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Bulletins and News Discussion from March 10th to March 16th, 2025 - The New World Struggles To Be Born; Now Is The Time Of Proxy Wars - COTW: Myanmar

Image is from Wikipedia's article on the war..

I've wanted to cover Myanmar for a while now but haven't had the needed knowledge to write much more than "This situation really sucks." After doing a little reading on the situation, I feel even more confused. A decent analogy is the Syrian Civil War, at least while Assad was in power (though it's still pretty true today) - many different opposition groups, some co-operating with the United States, others not. The main government supported partially by an anti-American superpower, but who could live with that government collapsing if there are deals to be made with the group coming into power. A conflict kept going and exploited at least partially by the United States and other imperial core powers, though with plenty of genuine domestic animosity and desires for political independence.

Recently, the Myanmar government - the mainstream media uses "junta", which is probably accurate despite the connotations - has promised elections at the end of 2025. This doesn't seem likely to happen, and even if it did, how this would work in a country as war-torn as Myanmar is unclear. The government is losing territory and soldiers at a quick pace; they now hold only 21% of the country, though that 21% does at least comprise many of the cities. It's difficult to get a handle on the number of people affected because civil wars and insurgencies have been ongoing in some shape or form for decades, but we're talking at least millions displaced and thousands of civilians killed.

Here's a comment by @TheGenderWitch@hexbear.net from fairly recently that covers the situation in Myanmar:

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1K comments

  • @xiaohongshu@hexbear.net I have a question for you, my dear comrade.

    China, as we know, undervalues its currency in order to be more appealing to exports and to secure a better position in the international market. On the other hand, China recently confirmed that the public deficit will grow to be of 4% for the year 2025. Seeing as China is systematically devaluing its currency in the international market, is there any reason why it doesn't just ramp up expenditure a lot further? Social services could certainly be improved and there is a growing concern for unemployment. Is there anything other than neoliberal brainworms preventing the government from doing this?

    Thank you in advance

    • Good question. I was thinking whether I should explain it in MMT terms but from your other replies, you seem to already have some familiarity with it so it’ll be quite easy for you to understand.

      You are absolutely right in that from an MMT perspective, the Chinese government can simply create the money it wants to fund social spending etc.

      However, such mechanism does not exist when it comes to RMB issuance within China’s central bank (PBOC). Since the 1994 “exchange rate reform” that unified the dual exchange rate regimes and the depreciation of the yuan from 5.8 / USD to 8.7 / USD, and especially since joining the WTO in 2001, the expansion of the yuan monetary base has come primarily from accumulation of foreign reserves (at one point, it reached 90% of all new currency issued). After 2014, as the US ended its quantitative easing, export revenues dropped sharply and China has since maintained ~$3.2T USD of foreign reserves to this day. The proportion of foreign currencies in monetary base has since dropped from 90% down to 40-50%, and the rest is replaced by the central bank issuing various forms of financial instruments that collateralize assets e.g. repo, SLF/MLF, etc. to finance the creation of new monetary base.

      From 2003-2013, the yuan monetary base increased by ~21 trillion yuan (8.5x expansion), and nearly all of which came from foreign reserves. In other words, Chinese exporters earned dollars/foreign currencies, sold them to the PBOC, the latter then bought US treasuries or other form of securities and kept them as “foreign reserves”, and in turn issue an equivalent amount of yuan into the economy (e.g. depositing into the bank accounts of the exporters).

      Of the 21 trillion newly issued yuan from 2003-2013, ~13 trillion (62%) went into real estate and other speculative domains. The other 8 trillion entered the real economy but because the RMB issuance mechanism was so heavily reliant on earning foreign currencies, a large part of those 8 trillion went into export-oriented sector as opposed to the domestic-oriented sector.

      As such, financing of domestic-oriented economy became deprioritized. This drove local governments to borrow from commercial banks and private investors to build infrastructures and high speed rail (instead of directly financed by the central government). At the same time, because the high proportion of foreign reserves drove down the bank reserve interest rate (lower than deposit rate), this forced commercial banks to raise their lending rate and this ultimately led to a proliferation of shadow banks. Prior to 2014, local governments were not allowed to issue their own debt/bonds, and as such borrowed through these shadow banks with high interest rates, and this formed the mountain of “hidden debt” that has continued to strain the local government finances to this day.

      As you can see, these are all very regressive methods of financing a government project from an MMT perspective.

      Let’s say you are a local government and want to build a hospital or a high speed rail station, you have to borrow from the banks or issue bonds to attract funding from private investors. First, exporters earn foreign currencies and sell them to PBOC, which are then kept as foreign reserves (the PBOC then issues new RMB currencies into the banking reserve to increase the monetary base). Because commercial banks are required to keep a minimum reserve requirement ratio (RRR), the more reserves there are in the banking system, the more the banks can lend.

      Second, because economic growth is reliant on export, the funds from bond holders would also likely come from earning foreign currencies first (or through secondary effects of export revenues being used to fund domestic development).

      In either case, the financing has to first come from a foreign country willing to spend their money on Chinese goods (i.e. the US running a huge and persistent trade deficit).

      On the other hand, let’s see how the RMB issuance mechanism would work under an MMT framework (China having full monetary sovereignty): PBOC directly creates new issuance of yuan into the reserve system of the commercial banks, and commercial banks then deposits bank accounts of the companies contracted to build hospitals/high speed rail stations. The excess reserve was then soaked up by the Chinese government issuing government bonds, purchased by the PBOC.

      Note the very important difference here: the MMT financing mechanism involves the government directly buying from the local economy (new money injected directly into the economy), whereas the current financing mechanism that China employs often relies on selling stuff to foreigners first AND borrowing from commercial banks which increases the systemic risk of a banking crisis e.g. commercial lending creates assets for the borrowers (deposits in the local government account to build infrastructure) but also liability for the creditor (local government has to repay that debt in the future) - no new money is directly injected into the economy. If export revenue does not increase, then the broad money supply (e.g. M2 per IMF definition) expands but the monetary base stays the same.

      With regards to the new Chinese government budget of increasing deficit to 4% - this is a good thing and will certainly increase spending on welfare etc. However, whether an increase from 3 -> 4% is enough to offset the slowing consumption, only time will tell. More importantly, this increase in deficit is may or may not be permanent (many countries increase their deficits during recessions and then pull back when the economy stabilizes). This is opposed to the MMT framework of calling for permanent deficit spending. In other words, the local governments would not have been mired in such a huge amount of debt (no need to borrow in the first place) had the financing mechanism was conducted this way. China would not have a problem with funding social welfare and other public services at all.

      Finally, I will go through one more set of figures with you, as an example: following the 2009 GFC, the Chinese government immediately a 4 trillion yuan stimulus to keep the economy from going into recession.

      Of the 4 trillion yuan, 1.18 trillion came from the central government, which was financed by issuing government bonds. The other 3.82 trillion came from local government and private sector financing. The local governments soon followed with their own initiatives that added another 18 trillion yuan into the stimulus, which was financed by borrowing from the banks or private investors.

      All of the information above came from Jia Genliang’s 2018 book《国内大循环：经济发展新战略与政策选择》(The Great Domestic Circulation: New Strategy and Policy Choices for Economic Development), who is the foremost MMT/Marxist professor at the People’s University today.

      As you can see, whenever the Chinese government increases its deficit spending, it has to be funded from somewhere else. This is a “hard currency” approach as opposed to the “soft currency” financing that MMT is advocating.

      Hope this makes it clear. Let me know if you have any other questions.

    • You cannot rappidly expand the fiscal deficit without the government/state banks issuing more dept. So if you want to jump to idk 8% then the question becomes "who is generating the debt that drives the huge increase in money circulation" now that you (China) are killing land finance. What is the asset base backstopping financial activity that goes hand in hand with that money generation now that land is not the fulcrum? Helicopter money drops still require central bank operations to issue a ledger, aka debt. No market economy has a choice on this matter. You either generate collateralized asset to expand the monetary base & drive money circulation (and increased deficit spending) or you don’t have a market economy. China right now is a market economy through and through. It has little to do with neoliberalism. Xiaohongshu mentioned the USSR in the 30s in the past but they werent a market economy , not financialized or globalized to the slightest, and so they could expand their monetary base, spending and speculation immune from market forces and behaviors

      So one should think of land sales in the Chinese economy the same way one thinks of Treasury Bills in the US economy. T Bills are the US’s unique magic sauce. That’s what the US economy discovered when FDR made war bonds go BRR. Capital formation is whatever collateral you can issue as a promise for future repayment. It doesn’t need to be land. The US didnt and couldnt expand its fiscal deficit without ramping up the issuing of more treasury bills. In China's case for specific historical factors it was land, for better or for worse. We cant change the past. Even if China wanted to rapidly expand its deficit spending the first task and prerequisite is to shift the basis of capital formation away from land sales and towards more abstract financial instruments but it cant happen overnight. What is needed is a new ,mature, credit generation mechanism that fits China's current state of development, administrative capacity and local finances.

      Details MUST be very ironed out before attempting such expansions. Sure China is attempting to develop their bond market for example and is slowly itching towards tax reforms but its not nearly there to support lets say a doubling of deficit spending within one year. Until local finances are sufficiently unlinked from land sales and the bond markets and tax system are sufficiently mature and reformed MMTing that shit cant happen either. Restructuring must come first before any large monetary expansion but also happen slow and controled enough to not cause a bigger crisis. A delicate balance and gradual process but one that China is walking at the momment efficiently

      Many chinese economies advocate (more conservatively) for that direction ,even before and during this plenum. The holdup is in the details of what the specific circulation and dept generation mechanisms will be and how they should work, how to steer them to the right kinds of activities and behaviors, use of credit, resources mobilised, the system’s turnover velocity etc

      And another thing to keep in mind is that even with increased deficit spending while money going to education/healthcare etc does increase, people shouldnt expect China doing money transfers to citizens and households. China is completely different from how any european welfare state opperates not because they are neoliberals but because they are doing "capex socialism" if you will. They are and will be subsidizing supply and doing distributionalism through infastructure building and expanding their services without increasing costs (along with many in kind transfers and programs) before doing UBI or writing checks to families. They’re brilliant at scaling up supply so everything remains cheap so that with growing incomes households spend fewer quantities of their income for the same or more quantities of goods. In other words they have households making a profit relative to firms, a consumer surplus. Its pre-distributional vs post-distributional welfare economics. One reason Chinese savings rates are so high isnt because consumption is being suppressed but because sellers don’t have market pricing power over buyers.

      They have been running supply side deflation biased policies for more than two decades now and have no intention of stopping, but have gotten slight inflation through aggressive credit expansion as the offset pressure. The latter flagged after land finance died, so we’re just left with the deflationary supply bias until they can restore an expansionary credit cycle, which requires completing the rotation from land to sovereign finance.

      • You cannot rappidly expand the fiscal deficit without the government/state banks issuing more dept

        Can you explain this? Hiring 1 million teachers and doctors looks like a way to expand fiscal deficit without debt to me. Why do you link fiscal spending to debt? The Chinese central bank can create RMB at will and use it to pay salaries.

        Helicopter money drops still require central bank operations to issue a ledger, aka debt

        Again, why is this so? What prevents the Chinese policy makers from literally creating money to hire more public workers in welfare? I don't see why it has to be linked to any debt.

        So one should think of land sales in the Chinese economy the same way one thinks of Treasury Bills in the US economy.

        Sure, I'm not aware of the technicalities of the land sales in the Chinese economy, but the US can literally create dollars out of nowhere without the need for treasury bills. It constantly does so, as a matter of fact.

        The US didnt and couldnt expand its fiscal deficit without ramping up the issuing of more treasury bills

        This is from the times before the gold standard was abandoned in the US. The US at the time artificially limited the amount of currency it could issue by offering the possibility of exchanging dollars for gold at a fixed rate in the central bank. This is no longer the case with the dollar, nor is it with RMB, this artificial limitation was lifted.

        The rest of your comment goes further on China's supposed limitation for deficit based on debt issuing, have you ever studied MMT and the idea that currency is created at will by central banks?

        • MMT just describes how fiat money works yes. All currency is sovereign issued, and all money issuance is credit with a liability on the other side of the accounting book. So in a fiat system, all money creation also creates a matching "debt". How much should you care about it is another issue. But Government money creation does come with a net position of indebtedness/liability, a "borrowing" in just balance sheet terms, cause all financial assets, as in the total financial equity across the economy, sum to zero at any time. And for the central bank/government to assume that net position of liability and issue accordingly, it has to do so against something on the asset side.

          MMT may say that the US issuing TBills for that role is a self-imposed theater/restriction and a relic to the extent that the Fed could buy the bonds directly or that you could skip the whole bond thing and introduce a simple line of credit at the Fed that the US Treasury can always borrow on at a perfectly reasonable interest rate. But it doesnt deny that a mechanism will exist

          • All currency is sovereign issued

            This is not true. Commercial banks can also create deposits through loans, but this comes with matching liabilities. In fact, this is the primary mode through which currency is created in the Chinese economy today. The broad money supply is many times greater than the yuan monetary base.

            Government debt is simply a reserve drain for countries with monetary sovereignty under the MMT framework. It has nothing to do with the debt financing as you’d do in the EU where countries that cannot issue their own currencies.

          • I don't think we agree

            all money issuance is credit with a liability on the other side of the accounting book

            That's not necessarily the case. The state can, for example, print a bill, there's no accounting book there. The debt is itself represented by the bill, but that's hardly "the issuer going into debt", it's just "the owner of the bill has the right to request goods or services for a value equal to that of the bill".

            Again, to my question: isn't it true that the Chinese government could simply decide to hire a million teachers and pay them all in newly minted (in contemporary times digital) currency? What kind of backing would it need? Why do you think it would require any incur in any debt to do so?

            or that you could skip the whole bond thing and introduce a simple line of credit at the Fed that the US Treasury can always borrow on at a perfectly reasonable interest rate. But it doesnt deny that a mechanism will exist

            I do deny it, and from what I understand, MMT economists deny it too. The Fed could literally type the sum into a keyboard, and make the money appear in the bank account of the Treasury. No loan, no interest rate, literally spawning the currency into a bank account. After all it's just a number in an account. Where's the problem with that?

            • This isn't entirely related to your original arguments, but I wanted to express that there are Marxist criticisms to MMT and push back on ideas that suggest we can print money with no end and that money is just a number. And even MMT theorists themselves admit that MMT doesn’t means you can print money without real repercussions.

              The heart of the Marxist critique of MMT isn't that it disagrees that banks can create money (they can) but it is that MMT ignores value and some MMT proponents get the idea that money can be somehow disconnected from the material realities of production. Printing money doesn't, by itself, create real value in the economy that the money must refer back to.

              From Michael Robert's article https://salvage.zone/the-modern-monetary-trick/

              Money only has value if there is value in production to back it. Government spending cannot create that value... Productive value is what gives money credibility. A productive private sector generates the domestic product and income that gives government liabilities credibility in the first place. When that credibility is not there, then trust in the state’s currency can disappear fast, as we have seen in Venezuela, Zimbabwe and Argentina.

              The claim that governments can spend money and run deficits without the constraint of the burden of rising debt is not really new, or radical. Keynesian economic theory has always argued that government deficits and rising public sector debt need not become ‘unsustainable’, as long as the extra spending produced faster economic growth. If real GDP growth is higher than the interest cost on the debt (g>r), then (public) debt can be sustainable. Indeed, this is the argument put forward by mainstream Keynesians, and now even the likes of the IMF and the Fed. All MMT seems to be adding is the claim that governments don’t even need to increase debt in the form of government bonds, as the central bank/state can ‘print’ money to fund spending. 

              But even MMT theorists admit that there are real constraints to money creation.

              But there are constraints on government spending, that MMT admits to. According to Kelton, ‘the only economic constraints currency-issuing states face are inflation and the availability of labor and other material resources in the real economy’. Those are two big constraints, it seems to me. According to MMT, inflation arises after unused capacity in an economy is used up, so that there is full employment of the workforce for given technology. When there is no extra capacity, and supply has reached its limit, more government spending financed by printing money will be inflationary and prices will rise. The state may control and issue the currency, and governments may never run out of it, but the capitalist sector controls technology, labour conditions and the level of skills and intensity of the workforce. In other words, the state does not control the productivity of labour – real value – with its dollar printing. An economy is limited by productivity and the size of the labour force when fully employed, so if the government goes on pumping money in when output cannot be raised further, inflation of commodity prices and/or in speculative financial assets will follow. And MMT supporters are well aware of this risk. In the words of the leading MMT academic, Bill Mitchell: 

              Think about an economy that is returning from a recession and growing strongly. Budget deficits could still be expanding in this situation, which would make them obviously pro-cyclical, but we would still conclude the fiscal strategy was sound because the growth in net public spending was driving growth and the economy towards full employment. Even when non-government spending growth is positive, budget deficits are appropriate if they are supporting the move towards full employment. However, once the economy reached full employment, it would be inappropriate for the government to push nominal aggregate demand more by expanding discretionary spending, as it would risk inflation.

              This can be viewed through the equation of exchange

              vM = PT

              Where v is the velocity of money, M is the amount of money in the economy. P is the price level and T is the volume of transaction. Even though the equation is typically used in the Quantity Theory of Money, the equation itself is a bit of a tautology (by the definition of the velocity of money) and Marxists, MMT (noninalists) and Quantity Theorists argue on the causality of the parameters. That's a bit of a tangent though, but arranging the equation for the price level you get

              P = vM/T

              A bank can make money by issuing loans (increasinf M). There's no disagreement there. And typically the extra money does go into boosting the production of goods (so T incrases). So as long as the extra money creates extra goods by allocating labor to sectors (and hence creating real value) then there is no inflationary pressure.

              But there are productive, material, limits to an economy. The labor supply is a big one. When full employment is reached and there is no extra output, or value, that can be produced, then there is an inflationary pressure.

              And MMT theorists even admit this.

              Another limitation of MMT that Michael Hudson and Michael Roberts both mention is that it is a theory of domestic money creation. It doesn't help with the creation of foreing currency obviously. So there are limitations in its use in international exchange. As well as for nations that have no sovereign currency, obviously.

              • Thanks a lot for your detailed comment too.

                Yeah, my point wasn't "just print infinite money". You specifically mention inflationary tendencies as one of the main limiting factors to currency issuing. My point was rather that China generally doesn't suffer from inflationary tendencies, to the point that it decides to undervalue its own currency in order to make exports more attractive.

                A proposed policy in my opinion would be to stop this artificial undervaluing of the currency, and instead achieving this undervaluing (if it was desired) through massive currency issuing for imports. Why just give away your money for cheap, when you can instead bring your money down by issuing more of it and acquiring goods and services for the population in the international market? This currency in foreign reserves wouldn't create inflationary tendencies in China because it's not in the economy, and additionally, the increased supply of goods and services through import could enable the increase in national deficit without incurring in inflation risks (more money but more goods and services). This way you could improve material conditions and welfare for the population, create new employment, and still run a low value currency that makes exports attractive to the international market and boosts your production for that extra economic growth.

              • The most important part of MMT is that sovereign currency states aren't limited by money but by real resources, that's the functional finance (as opposed to sound finance) part of it.

              • Keynesian economic theory has always argued that government deficits and rising public sector debt need not become ‘unsustainable’, as long as the extra spending produced faster economic growth. If real GDP growth is higher than the interest cost on the debt (g>r), then (public) debt can be sustainable. Indeed, this is the argument put forward by mainstream Keynesians, and now even the likes of the IMF and the Fed.

                This is not true. Keynesians argue that deficit spending should be increased during crisis (e.g. a recession) to stimulate the economy but not during normal times. In fact, Keynes himself was a proponent of austerity when the economy is not in crisis.

                MMT specifically argues for a permanent deficit spending, which is very similar to what Stalin did for the USSR from 1929-1955 until Khrushchev defaulted the Soviet mandatory bond in 1957.

                All MMT seems to be adding is the claim that governments don’t even need to increase debt in the form of government bonds, as the central bank/state can ‘print’ money to fund spending.

                This is also not true. It is an entirely different framework to understand and implement a monetary system that could fundamentally shift the entire economic structure for a country like China (see my other comment to the OP that explains how MMT could drastically reduce the systemic risks inherent within China’s economy today).

                • Hey thanks for the response. Your comments are always interesting and full of detailed information. I see the distinction you're making between Keynesianism and MMT, and that’s something I’ll think more about. The quotes above ste for Roberts, and perhaps he is citing others in a Keynesian (or even post- or neo-Keynesian tradition, not sure??) My point was more about how mainstream Keynesianism justifies deficit spending under certain conditions and a Marxist critique I am aware of that tries to being value back in the picture. But I get that MMT frames things differently, and you are also pulling from an author that blends MMT and Marxism. That's worth checking out. I’m still working through different perspectives on this, so I’ll look into what you’re saying further.

                  In any case, I appreciate the discussion. It’s always useful to see these different perspectives laid out clearly!

            • all government spending is done just like that in the end typing numbers into accounts, bond issuance is merely to maintain target interest rate and to provide free money to bondholders. but bond issuance isn't necessarily required to maintain target rates now since many central banks offer interest on reserves.

              as for fiscal deficit, the government can't really tell what the fiscal deficit will be, they can only make projections, for example, lets say Government makes a budget in January where they project $100b expenditure and $90b revenue, that $90b is projected, with that projection the deficit is 10% with expenditure as the base.

              but let's say a pandemic hits, or there is a civil war and there is a huge collapse in demand and employment, this causes tax revenues to fall and welfare spending to rise automatically, the actual expenditure at the end of the year ends up being $110b and actual revenue is only $80b. the real fiscal deficit ends up being 27%.

              this can be a huge problem for countries that run currency boards, use foreign currencies (like Greece) where tax revenues falling means the Government may not able to float bonds at low rates (they cant just add numbers to accounts since they dont control it). but sovereign states can float its own currency bonds at whatever rate it desires, since it is risk-free, but as I said, it's not even necessary now.

              The sovereign issuing capacity isn't magic, for example, let's say the wheat production in a country is barely enough to sustain its population, a drought comes and destroys half the crops, if the Government tries to maintain its spending, hyperinflation could occur (food shortage won't go away), on the other hand, if it cuts spending or raise taxes, it will only increase tax burden while not increasing food. the issue is food, not whether spending is too high or too low.

              the Government can use its taxing and spending powers to say, improve irrigation to prevent droughts from being so damaging, so long as there are people who are unemployed and adequate resources (water, tools, pumps), this can be done, but it takes time. so, in case of such sudden shocks, the immediate solution is to ask for foreign aid (but that can be limited too) and use rationing so that everyone gets something at least, some level of malnutrition and starvation is inevitable in any case.

1040 comments