1/6
“China currently doesn’t need to conduct asset purchases,” Yi Gang, governor of the People’s Bank of China (PBOC), wrote in the September issue of Financial Research on Tuesday.
scmp.com/economy/china-… via @scmpnews
“China currently doesn’t need to conduct asset purchases,” Yi Gang, governor of the People’s Bank of China (PBOC), wrote in the September issue of Financial Research on Tuesday.
scmp.com/economy/china-… via @scmpnews
2/6
“Conditions allow this because the country’s potential economic growth potential is expected to stay between 5 and 6 per cent, and the yield curve can be maintained at a normal upward slope.”
“Conditions allow this because the country’s potential economic growth potential is expected to stay between 5 and 6 per cent, and the yield curve can be maintained at a normal upward slope.”
3/6
This is an interesting point. I would argue (and so would an increasing number of Chinese and foreign analysts, it seems) that China can only maintain 5-6% growth rates as long as monetary policy accommodates explosive growth in debt.
This is an interesting point. I would argue (and so would an increasing number of Chinese and foreign analysts, it seems) that China can only maintain 5-6% growth rates as long as monetary policy accommodates explosive growth in debt.
4/6
Perhaps more importantly, given regular PBoC scolding of US and European QE, what is the difference between moral hazard and central-bank asset purchases?
Perhaps more importantly, given regular PBoC scolding of US and European QE, what is the difference between moral hazard and central-bank asset purchases?
5/6
With the former, the banks create assets secure in the knowledge that they can pass the risk on to the government, whereas with the latter, the banks create assets and the government buys them whenever it needs to obviate risk.
With the former, the banks create assets secure in the knowledge that they can pass the risk on to the government, whereas with the latter, the banks create assets and the government buys them whenever it needs to obviate risk.
6/6
Are central-bank asset purchases meaningless, or at least unnecessary, in a system underpinned by moral hazard? I wonder if @PMehrling might have an answer.
Are central-bank asset purchases meaningless, or at least unnecessary, in a system underpinned by moral hazard? I wonder if @PMehrling might have an answer.
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