China’s Mountain Of Debt Is About To Crumble

Naked Capitalism has the article China’s Mountain Of Debt Is About To Crumble.

Hordes of China’s private firms are now going under after guaranteeing other’s loans.

I think it might have been Steve Keen that has been talking about the Chinese debt crisis for a long time. Since I knew Keen was a firm believer in MMT, I couldn’t understand why he was so concerned about debt in China. Someone finally woke me up to the fact the problem was private sector debt, not government sector debt. Lately, I have been reading what Michael Hudson has to say about private debt to the rentiers in the FIRE sector in the USA – similar results will ensue.

Perhaps the solution is for the Chinese Central Bank to go into the retail banking business of lending to the under-served parts of the private sector. As we have known since Keynes explained this in the 1930s, just pushing money out to institutions does not make them spend it the way the government wants them to. At some point the government has to spend the money directly to the recipients it wants the money to go to.

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