the mortgage company in full (the purchase price) at once, or do you receive a monthly amount from the mortgage company that sums up to the house price you sold for?
Gold has always been touted as a hedge against inflation, it's not, it's a hedge against financial system instability, inflation being a major symptom of such instability.
Calculator thinks $6,000/kg => $41,000/kg, actual price $6,000/kg to $48,000/kg. That makes sense because 'true' inflation (consumer goods + assets) probably outpaces official inflation (consumer goods only).
Gold can't exactly get more or less valuable over time. It is a rock. We have no practical uses for it.
My impulse to point out that it's a very useful metal is tempered by my surprise that only 10% of gold production goes to applications where gold does something other than look golden or just exist as a physical store of value. It seems a little silly. Gold mining is quite destructive; environmentalists should fly around the world, giving speeches on the worthlessness of gold, but where's the glamor in that?
> Gold mining is quite destructive; environmentalists should ...
If it makes you feel better, it is common for gold to be found as an enriched layer sitting on top of a copper deposit. So a big chunk of gold mining isn't gold-for-gold's sake, it is something mined on the way to a much more practical substance - copper.
Actual gold mines doing environmental damage are a thing (cyanide ahoy!) but the footprint is small and hopefully not important.
Depending on how the student loan bubble bursts, it could wind up with a number of institutions being forced to shut their doors, or make large cuts to staff/programs/etc.
in the old days, people could pay tuition with a part-time job.
Not saying it _isn't_ part of the story, but I don't think it's as big of a factor as folks might initially (or anecdotally) believe.
Disagree if you consider that many people are getting mortgages on overvalued properties at or near market peaks now, and in another significant downturn those could easily be underwater by 15%-50%. The same thing happened widely in the prior real estate bust in many trendy areas, leading to many foreclosures.
Corporate debt may be: https://imgur.com/a/b54hMSg
And frankly with the amount of outstanding US govt debt and underfunded pension & healthcare liabilities the USD may either get dethroned and devalued or sent into the negative interest rates purgatory like Japan is currently living in. Japan cannot possibly ever raise rates, at 2% rates 100% of their tax take will go towards paying the interest on their 250% national debt.
Add to that the history of Smoot-Hawley and the general outlook of the 1930s ...