Comment by amrocha
1 month ago
I never said anything about lending infinite money, don’t straw man me.
The constraint is on real resources, which China has plenty of, regardless of how much debt they have.
The financial situation is an accounting detail. China could decide to write off all debt it owes to itself tomorrow, and literally nothing would change.
> I never said anything about lending infinite money, don’t straw man me.
You did say...
> There actually literally is a free lunch. Debt owed to the government by itself isn’t real
Which I think is reasonable to interpret as lending infinite money.
> The constraint is on real resources, which China has plenty of, regardless of how much debt they have.
I'm not even sure what you're saying here. Constraint on what? Money? Economic growth?
Assuming you mean money, it doesn't make much sense. Ok, China has lots of real resources. In order to pay down debt, they need to turn those resources into money. They can certainly create the supply, but they also need demand.
It's like Canada saying they have infinite resources in their timber. "We'll just cut down the wood and sell it". Well there isn't infinite demand for timber, so in fact, having a lot of resources doesn't mean you have endless money.
> China could decide to write off all debt it owes to itself tomorrow, and literally nothing would change
Absolutely not true. Look at the real estate developers. China is working hard to get them out from under the crushing debt they have. If, as you claim, they could "write off all debt, and literally nothing would change", why didn't they.
The answer is that China is mostly a market economy. Writing off debt has massive consequences bothing domestically and internationally.
This is the trade off China made when relying on the free market for growth. If they want to leverage the free market, then they are held to the free market's rules (which they are currently dealing with).
I don’t think that’s reasonable at all.
Can you imagine a world where a government could spend infinite money without any problems? If you can’t, then why would someone else think that? If you thought my understanding of macroeconomics was different from yours and you were genuinely curious, it would have been a good idea to start by asking questions. Or if you thought I was an idiot you could have just ignored me. But you chose to assume an obviously ridiculous premise to my comment and reply based on that. That’s the definition of a straw man argument.
If you still care to know, the constraint on government spending is real resources (and whether they can be usefully utilized of course).
I don’t know about the real estate situation in China, and I don’t know if it was financed by private debt or public debt, so I can’t comment on it.
Ok, so if you agree that infinite spending is impossible, and resource extraction is limited by the market, then what do you mean by:
> There actually literally is a free lunch
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