Re: General Theory Seminar --Savings and Investment

["ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

Field data on the relationship between deflation and savings.

Henry C.K. Liu

China adopts CPI as main indicator

China has adopted the broader consumer price index as its measure of inflation,
according to the state development planning commission. The broader CPI replaced
the retail price index as the benchmark for inflation because it is more
representative of economic growth and consumer spending, according to Wang Yang,
commission vice-minister. Mr Wang said the CPI, which includes services,
fell 0.2 per cent year-on-year in January, but said it was expected to turn
positive later in 2000. RPI fell a preliminary 2.9 per cent in 1999, while CPI
dropped 1.3 per cent.


Chinese savings hit $727.8bn

Personal bank savings in China rose 11 per cent to Yn6.0242 trillion ($727.8bn)
in the year to the end of January 2000, continuing a runaway increase. Savings
rose Yn761.5bn in 1998 to Yn5.34 trillion,
representing 67 per cent of gross domestic product. Cutbacks in the social
security network and rising unemployment have helped drive more Chinese to save
and given the country one of the highest savings rates in the world. The Chinese
government has imposed extra taxes on bank interest and cut interest rates in an
effort to counteract nagging deflation.


"ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" wrote:

> John O'Donnell wrote:
>
> > However, with hyperinflation or its opposite [Yet to be seen?]
> > hyperdeflation, the question of liquidity becomes a bit suspect.
> > Liquidity during a hyperinflation is suspect because people
> > can't get rid of it fast enough to contain losses and if there
> > ever is a hyperdeflation because people would hold onto money as
> > long as possible making it unavailable for trade.
>
> As happened in Hong Kong in 1988-99 and in Japan for the last decade and even
> now and in China starting in 1999.  People held back from buying under the
> expectation that prices have not hit bottom.
>
> Henry C.K. Liu