Debt loops rationale and effects발음듣기
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Debt loops rationale and effects
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출처 : 칸아카데미
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Now that we have a general layout in our minds of how all of the mechanics are fitting together, what I want to do in this video is discuss a little bit about why the different actors would do what they are.발음듣기
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And really, why it's so hard to unwind each of the actors, why it's so hard for them to unwind themselves from the scenario.발음듣기
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Where I finished off this last video, I talked about more cash being in American pockets because of essentially, debt being cheaper, government can spend more money, lower taxes.발음듣기
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And I said that's more money to buy Chinese products, but it's in general more money just for Americans to spend on each other.발음듣기
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For any Keynesians out there, the more you spend, that will stimulate the economy, lower taxes.발음듣기
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And in general, debt being cheaper, lowers interest rates, all of these things stimulate the economy.발음듣기
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Now, normally when you're stimulating the economy like this, and you have all of these factors, you have the risk of higher inflation.발음듣기
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But remember, inflation, or at least price inflation, is just the price of all of your goods.발음듣기
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So to some degree this whole cycle also keeps - I guess you could say, the surface growth that the average American consumer experiences looks very positive and inflation stays slow, so we can also say money to buy each other's services.발음듣기
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So if you are China and you're starting off, you are a real Communist country maybe 30 years ago.발음듣기
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And then you start to have market-based reforms and you really want to enter the developing world.발음듣기
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But you don't have the industrial base in the late '70s or early '80s to to really compete with the Germanys, and the Americas, and the Japans - and when I say Americas, I mean United States - on their terms.발음듣기
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So one advantage of export-led growth is when you're just beginning to develop, you have a less-developed society, you have less of an industrial base.발음듣기
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So when you have export-led led growth, you can actually build, you actually will encourage investment in factories that can go and produce things for the developed world.발음듣기
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And by keeping your currency low - by artificially keeping your currency low - and let me be clear.발음듣기
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With just standard free trade, labor costs are going to be cheaper in a place like China or India that has a lower standard of living.발음듣기
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You would have things that would move offshore, manufacturing and services that move offshore.발음듣기
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But if you super charge it, if you make it even cheaper to manufacture, to do business in China, it'll just accelerate the investment in production in China.발음듣기
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Artificially suppressed currency - and this also happened with Japan after World War II - artificial suppressed currency, and to some degree we wanted that, because we want to Japan to become intertwined with the United States.발음듣기
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We saw what happened to Germany after World War I, where it was so economically unsuccessful that it was very easy for a character like Hitler to come to power.발음듣기
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But anyway, you artificially suppress a currency, it makes your exports cheaper, and which then encourages more investment in production at home.발음듣기
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And as you become more efficient and as you go down that development curve, you'll become more and more competitive over a whole series of industries.발음듣기
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And the idea is, once your people get developed enough, you will have enough capital at home.발음듣기
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You will have enough of a consumer base at home that some of this extra capacity can then be turned back to your own people.발음듣기
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That you can then use these goods to sell to your own people to increase their standard of living.발음듣기
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So at first, you are building washing machines and refrigerators for the United States and Europe.발음듣기
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And because you're building those washing machines, those are jobs for Chinese and eventually, once they have enough money, once there's a critical mass of a middle-class Chinese, that same capacity could be used to sell washing machines and refrigerators to the Chinese, and it would raise their standard of living.발음듣기
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It builds manufacturing base, and a domestic consumer market - which just means people in China, once they have jobs and they have capital, will be able to buy the goods themselves - and domestic consumer market.발음듣기
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You could imagine, if you are the developed country that is buying these goods, they would be cheap to begin with, but now they're even more artificially cheap.발음듣기
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And it's very clear that this has been happening, whether you want to point to Japan or in general, we've been losing our manufacturing base to other countries.발음듣기
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We shouldn't focus on manufacturing, since manufacturing always tends to go to whoever can do it for the cheapest price.발음듣기
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We should focus on knowledge things, whether it's pharmaceutical industry or the IT industry.발음듣기
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So this looks like a negative, and it is really a negative on some level, but the one I guess you could call it a superficial positive is lower cost for American consumers.발음듣기
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So if you're not one of the people who lost their jobs at the manufacturing plant, and your the great majority of the rest of Americans, it seems like a good thing.발음듣기
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You suppress you currency, your goods are cheap, more production at home, more investment at home, more capital and jobs eventually, point that capital, point that investment back at your own home market and now you are a developed country.발음듣기
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In particular, it's not a trivial thing to make that whole market be as consumptive or as consumer-driven as maybe some of these developed markets abroad.발음듣기
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You're just accumulating this mass of, in this case, U.S. dollars and you're using it to go essentially lend to Americans, to lend to the government, and it essentially gets lent to the American people.발음듣기
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The minute that you stop, let's not even talk about unwinding this, let's say the minute that you stop buying dollars, your currency will inflate and the holdings - these trillions of dollars of assets - will drop in value, because the minute you stop buying dollars, the currency markets will allow the yuan to appreciate, the dollar to drop and so stopping buying leads to drop in value.발음듣기
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If they actually ever tried to unwind this situation, as they start selling these, that would drop the value of whether you want to call it the dollar or the U.S.발음듣기
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So the whole time, in order to keep their currency propped up, they've been buying these assets, they've been buying these dollars.발음듣기
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But the very act of unwinding it will - I won't say make it worthless - but it will make the value of their holdings go down dramatically.발음듣기
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And it's just as hard for the U.S. because if you think about it, a lot of people in the U.S. would look at this and they'd say, hey, this is horrible.발음듣기
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The minute that China stops doing this, stops artificially supporting their currency, or even worse, the minute they start unwinding all of these dollars that they've accumulated, what's going to happen?발음듣기
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They're going to start selling U.S. Treasuries, there's going to be lower demand for U.S. Treasuries because they're not even buying it, they might be selling it.발음듣기
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Now when long-term interest rates go up, that means that borrowing is harder, that people will want more interest to lend you money, that credit card rates will go up and in general, the entire United States economy will go down.발음듣기
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We were so dependent on cheap debt, and when that debt got a little less cheap, everything kind of ground to a halt.발음듣기
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That would be even worse if the Chinese stopped buying our debt and allowed interest rates to go up.발음듣기
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So we are kind of locked in this very perverse cycle, where although it looks like the Chinese are unambiguously I guess, benefiting from this, they are accumulating these assets and the minute that they try to stop accumulating those assets, the value of those assets are going to go down.발음듣기
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And even though the United States looks like it's getting their manufacturing base depleted - and that is true, it is getting its manufacturing base depleted because of this - it is keeping interest rates low.발음듣기
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