Most of the economic commentators are not only incompetent and useless, speaking only from the Ministry of Finance, but they are also the ones who brought about Japan's great stagnation in 1990 and the deflation that continues to this day.
I have hit the nail on the head when I say that Hideo Tamura, unlike them, is a real person who publishes his economic theories based on the knowledge he has accumulated over the years through his research and conviction.
The nightmare of Xi Jinping's regime as U.S. interest rates rise
China has been a parasite on international finance supported by the low-interest rate of the dollar, but in March, the Federal Reserve will start raising interest rates.
Money will flee China en masse, and there are fears of a financial crisis.
The prediction that China's gross domestic product (GDP) will overtake the U.S. and become the world's largest in another ten years is unreliable.
The global economy is a set of the real economy, reflected in GDP, and the financial economy, consisting of financial assets and liabilities.
The financial sector continues to expand and overwhelm the GDP.
According to the International Monetary Fund (IMF) statistics, the total financial debt of the world as a whole was 1.5 times the GDP in 2005, and it will be 2.3 times in 2020.
The U.S., which holds the reserve currency, the dollar, is the leader of global finance, and it collects surplus funds from Japan and other countries around the world to expand its "liabilities." Still, at the same time, it redistributes them around the world to increase its "assets.
The excess of liabilities over assets (net liabilities) for the past 20 years is over $14 trillion for the U.S. and just under $2.6 trillion for the world as a whole, meaning that 5.4 times the world's net liabilities are concentrated in the U.S. (just under 1.3 times in 2005).
Debt, in other words, loans, may not sound good to the hard-working Japanese people, but in today's global capitalism, the borrowers of vast sums of money become rich while the lenders become poor.
A typical example is the world's largest debtor nation, the United States, and the world's largest net creditor nation, Japan.
In 2020, Japan's net external credit to GDP ratio will be 68%, while the U.S. net debt to GDP ratio will be 67%, forming a mirror image.
GDP (in dollars) in the U.S. is more than 2.7 times higher than 25 years ago, while it is 0.91 times higher in Japan.
Japan's GDP has shrunk due to the government's stubborn adherence to a deflationary policy, and the excess money, instead of flowing into the domestic market where there is no demand for funds, has poured into the dollar financial market, supporting the low-interest rates of the dollar.
U.S. financial capital redirects the vast amount of money from Japan and other countries to countries and regions where it can expect high profits.
The largest investment and loan destination is China, which has grown at a high rate.
If the U.S. raises interest rates, the world's money will flow in the opposite direction.
The graph shows the policy rates of the U.S. and China and the capital flight from China.
Capital flight refers to money that cannot be captured in the balance of payments statistics and is called "error leakage" in China.
For a leak, it's not half bad.
In China's financial system, the People's Bank of China, the central bank, issues yuan in proportion to its foreign exchange reserve assets, mainly dollars.
Doing this raises the interest rate on the yuan higher than the dollar rate to attract foreign currency inflows and avoid capital outflows from the country.
The period of the high capital flight lasted from 2015 to 2018 when capital flight intensified as the interest rate differential narrowed due to the U.S. interest rate hike.
The U.S. interest rate hike began in December 2015, and the surge in capital flight started even before that.
It was triggered by the devaluation of the yuan against the dollar.
After the U.S. interest rate hike, banks' non-performing loans began to swell, giving the appearance of a financial crisis.
Fed Chair (then, current Treasury Secretary) Janet Yellen postponed an additional interest rate hike until a year later, fearing that it would spread to the U.S. financial markets.
Capital flight from China has been shrinking for the time being since the fall of 2019 when the Fed turned to rate cuts.
In response to the new coronavirus disaster in 2020, the Fed turned to a U.S. policy rate of 0.125% and a hostile, actual interest rate policy that takes inflation into account. Still, the capital flight has resumed since the fall of 2020.
Summers, a former Treasury secretary close to the Viden administration, argues that the Fed should raise interest rates at every monetary policy meeting from March until the end of the year to curb high inflation.
If so, the speed and breadth of rate hikes will resemble 2016.
The Chinese economy is experiencing a significant slowdown due to the bursting of the housing bubble.
About 50 percent of China's GDP is accounted for by fixed-asset investment, mainly in housing development, but there is no alternative economic driver to housing.
Amid the economic downturn, the People's Bank of China has no choice but to continue its low-interest-rate policy.
Since 2020, the Xi Jinping administration has allowed wholly-owned subsidiaries of major U.S. financial capital firms to increase their debt by investing in securities directly incorporated into foreign exchange reserves.
However, the capital flight has been so large that the foreign reserves have hardly increased.
According to the latest balance of payments statistics, the increase in external debt in September 2021 compared to the end of 2019 was $625.6 billion. Still, the extreme level only increased by less than $9.3 billion.
Although it appears to be the world's largest economy with foreign currency reserves of $3.2 trillion, the external debt is $2.7 trillion, and the net foreign currency reserves are just over $500 billion.
The U.S. interest rate hike will expose China's vulnerability as a parasite on dollar finance.
Foreign investors have given up on China and are pulling out of securities investments in China.
Greedy Chinese party officials and their families will move their assets overseas through back channels, defying the Xi administration's restraints.
Will this be the start of a nightmare for the Xi regime?
