[dalbasal]

I feel like economics has gone backwards, for generations now, in its understanding of monetary/debt/macroeconomic inflation.

I don't think we ha "The Answer" before. But now we don't even have the questions anymore.

A country/economy can't "borrow from the future," or save for the future. We can invest in the future. We can eat the seedcorn, but those are very limited.

China used debt creation, like other economies did/do to catalyze increased economic activity. That economic activity is from the present, not the future. Present construction workers doing work, getting paid..

It demonstrably represents economic potential being realised. The "unsustainable" part is the debt. Meanwhile, paying back the debt (the economy as a whole) creates the reverse process. Economic activity recedes.

I think the prevalence of "jubilee" in ancient culture is a clue. Economies really do need a debt cancellation mechanism to be stable. Bankruptcy is insufficiently scalable.

The west's "solution" has been nationalisation of debt. But, instead of a preprepared plan, it's a chaotic, emergency event that only a handful of bankers understand before it's too late.

We need some new ideas here. China too.

[addicted]

China’s borrowing from the future involves more than just debt. And also, the direction of the debt is not as clear as you would think.

For 1, the Chinese have built up unsustainable infrastructure with very limited usage that needs to be maintained. Even if you jubilee away the debts picked up future generations will still be paying for the maintenance of infrastructure that simply doesn’t have the usage to justify it.

For 2, a very significant amount of debt, especially in the property sector, is owed by massive hundred billion dollar businesses to ordinary people who invested their entire life savings into buying an apartment which has not been built. If you forgive the debt, you end up with the poorest people subsidizing the biggest companies in the world.

[toomuchtodo]

You get to the crux of the issue with point 2. China is a nation of savers. They put their savings in real estate with the idea that line would always go up. That real estate value is going to come down, and China will be old. Enough homes for everyone after haircuts are taken, but not much else. China will look more like Japan or Italy in the future.

[jemmyw]

Using debt to buy a better future is a tried and tested economic mechanism. The idea being that your eventual economy is so much bigger than the debt. Taiwan is an example where it was even potentially risky but still paid off.

China did use debt like this but it has added too much debt at the provincial and company level for things that won't pay back ever.

Western countries do this too. If the US used debt to fund some of the infrastructure projects it sorely needs then that might pay off. If it uses debt to keep taxes lower then that can't have a payoff. It does both of course, but more on taxes and maintenance than on infrastructure.

What countries could do with is a way to stop themselves being able to make these bad decisions on spending. The EU had an idea of fiscal rules that you needed to implement to be part of the club, and that did help clean up some newly joining economies... but then everyone in the EU already just ignores the rules.