China's Liquidity Trap: Injecting Cash, Ignoring Deflation-Will Asia Follow Suit?

China's central bank has increasingly relied on measures like buying and selling government bonds to inject liquidity, signaling potential future increases in monetary supply. This routine practice aims to counteract severe internal deflation caused by weak consumer demand and insufficient domestic investment. Despite these efforts, liquidity injections are likely to transition deflation into stagflation, marked by low demand and rising inflation. This issue is not unique to China but affects the entire East Asia region, particularly Confucian cultural nations.
While China's economic struggles might momentarily benefit neighboring countries by attracting capital, the underlying demographic and economic issues-such as aging populations and declining birth rates-pose long-term risks for the entire region. China's monetary policies are primarily addressing symptoms rather than fundamental problems, thus perpetuating a cycle of deflation and stagflation.
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[@robertbraden4454]

great episode Don. Congratulations on 25k subscribers. Should be at least 10x more.

[@andystich730]

Clear thoughts on a very cloudy subject

[@freepoet6737]

Some of the best content on youtube, IMO.

[@mskmsk7174]

Another well reasoned podcast.

[@chuckichas]

Thank you for the perspective. Let's do something for humanity.

[@MinTubaTuba]

Thank you, for the clarity of your analysis & applied insight.

[@joshuahernandez3216]

Your economic and cultural info about China is second to none.

[@djparn007]

Thank you, Don. 👍

[@michaelgothenburg364]

Very good, Thank You Don

[@dougpage2730]

Thanks Don!

[@larsporsena7115]

The best strategic analysis

[@chuckley99]

Thanks Don

[@RajivSharma-en5lx]

Excellent.

[@luminyam6145]

Thank you.

[@paulmaher3358]

Another good one, thanks Don.

[@jamescarson9427]

Excellent!

[@giusmaximus9586]

Good !

[@powershift2024]

Very informative video, thank you Don.

[@moorthyy27]

great video

[@CBBC435]

This is a very good explanation of things.

[@proudeuropean2]

Great reporting. Can you do a piece about "trust". This was so important to solve recent economic downturns in US/Europe. Leaders explaining the situation and justifying policy actions. I don't see Chinese leadership doing this.

[@mennobaron975]

Again fantastic analysis! Don is the Chinese Peter Schiff 😆

[@patf6957]

What percent of national income in China goes to households - something like 40%? That's extraordinarily low and puts a hard, and low, limit on consumption.

[@eattherichnow1]

You are a brilliant man! I want a brain like yours when I grow up! 😄

[@parrotraiser6541]

One day, bankers and governments will see that trying to push on a string is a waste of effort. At best, it creates a waste of real resources.

[@edwardv1219]

Actually Chinas aging is increasing at a faster rate than any nation in history. Yes faster than Japan and South Korea. They are just not as far along the process as those two as their population collapse started later. However they will bottom out sooner as it’s now expected the Chinese population will be half of what it is today by 2075, and maybe as early as 2050.

[@jagkorps]

Thanks, great video. I'd be interested in a follow-up that explores the underlying demographic and social issues you say all the Confucian-based systems are experiencing. What is it about Confucian-based systems in particular that gives rise to these problems? What kind of non-financial reforms are needed to remedy them? Can they still be remedied at this point?

[@powershift2024]

Peter Zeihan on YT has very succinct videos on demographic declines/ increases for most countries. His expertise is in geopolitics but demographics are directly driven by this. They're worth a watch, cheers.

[@bjrnhjortshjandersen1286]

Patience is not a Chinese business virtue....fast and superficial is the general approach.

[@fattymatty5380]

Unfortunately the US government is doing the exact same thing. The only distinction is a matter of scale as a % of GDP. The US is fine as long as people believe that the currency they’re carrying (virtually or real) has value. It’s really just a matter of trust. When people and businesses realize that the currency loses value quickly, the currency then becomes a worthless piece of paper. Once that happens, it all crashes. The outcome is the same, just at different times.

[@cyberslim7955]

I cannot help but think, that a planned economy mindset is just not able to handle a large advanced economy, right?

[@KYOSHIROSATO]

China can still play the card of aid for the poor, as for example in the US that pay the rent of the beggar, and hotels for illegal immigrants in some cities, aid for single mothers, aid for those who earn little and have children, increase the retirement of those who earn little.

[@CryptoCryoto]

In the words of the kids in the hall, how long does China have? 😅

[@Pyramidalist]

To increase demand from customers in the country and abroad and investments there are 3 minimum necesseties ... confidence in a future of prosperity and ... security as well as ... globally competitive net return on equity This is NOT given in any autocrathy and even the most western countries.

[@KenannAbaka]

Thanks for the breakdown! A bit off-topic, but I wanted to ask: I have a SafePal wallet with USDT, and I have the seed phrase. (behave today finger ski upon boy assault summer exhaust beauty stereo over). What's the best way to send them to Binance?

[@DavidMCammack]

Japan and Korea fly in many foreign workers from poor countries, such as Nepal and Vietnam. If the pessimistic outlook of this video does not come true, this offsetting factor, of foreign immigrant labor, may be the reason.

[@pierotorroni9197]

Tha Bank of China must have Maduro as advisor. I am Italian. I saw the same thing to happen in Yugoslavia in the 70s and part of the 80s. It was the harbinger of the dissolution of Yugoslavia. The war that followed came from this and the hate amongst the different nationalities along the religious lines. Slovenia and Croatia were catholics. Serbia was christian orthodox. Bosnia Erzegovina chiefly muslim. Kosovo is muslim. Macedonia a mixture , chiefly christian ortodox.The tensions , that Comunism tried to suffocate , erupted with the fall of comunism. My best wish is that something like that cannot happen in China. But I read that China history is constellated of the dissolutions of the central power i.e. the Emperor.

[@slangelands4255]

Demographic issues can be somewhat alleviated by allowing or encouraging more immigration. Unfortunately, tribalism is still widespread in many Asian nations. For instance, interracial relationships are frowned upon, let alone marriage. Foreigners in China are being stabbed and killed....with Japanese children!! being specifically targeted. There are literally millions of refugees that need homes. The United States has its share of problems, but it is still one of the most powerful and dynamic nations on the planet. And it was founded on relatively free immigration. Mass media covers bad immigration outcomes disproportionately compared to successful.

[@dennistani1986]

Don, one of my positions has always been......"communism doesn't work. If you don't believe me, ASK RUSSIA. Anybody out there disagree with me? Take care everyone.

[@finca5302]

China export deflation to all south east asian Country. They sell cheap stuff, forcing all local manufacture to close down and layoff. The capital investment that they choose also not a long term investment, more like trading company (import cheap product from China and then sell it with dumping price) sometimes even illegal (not paying import duty n tax.

[@Michael-o3h]

Thank you Dong. Say hi to my cream pie lei, Ally and Dave! Chris and burns Ahahahahaha. What's it like being a traitor bruh? hahahahaha ahahaha 😊😅😮😢

[@JamesJohnson-gv7tv]

Here is proof. The banks are purchasing government bonds which returns liquidity to the government “like printing more money.” Yuan vs USD: Yuan ¥7.07 vs USD$1.00 at this exact moment Eastern Day Iight Savings Time, Boston, MA, USA.

[@bellybull]

mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm😄

[@PhilipWong55]

The U.S. maintained its embargo on China during the Great Chinese Famine (1959-1961), discouraging other nations from sending food, confident that millions of deaths from starvation would ensure China’s permanent collapse. Consumers worldwide are now frustrated with the influx of affordable goods from China. The British opium nearly did them in, and surely these tariffs on Chinese products will finish them off for good this time. Meanwhile, China’s GDP growth is at 4.7%-a clear sign that the nation is finally collapsing. US citizens are continuing to enjoy these benefits of freedom, human rights, and democracy: Economic inequality, inflation, stagnant real wages for the last fifty years, costly healthcare, an expensive education system, student loan debt totaling $1.7 trillion with an average balance of $38,000, poor public transportation systems, racial inequality, mass incarceration, the militarization of police, deteriorating infrastructure, housing unaffordability, homelessness, the opioid epidemic, and gun violence. The Chinese government is denying its citizens from enjoying any of the above benefits that US citizens enjoy.

[@rondewitt6238]

Have you considered how there can be a 4.7% growth while the housing crisis, banking/financial crisis and huge unemployment is going on??? Almost like the official economy has basically nothing to do with the needs of the “common” people…

[@ggusta1]

Did you see the richard koo interview on block works macro regarding chinas balance sheet recession? Highly recommend