“I’m afraid to know what an entire country would do.” (when their debt bubble bursts)
In the case of China, you have a lot of company, including a lot of Chinese.
They have a joke in China: This may be the worst year in a decade, but it will be the best year of the next decade.
Insiders saw the debt getting crazy high years ago, and started trying to get their money out en masse. The communists imposed some pretty draconian capital controls, to forbid people from transferring money out of China in 2017.
The Chinese Government has also used their foreign reserves to intervene in their stock markets, and International currency markets, to prevent a crash of their equities or currency. They also use direct pressure from the Government on big players in their financial markets, in a way that is foreign to us - essentially ordering them to buy and sell and lend - or else.
When one (or a few) of their historic bubbles burst, it has the potential to be worse for them than 2008 crash, or Japan’s crash in the 1990s, that led to their “lost decade” (which stretched into two decades), of low/no growth and stagnated standards of living.
Lots of businesses shutting down, lots of unemployment, lots of people losing their life savings in stock market or housing price crashes, and currency devaluation.
It sounds like it’s gonna be pretty dam bad.
But when you have dictators trying to mix in capitalism, I guess it makes things worse because they won’t let natural recessions happen.
If that makes sense cause I have no idea :)
BB - you really have a way of explaining economics in a simple way. To be able to explain complex things in a simple way is the sign of someone who really, REALLY knows.
Thank you for this explanation!