Loading ...WELL HERE’S A BOOM BOMBSHELL THEORY PERCOLATING BEHIND THE SCENES
Lets Suspend everything we think you know about how China “works” .
This guy Gerry from Boom Finance has an interesting observation about the Chinese “Model” of Economics vs the Western Model
This guy is a real “maveric” Economist and his stuff is way outside the box and fascinating
CPI DEFLATION IN CHINA – ECONOMIC NIRVANA BECKONS?
CPI numbers in China have been trending down for the last 10 months. Last week, the numbers were released for July and went negative – 0.3 % Year on Year. By definition, negative rates of inflation are deflation. It is important to note that China’s Producer Prices (YoY) have also been in deflation for 10 months, since October 2022.
China’s current Annual GDP Growth, however, registered in July, is positive at 6.3
tion is this. Can China maintain positive GDP Growth while experiencing negative CPI inflation (deflation)?
If so, then they will demonstrate once and for all that their centralised control of the money supply via disciplined government control of their financial sector is effective at delivering non inflationary growth. That will be an extraordinary achievement and arguably revolutionary in an economic sense.
ECONOMIC NIRVANA?
The next 6 – 12 months (and more) will be very interesting to watch. We may see the emergence of a completely new economic paradigm with the Western advanced economies in persistent Stagflation — (CPI inflation combined with flat or negative growth in GDP) — while the Chinese economy could continue to grow as their consumer prices fall.
If this can be achieved, the China model of sophisticated, centralised command and control of their volumes of physical cash in circulation and of their financial system (effectively a system of semi-private banks that provide credit money upon command) combined with an free-wheeling, entrepreneurial real economy will be fully confirmed as superior to the Western model.
The Western financial system model for money origination, by contrast, is almost totally reliant on the continued emergence of willing private borrowers coming forward to private banks and demanding bank loans. In the West, there is really no centralised command and control over money origination other than the use of interest rate settings by national central banks. Thus, the Western economies are effectively hostage to borrower demand. (By the way, for the record, BOOM does not agree that the Basel Ratios apply any real restrictions on bank loan expansion).
If the Chinese can deliver this economic nirvana in the longer term while western economies stagnate, then the Western advanced economies will (arguably) have no choice but to abandon their 400 year old, private banker dominated financial model. The end of capitalism? The end of private banks? Not quite — private banking itself is not the problem. It has huge advantages of speed, innovation and diversification of money supply. Overwhelming private banker dominance of the money supply is the problem.
So — how can we rescue the West if Stagflation becomes embedded?
In the West, there is a decline in the population of willing borrowers due to their declining working age populations. To ensure a return to economic growth and controlled CPI inflation, Western governments will have to quickly issue increased volumes of non interest bearing, physical cash into their economies and encourage people to use it as much as possible. In other words, western governments will have to take back the control of their money supply which they have effectively surrendered to the private bankers over the last 400 years and especially over the last 50 years.
Non-inflationary economic growth is seen as an impossible dream in the West where private banks and their borrowers rely on CPI inflation and asset price inflation to keep them solvent. That impossible dream is not a Bridge Too Far if the importance of physical cash volumes is recognised. Physical cash is a non interest bearing, natural buffer to credit money (created as bank loans).
THE GREATEST ECONOMIC EXPERIMENT EVER
For over 400 years, since the early days of private banking in medieval Venice, economic expansion has been driven by private banker dominance of the money supply. Prior to the emergence of private banking and the use of their double entry ledgers, economies were feudalistic, dependent upon a wealthy Monarchy or Aristocracy to spend its money, sometimes borrowed, sometimes not, in the form of physical cash into the economy via lavish spending projects. Private banking changed all that and allowed private borrowers access to bank loans. That unleashed the spirit of entrepreneurial endeavour. And what followed was the emergence of prosperity built upon an ever expanding supply of bank loans (credit money).
Such a system works well when there is an increasing demand for bank loans over time from increased numbers of borrowers. It works even better when there is a banking regulator present to ensure that banks do not become too profligate in extending credit.
However, if the borrowers become either reluctant or shrink in number from disease, demographics or warfare and the Government does not increase physical cash in circulation, then the economy becomes starved of fresh newly originated money. The result is economic stagnation.
more Boom Here
Interesting!!
Not to put too fine a point on it, but this is nonsense. Our system may be coming to an end, but it is not being supplanted by China’s system. China doesn’t even have a system!. Their economic model is “blood suckerism”. They leach off the host until the host dies, then they will die. How clever! Free trade and economic co-operation for the purposes of prosperity are essential. Zero sum economies are foolish in modern times. Sensible trade will bring peace among nations. Prosperous people have no interest in war.