tag:blogger.com,1999:blog-7820485130017459619.post603840886488714349..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: The Rise and Rise of ChinaUnknownnoreply@blogger.comBlogger19125tag:blogger.com,1999:blog-7820485130017459619.post-43677003591675700902009-09-16T13:11:36.804-07:002009-09-16T13:11:36.804-07:00A few more links off the topic but interesting.
&...A few more links off the topic but interesting.<br /><br />"Inflation falls to lowest since January 2005"<br /><br />http://www.guardian.co.uk/business/2009/sep/15/consumer-price-inflation-cost-of-living<br /><br />Consumer Price Index (CPI) fell to 1.6% in August, above the consensus forecast of 1.4%.<br /><br />The RPI measure of retail price inflation, which includes housing costs and is used as a benchmark for pay deals, stood at -1.3% in August against -1.4% the month before and analyst forecasts of -1.5%.<br /><br />A lot more could be said about how this is possibly misleading besides the headline - and check the comments - lot of people complaining that prices haven't gone down in food , leading to questions about how the data is gathered.<br /><br />"Unemployment hits highest since 1995"<br /><br />http://www.guardian.co.uk/business/2009/sep/16/unemployment-rises-recession<br /><br />And the FTSE still goes up without a waver all day. Do you think they hide the newspapers on the trading floor to avoid upsetting the bulls?<br /><br />"U.K. Banks to Post $215 Billion Losses, Moody’s Says"<br /><br />http://www.bloomberg.com/apps/news?pid=20601102&sid=afu5IWbkX1ZY<br /><br />An end to boom and bust? transfer the exploding and imploding to the banks instead and let the rest of the economy rot? Strange plan Gordon.<br /><br />"US credit shrinks at Great Depression rate prompting fears of double-dip recession"<br /><br />http://www.telegraph.co.uk/finance/financetopics/recession/6190818/US-credit-shrinks-at-Great-Depression-rate-prompting-fears-of-double-dip-recession.html<br /><br />"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said. "<br /><br />Debt deflation, massive foreclosures, unemployment, protectionist brinkmanship, over inflated stocks with rats leaving the sinking ship, foreign investment plunging, questions asked about the Dollar as reserve, million or so (depending on who you ask) marching on Washington and is a throwaway news story in most venues, and another million things I could being up that has gone wrong and is not reported either. Sure looks like green shoots to me. <br /><br />How longer can they keep pumping it all up with more debt when the consumer is tapped out and deleveraging, or just giving up and walking away because they have seen the banks get away with it. A jobless recovery has been touted, now a consumerless economy? <br /><br /> Helicopter Bens Magic show is going to make Derren Brown jealous, I mean Derren only faked predicting the lottery, Bennie is trying an even bigger trick with the whole damn economy with an even lamer excuse and the public is lapping it up.<br /><br />I wonder if he and others cheerleading will still say they couldn't have predicted it when the whole thing goes bang?Lefty Feepnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-8377976882148436842009-09-14T19:27:20.524-07:002009-09-14T19:27:20.524-07:00Steve Keen has a new post on Debtwatch:
http://ww...<b>Steve Keen has a new post on Debtwatch</b>:<br /><br /><a href="http://www.debtdeflation.com/blogs/" rel="nofollow">http://www.debtdeflation.com/blogs/</a>.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-2927595044814498822009-09-14T13:55:59.118-07:002009-09-14T13:55:59.118-07:00A good Denninger article.
http://market-ticker.or...A good Denninger article.<br /><br />http://market-ticker.org/archives/1428-Green-Shoots-WHERE-IS-GLOBAL-TRADE.html<br /><br />Global shipping has 12% idle ships when they should be in their busiest time moving Christmas goods? Doesn't look like much of a recovery to me.Lefty Feepnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-63282779773711535452009-09-13T19:02:53.037-07:002009-09-13T19:02:53.037-07:00US headed for deflation?:
Falling prices raise sp...<b>US headed for deflation?</b>:<br /><br /><a href="http://www.chicagotribune.com/business/yourmoney/chi-tc-biz-ym-deflation-0913sep13,0,3226470.story" rel="nofollow">Falling prices raise specter of deflation</a>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-6248704359692541292009-09-13T00:35:21.671-07:002009-09-13T00:35:21.671-07:00China’s Capital Controls: the Key to Stopping Bubb...<b>China’s Capital Controls: the Key to Stopping Bubbles</b><br /><br />This report by the <i>Bank for International Settlements</i> shows that China’s capital controls are still effective:<br /><br /><i>current official restrictions appear to have effectively limited cross-border flows and thereby segmented onshore/offshore markets. In particular, the spreads between the onshore yield and offshore NDF-implied yield on the Chinese renminbi suggest that cross-border arbitrage has not equalised onshore and offshore renminbi interest rates. This segmentation questions the view that China has no independent monetary policy.</i><br /><br /><a href="http://www.rieti.go.jp/en/events/05031901/pdf/5-1_ma_2.pdf" rel="nofollow">Are China's capital controls still binding? http://www.rieti.go.jp/en/events/05031901/pdf/5-1_ma_2.pdf</a><br /><br />The destabilizing inflow of short-term capital has been a problem in China since 2005 (and contributed to the stock market and real estate bubbles there), but if you have an independent monetary policy like China you can raise interest rates to cool the economy as a first measure that will be effective:<br /><br /><i>If you fear that your economy is growing too fast, and thus inflation is on the rise, responsible central bank mantra dictates that you should raise interest rates .... But this is exactly where the problem lies. If you raise interest rates in an economy open to capital flows, at the same time as the world’s money centers have low or almost zero interest rates, what happens? Almost certainly, you will attract more capital from overseas. This capital inflow will likely feed into your domestic credit boom and further the run-up in asset prices, housing construction, and other bubble-related phenomena.</i><br /><br /><a href="http://baselinescenario.com/2009/07/30/the-case-for-capital-controls-again/" rel="nofollow">http://baselinescenario.com/2009/07/30/the-case-for-capital-controls-again/</a><br /><br />Thus with controls on capital inflows and tighter domestic financial regulation, bubbles can be minimised. <br /><br />China can do this, and will most probably be able to deal with the <a href="http://www.reuters.com/article/ChinaInvestmentSummit09/idUSTRE58022D20090901" rel="nofollow">large capital inflows it is now experiencing</a>.<br /><br />We in the West could have done the same thing to prevent the devastating bubbles that have plagued Western economies since the 1990s.<br /><br />All that is needed is to a return to an updated version of Bretton Woods era policies.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-1583849260915749122009-09-12T00:43:42.712-07:002009-09-12T00:43:42.712-07:00UN wants new global currency to replace dollar @ h...UN wants new global currency to replace dollar @ http://www.telegraph.co.uk/finance/currency/6152204/UN-wants-new-global-currency-to-replace-dollar.htmlMwarang'ethehttps://www.blogger.com/profile/17751879277752081774noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-47189703960164893622009-09-11T12:12:48.538-07:002009-09-11T12:12:48.538-07:00The Chinese rulers must be fretting with the risin...The Chinese rulers must be fretting with the rising tide of opinion putting them firmly at the head of the superpower serpent. They must fear the limelight revealing their version of sleight of hand governance, bringing about the downfall of their own house of cards; as the furthest West of the Western consumer looks inwards and cancels their subscription to the Eastern tupperware party. <br /><br /><br />Romford DOC: - <br /><br />CE. I did buy it, but now i'm not so sure. I am sure I firmly believe that all view's are worthy of consideration whatever their worth.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-60875595013483069492009-09-11T03:57:31.864-07:002009-09-11T03:57:31.864-07:00While the official line is not 100% clear on the d...While the official line is not 100% clear on the defaults and the links I provided (by the authors own admission) are only conjecture based on what evidence is available, circumstantial or otherwise, I think there is increasing evidence of protectionist measures, between China and other countries.<br /><br />The following link is a good summation of recent examples. Minor mostly, but the general background does not paint a picture of rosey trade relations<br /><br />http://www.nakedcapitalism.com/2009/09/trade-tensions-with-china-quietly-escalating.html<br /><br />The SDR as a reserve currency doesn't feel right to me either - I have heard it mentioned elsewhere but have the nagging feeling that myself and others have confused China talking about needing a new reserve currency, while mentioning SDR's and getting them mixed up as meaning the same - any explanation that shows they are different would be helpful.<br /><br />I think we will have to agree to differ with regard globalisation and regulation. I have read too many discussions between yourself and Lord Keynes and others to think I could change your mind about things - especially as I am more focused on psychological dynamics than economic theory.<br /><br />I do understand your points, but I feel there are other explanations that could point to what has happened and what could be done to help stop it happening again. <br /><br />your question - would you be willing to stand at a village road and turn back poor Chinese peasants seeking a better life in the cities?<br /><br />I would not turn back anyone - it is their own decision for good or ill. But I would educate them of the risks they could be heading into, that they could end up poorer than they are now physically, mentally and spiritually, as well as economically due to the dangers of the city, what they could lose when they leave the farm and how what they hope to gain might not end up being what they get. <br /><br />Point out that those who are there are apt to treat you well when you are in their favour and useful to them and discard you when you are not.<br /><br />In short - treat them like adults and let them make an adult decision based on risk vs reward as a pose to the fantasy that the capitalist system portrays of plenty for those willing to work - (and ignoring what happens to the losers) If they understand that that dream is just an advertisement and are willing to take the risk then send them off with good wishes, otherwise let them think a little more about if they really need to go there or are just lured in by glittering promises.Lefty Feepnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-14147894684542996052009-09-10T19:25:03.928-07:002009-09-10T19:25:03.928-07:00More on China's rejection of globalization and...<b>More on China's rejection of globalization and free trade</b>:<br /><br /><i>“The Chinese [regime] employs direct and indirect subsidies such as grants, interest loan subsidies, debt forgiveness and tax concessions to prop up state-owned enterprises, introduce new technology and expand or build new capacity." .... At the end of 2006, a state decree ordered that the state would maintain “absolute” control over SOEs that were deemed critical to national security and economic livelihood: defense, electric power and grid, petroleum and petrochemical, telecommunications, coal, civil aviation, and shipping. <br /> .... If the Chinese regime wants to compete in a certain market dominated by the United States or other foreign countries, the state will designate that industry as “pillar,” and then the state will provide subsidies and pay for R&D.</i><br /><br /><a href="http://www.theepochtimes.com/n2/content/view/14634/" rel="nofollow"> China’s Industrial Policies Hurting U.S. Industries and Workers </a>. <br /><br />Finally, the Americans are realising that they need an activist industrial policy as good as China's.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-33376395796492798082009-09-10T19:01:27.411-07:002009-09-10T19:01:27.411-07:00Response on Globalisation and China
As for global...<b>Response on Globalisation and China</b><br /><br /><i>As for globalisation, this is a problem if you take a nationalist perspective, but not if you take an internationalist perspective. Having witnessed Chinese growth first hand, I have seen the difference that growth resulting from globalisation makes. As I once asked an individual, would you be willing to stand at a village road and turn back poor Chinese peasants seeking a better life in the cities?</i><br /><br />You can’t point to China’s success as proof of the orthodox policies of globalisation, <b>because China simply doesn’t follow those policies.</b><br /><br />How can a country <a href="http://books.google.co.nz/books?id=Yi8NrrZVvK0C&pg=RA2-PA4&lpg=RA2-PA4&dq=%22capital+controls%22+china&source=bl&ots=TZfz0FExHX&sig=YOZBOHWDl9f-yopobwy4BMWswq4&hl=en&ei=WaupSvCAJIncsgODh-3yBA&sa=X&oi=book_result&ct=result&resnum=2#v=onepage&q=%22capital%20controls%22%20china&f=false" rel="nofollow">with capital controls</a>, state-owned banks, a fixed currency, a large state-owned industrial sector, subsidies to key domestic industries, huge non-tariff barriers, a very cautious and protected trade policy, an activist industrial policy, and (now) a massive Keynesian stimulus package be an example of the success of globalisation!! [as an aside, take a look at <a href="http://www.theepochtimes.com/n2/content/view/14634/" rel="nofollow"> why China’s steel industry dominates the global market </a>. It wasn’t through globalization!; I would also note that one of the keys to the success of China’s stimulus is that the major banks are <a href="http://ablog.typepad.com/keytrendsinglobalisation/2009/07/chinas-1st-half-gdp-growth-should-settle-dispute-on-correctness-of-its-approach-to-the-financial-cri.html" rel="nofollow">state-owned and can simply be instructed by the state to expand lending</a>, unlike private banks in the West].<br /><br /><b>In short, Chinese peasants are not flooding to the cities because of globalisation at all, but because of policies that are the opposite of what we call globalisation.</b><br /><br />Furthermore, if you want an example of the <b>real effects</b> of orthodox globalisation, take a look at the catastrophe it has produced in Latin America, the Caribbean, and Africa. <br /><br /><i>Argentina is the result of pure neo-liberalism or globalisation, not China.</i><br /><br />There are, of course, two factors that have been important in the rise of China: <b>(1) Foreign direct investment and (2) international trade.</b><br /><br />But, in fact, an international system of Keynesianism, financial regulation, controls on short-term capital movement is <i>perfectly compatible</i> with long-term foreign direct investment and increasing international trade, just as it was in the Bretton Woods era. <br /><br />It is a complete myth that Keynesianism, industrial policy, controls on the flow of “hot money” and state intervention cannot exist alongside strong international trade.<br /><br />Nobody is asking “poor Chinese peasants seeking a better life in the cities” to turn back.<br /><br />And, most extraordinary of all, you seem to have neglected to mention that the huge export-led growth model which employs so many peasants (which you also partly blame for the de-industrializing of the West) is not really sustainable in the long term. An alternative Keynesian/social democratic system of providing free or cheap medical care, pensions, education, and social services would free up domestic Chinese demand to consume goods made in China, so that internal consumption can be the engine for growth. <br /><br />And doing that would have nothing to do with globalisation, which demands the relentless privatisation of social services – <b>one aspect of neo-liberalism that <i>China did follow</i>, but is precisely what has harmed its domestic growth and its people so much.</b>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-12831440027548464132009-09-10T14:02:41.448-07:002009-09-10T14:02:41.448-07:00Anonymous:
Many thanks for a very interesting com...Anonymous:<br /><br />Many thanks for a very interesting comment. I would not be so trusting in the statements of official Chinese policy statements. For example, they have spoken of a 'peaceful' rise of China, but are now developing a blue water navy. A blue water navy is for power projection, not for defence. <br /><br />With regards to the Triffin dilemma, I do not believe that the same problem was apparent with £sterling when it was a reserve currency, but I am open to correction on this. In the meantime, it appears that China is accumulating bullion, and this (as I have speculated) might mean a future gold standard currency. <br /><br />The Rational Martian:<br /><br />I am sympathetic to the views that you are expressing, as many share them. However, I would contest that anything like a free market has existed at all. I wish I had kept the link, but I saw an excellent article about 6 months ago which listed all of the regulation and intervention roles of just the Federal Reserve. <br /><br />This is just one agency, but if you add them all together, then there is no way that you can call anything that has happened 'free market'. As I pointed out in my post on banking reform, the emergence of securitisation was a direct response to regulation, as were the emergence of SIVs, and this is taken from a Bank of England paper. I could go on....<br /><br />Then there are examples like the Japanese QE pumping liquidity into the US, the Chinese currency manipulation and so forth...<br /><br />In this respect, I share the views of the Austrians, who quite rightly point out that there is the use of smoke and mirrors to distract from the role of central banks in this crisis. Without such manipulations, without the Basel framework, a minor crisis of adjustment instead of a disaster. <br /><br />Lefty Feep:<br /><br />Thanks for the update on the defaults. I will keep an eye out on this story. I find it somewhat puzzling, as I have mentioned. <br /><br />With regards to SDRs, I can not see how they might become a genuine reserve currency. I will try to post on this to explain why in the future, as this takes considerable explanation. <br /><br />Whilst being of a libertarian bent, as you put it, I diverge with the Austrians and Libertarians on regulation of business size and share of market. I do believe that there is a role for this kind of regulation. <br /><br />However, minimising government involvement in business also minimises the ability for particular companies and organisations to co-opt government, and avoids conflict of interest, and revolving doors between business and government. <br /><br />The recent articles on Goldman Sachs illustrate the problem with too much government intervention, with government agencies increasingly dominated by commercial interests. <br /><br />As for globalisation, this is a problem if you take a nationalist perspective, but not if you take an internationalist perspective. Having witnessed Chinese growth first hand, I have seen the difference that growth resulting from globalisation makes. As I once asked an individual, would you be willing to stand at a village road and turn back poor Chinese peasants seeking a better life in the cities?<br /><br />However, the entry of such peasants into the labour market increases the supply of labour, and that impacts on the value of labour broadly. If you are a sheet metal worker in the UK, for example, you are faced with new competition. Whilst your wages go down, the peasant who has moved into the new factory sees an improvement in their earnings. This is redistributive. <br /><br />Is this a good or bad thing? That, as I have said, depends on whether you take a nationalist perspective. <br /><br />I will try to respond to the other comments later, if I have time.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-53942500796694245602009-09-10T08:17:03.549-07:002009-09-10T08:17:03.549-07:00I am not sure that China wants the RMB to replace ...I am not sure that China wants the RMB to replace the USD as the world's reserve currency. The speech by Zhou Xiaochuan in March 2009 clearly indicates this.<br /><br />http://www.pbc.gov.cn/english/detail.asp?col=6500&id=178<br /><br />"Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries' demand for reserve currencies. On the one hand,the monetary authorities cannot simply focus on domestic goals without carrying out their international responsibilities��on the other hand,they cannot pursue different domestic and international objectives at the same time. They may either fail to adequately meet the demand of a growing global economy for liquidity as they try to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand. The Triffin Dilemma, i.e., the issuing countries of reserve currencies cannot maintain the value of the reserve currencies while providing liquidity to the world, still exists."<br /><br />I maybe naive, but I feel the statements that are now coming out of China are far more honest and believable than the trash that emanates from the forked tongues of the short term profit/election seeking western scoundrels. The Chinese, wherever you meet them, are, without exception, interested in long term stability and prosperity. This is diametrically opposed to the millisecond mentality of Goldman Sachs and their damn trading computers.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-51371810655179095442009-09-10T07:57:03.313-07:002009-09-10T07:57:03.313-07:00CE,thanks for your response.
While a fixed fiat ...CE,thanks for your response. <br /><br />While a fixed fiat currency system has its salient points, we don't have such a system now, but society still deludes itself using flawed and incomplete GDP figures. Can you suggest a methodology for presenting the true picture at this time, not in a hypothetical perfect world?<br /><br />On another topic, while I subscribe to libertarian principles myself, it has to be said (and Lord Keynes has) that the free market system of the West has shown itself to be spectacularly incompetent at optimal resource allocation. The state directed system prevalent in China may not remain prudent over the long term, but it has definitely come out on top this time round. <br /><br />This raises an interesting point as to whether free markets (and maybe freedom in general?) is the best way forward in a society composed mostly of dim individuals with a herd mentality and incomplete information. Is it better to leave the important decisions to a few scholars?The_Rational_Martiannoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-15115704526823201522009-09-10T03:05:39.635-07:002009-09-10T03:05:39.635-07:00Thanks CE.
I come here to read the good analysis ...Thanks CE.<br /><br />I come here to read the good analysis by yourself, but also for the conversation between your commentators, so I usually only post a quick link so as not to interrupt the flow. I just felt that since I had so much information to convey I was hogging the thread a little. (not to mention the few hours it would take to read all the links)<br /><br />When I read about China reigning in bank lending, I had a flicker of hope that they might actually be coming off the "bubble things up and expect thing to get better before it bursts" path of the western powers. It will be interesting to see if they can manage it and if it will teach the west anything.<br /><br />I must admit than when I heard of China threatening defaulting derivatives I hadn't time to read about it, assumed it was real estate derivatives and thought was a bluff as that bubble is too big to start a panic about defaults on.<br /><br />On realising it was commodities derivatives it seemed more credible, as while it would still set a dangerous precedent, the damage could be contained to some extent.<br /><br />The link I posted last article set the stage and showed the players - big names like Goldman and JP Morgan vs several Chinese state owned firms who rely on the price of oil.<br /><br />http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html<br /><br />The follow up post <br /><br />http://thefundamentalview.blogspot.com/2009/09/china-derivatives-threat-updated-and.html<br /><br />went into more detail, showing how several firms were advised (by goldman and others) that oil would soon goto $200 so they bought derivatives to hedge against that event.<br /><br />As we know, the oil price plummeted and those contracts were a problem for the firms that bought them. In October of 2008 Nanshan Power brought the legality of the derivative into question - In December it terminated the contract and Goldman didn't contest it - As the article states this is a precedent for the newest Chinese threat, it didn't come out of the blue.<br /><br />In short the threat seems quite credible - it is well known that China is buying into commodities in a big way - it is now seeking ways to protect it from predatory firms speculative instruments.<br /><br />I do not think you could have done it justice as a few paragraphs in this post CE, a post would be appropriate a little later when more information comes to light or news of actual defaults happening. <br /><br />With regards to SDR's and Chinas wish for a new reserve currency (preferably it's) I have heard you state a few times that China has been talking up SDR as a new reserve currency. Presumably as you say, as a stalking horse to position its own currency instead. <br /><br />What if they are too successful and the SDR or similar IMF instrument got its way and became the reserve? What would that do to the balance of power (apart from making Alex Jones and his fans go horse from screaming about the NWO taking over)<br /><br />Also of note is that the UN is itself calling for a new reserve currency.<br /><br />http://bloomberg.com/apps/news?pid=20601087&sid=aSp9VoPeHquI<br /><br />While trying not to be too cynical, the IMF and world bank are are of the same breed of bankers that preach "free trade" which practises favouritism to certain countries while allowing others to be despoiled. Will the same problems of globalisation carry on regardless?<br /><br />Knowing that you are are of a libertarian bent CE, I'd just like to point out that I think your view of the free market can work well on a local level - provided that large monopolies cannot take over and capture the financial and government sectors. But globalisation is just a double-speak for raking most of the worlds worth to the big boys.Lefty Feepnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-40662315146795992122009-09-10T02:53:45.180-07:002009-09-10T02:53:45.180-07:00Steve Keen has an interesting new post on DebtWatc...Steve Keen has an interesting new post on <a href="http://www.debtdeflation.com/blogs/" rel="nofollow">DebtWatch</a> using the data of Barry Eichengreen and Kevin O’Rourke:<br /><br /><i>So “green shoots”, or selective reporting? There is no doubt that the immense government stimulus packages across the world have slowed the rush into Depression. But the force that caused the crisis in the first place—excessive private debt accumulated in a Ponzi Scheme laundered through share and house-price bubbles—is still with us. Until that debt is addressed, the downward rush of deleveraging is likely to resume as soon as governments wind back their spending in the false hope that the crisis is over.</i>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-60087307262769379942009-09-10T02:37:41.391-07:002009-09-10T02:37:41.391-07:00More on China's Keynesian Stimulus:
China...<b>More on China's Keynesian Stimulus:</b><br /><br /><br /><a href="http://washingtontimes.com/news/2009/sep/08/chinas-stimulus-powers-up-economies/?feat=home_headlines" rel="nofollow">China's stimulus powers world economies</a> <br /><br /><a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aPOHjduHTfFg" rel="nofollow">Bank of China’s Zhu Sees ‘Bubbles’ in Asset Markets </a> <br /><br /><a href="http://ablog.typepad.com/keytrendsinglobalisation/2009/08/new-china-economic-data-shows-declining-trade-surplus-and-accelerating-economy.html" rel="nofollow">New China economic data shows declining trade surplus and accelerating economy</a>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-57471586188344126742009-09-10T01:09:00.972-07:002009-09-10T01:09:00.972-07:00...I was always against the bailouts. Time will sh...<i>...I was always against the bailouts. Time will show whether I was right or wrong.....</i><br /><br />I don't think it will. Allowing Lehman Brothers to go to the wall has already been written into history as a prime reason <b>for</b> the recession, and whatever happens in the future will not change that. If things get worse it will just be taken as further proof of that 'fact'. <br /><br />Even now, the cause of the Great Depression is assumed, by most people, to have been a lack of boldness in public spending, and it is impossible to prove otherwise, regardless of it having happened 80 years ago.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-79862960016265986712009-09-09T20:06:54.531-07:002009-09-09T20:06:54.531-07:00Some Comments on The Rise and Rise of China
The e...<b>Some Comments on <i>The Rise and Rise of China</i></b><br /><br />The early part of your post illustrates many of the points I have been making: that (1) Keynesian economic policies and (2) financial regulation and capital controls are effective policy tools. China has used, and is now using, both: the stimulus (which is Keynesianism) and (2) financial regulation. Your post concedes that they are working. For instance:<br /><br /><i>What we are seeing is that the Chinese appear to have learnt the lessons of the economic crisis, and are seeking to avoid lending being diverted into asset price bubbles, though it is quite possible that the action is too late.</i><br /><br />So you are conceding that these regulatory tools <b>can be effective</b>? That we could have used them in the West as well in the 1980s and 1990s? That we could have avoided the asset bubbles that brought on the 2008 crisis?<br /><br /><i>Lord Keynes points to the risks of bubbles in China and suggests controls on capital. My answer is that the only solution is the fixed fiat currency I have discussed in a previous post</i><br /><br />Actually, it’s not me, but policymakers in China and Asian governments turning to tighter controls on capital inflows, the very policy that could also have been applied to the West to stop excessive East Asian money from causing assets bubbles here. <br /><br />See my blog:<br /><br />http://socialdemocracy21stcentury.blogspot.com/<br /><br />In the case of China, they may tighten capital controls <b>which they already have.</b><br /><br /><i>The last element in the consideration of China is the mercantilism that is the centre of Chinese economic policy. I have detailed the many mercantilist practices of China, and have railed against the acquiescence of the West to such policies. Their manipulation of the RMB, various trade barriers, and disregard for intellectual property have been common themes. I will not re-state the points made in previous posts, but simply point out that China has been playing to its own rules, and those rules have been mercantilist in approach.</i><br /><br />In fact, the West used much the same mercantilist methods to become rich in the 19th century, with tariffs and protectionism as the main tools. What has happened is that from the 1970s onward neo-liberalism and the obsession with free markets has infected the policymakers and governments of Western countries. <br /><br /><b>It is free market and free trade fanatics who have destroyed the US and the UK industrial economies, not Keynesian policy makers or state interventionists.</b><br /><br />One exception is Germany which still uses industrial policy and (surprise, surprise!) still has a remarkable industrial economy with trade surpluses (so much so that it even gives the whole EU a trade balance!).<br />The US and the UK could rebuild their industries and economies, but it will be post-Keynesian economists who will do it, not advocates of laissez-faire or Adam Smith.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-55989989251817974852009-09-09T17:46:08.843-07:002009-09-09T17:46:08.843-07:00I forgot to mention that the many links against th...I forgot to mention that the many links against the last post by Lefty Feep were not (his description) link spam, but were all very interesting. <br /><br />I also noted the very interesting post by an anonymous poster on SDRs. This is a very interesting subject, and I may take a longer look at this in the future. <br /><br />Lord Keynes points to the risks of bubbles in China and suggests controls on capital. My answer is that the only solution is the fixed fiat currency I have discussed in a previous post. <br /><br />Another poster has linked to China's possible restriction of supply of certain metals, and this is just a further case of Chinese mercantilism that I have discussed previously. The link can be found here. <br /><br />http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6082464/World-faces-hi-tech-crunch-as-China-eyes-ban-on-rare-metal-exports.html<br /><br />Carl: A tough question, but one which I think has been covered in the blog in the early stages of the bank bailouts. I would have let them fall, and taken the short, sharp pain that followed, along with the risks of social unrest. It is difficult to summarise what I discussed over many posts, but I was always against the bailouts. Time will show whether I was right or wrong.....<br /><br />The Rational Martian: GDP as a measure is a problem with ongoing current account deficits and net borrowing. My solution to these problems is in the fixed fiat currency system that I have discussed in another post. However, GDP is even more flawed than I have discussed previously. In essence, economists are trying to measure something which can not be measured. They are mistaking what can be measured for what is actually taking place. A fundamental problem. I would like to detail why, but it is a very complex argument which I will need to leave for another time.<br /><br />I will leave the responses to comments here, but would like to express my appreciation for the many links. I would like to comment more, but time has run out....Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.com