This is going to be so interesting to watch unfold. You’ve got essentially two generations of Chinese who feel enslaved, unappreciated, and watched 24/7, and now they’re going to be paid in what they are likely to regard as money of dubious value. Will they surreptitiously start an underground economy based on the US dollar, or black-market goods? Will it all fall apart in some unpredictable way?
This reminds me of something that happened in the 1980s. Two major players in speculation - I think it was the Hunt brothers - decided they were going to corner the world’s market in silver. They had every detail worked out beautifully, but they were unaware of one cultural change that destroyed their plans. The change was that the Chinese communist party decided that it was okay for peasants to own silver once again, after it had been banned for a couple of decades. Well, for millions of peasants, the family ancestral wedding silver jewelry was the only wealth they had, so when the Revolution came, it was all buried and hidden so that it wouldn’t be confiscated. But once it was legal, everyone dug up their hidden wealth and flooded the world’s silver market, because they would rather have refrigerators and bicycles than ancestral jewelry (and because they figured they better spend it before it became illegal again). So,how will a billion ordinary Chinese citizens upend THIS new economic centralized plan?
I happened to be working at Bache when it was nearly bankrupted by the Hunt Brothers Silver Crisis. (Prudential stepped up and rescued Bache.) So one might think I would be aware of the Chinese factor, but I was not. Thanks for sharing.
I would love to hear your story! I read about the Chinese aspect in a long article in the Wall Street journal that detailed how the Hunt brothers’ plan should have worked, but didn’t. It stuck in my mind that the best laid plans of mice and men can be undone by these big cultural changes in other countries that never even cross your radar.
Black markets have always been a fixture in tightly regulated markets controlled by a central governing authority. I do not know the extent of black marketeering in China, but I would be surprised if it was not extensive.
However, what will upend the CCP's plan for the eCNY is the reality that the Chinese do not want to hold that currency. Every consumer in China has an easy way to avoid holding eCNY--just spend it.
Even the economists at the Federal Reserve are savvy enough to understand that accelerating spending is going to push inflation up and not down. A nation of 1.3 billion people choosing to live paycheck to paycheck is not going to help China's economy climb out the doldrums.
Time for a little gushing, Mr. Kust. You are excellent with details and with the big picture, with your understanding of both human nature and economic theory, with savvy analysis and wise insight. I value every column you write, and consider the money I’ve spent as a paid subscriber to be a terrific bargain. Thank you, thank you for your hard work and brilliant analysis!
This is going to be so interesting to watch unfold. You’ve got essentially two generations of Chinese who feel enslaved, unappreciated, and watched 24/7, and now they’re going to be paid in what they are likely to regard as money of dubious value. Will they surreptitiously start an underground economy based on the US dollar, or black-market goods? Will it all fall apart in some unpredictable way?
This reminds me of something that happened in the 1980s. Two major players in speculation - I think it was the Hunt brothers - decided they were going to corner the world’s market in silver. They had every detail worked out beautifully, but they were unaware of one cultural change that destroyed their plans. The change was that the Chinese communist party decided that it was okay for peasants to own silver once again, after it had been banned for a couple of decades. Well, for millions of peasants, the family ancestral wedding silver jewelry was the only wealth they had, so when the Revolution came, it was all buried and hidden so that it wouldn’t be confiscated. But once it was legal, everyone dug up their hidden wealth and flooded the world’s silver market, because they would rather have refrigerators and bicycles than ancestral jewelry (and because they figured they better spend it before it became illegal again). So,how will a billion ordinary Chinese citizens upend THIS new economic centralized plan?
I happened to be working at Bache when it was nearly bankrupted by the Hunt Brothers Silver Crisis. (Prudential stepped up and rescued Bache.) So one might think I would be aware of the Chinese factor, but I was not. Thanks for sharing.
I would love to hear your story! I read about the Chinese aspect in a long article in the Wall Street journal that detailed how the Hunt brothers’ plan should have worked, but didn’t. It stuck in my mind that the best laid plans of mice and men can be undone by these big cultural changes in other countries that never even cross your radar.
Black markets have always been a fixture in tightly regulated markets controlled by a central governing authority. I do not know the extent of black marketeering in China, but I would be surprised if it was not extensive.
However, what will upend the CCP's plan for the eCNY is the reality that the Chinese do not want to hold that currency. Every consumer in China has an easy way to avoid holding eCNY--just spend it.
Even the economists at the Federal Reserve are savvy enough to understand that accelerating spending is going to push inflation up and not down. A nation of 1.3 billion people choosing to live paycheck to paycheck is not going to help China's economy climb out the doldrums.
Time for a little gushing, Mr. Kust. You are excellent with details and with the big picture, with your understanding of both human nature and economic theory, with savvy analysis and wise insight. I value every column you write, and consider the money I’ve spent as a paid subscriber to be a terrific bargain. Thank you, thank you for your hard work and brilliant analysis!
Thank you for your kind words! They are truly very much appreciated!