Neoliberalism Has Met Its Match in China

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

WEB OF DEBT BLOG

When the Federal Reserve cut interest rates on July 31st for the first time in more than a decade, commentators were asking why. According to official data, the economy was rebounding, unemployment was below 4%, and GDP growth was above 3%. If anything, by the Fed’s own reasoning, it should have been raising rates.

The explanation of market pundits was that we’re in a trade war and a currency war. Other central banks were cutting their rates and the Fed had to follow suit, in order to prevent the dollar from becoming overvalued relative to other currencies. The theory is that a cheaper dollar will make American products more attractive on foreign markets, helping our manufacturing and labor bases.

Over the weekend, President Trump followed the rate cuts by threatening to impose a new 10% tariff on $300 billion worth of Chinese products effective September 1st. China…

View original post 1,633 more words

2 thoughts on “Neoliberalism Has Met Its Match in China

  1. I agree, James. It’s very hard to get good information on how the Chinese economy operates because their political system is so opaque. It’s pretty obvious, however, that they issue money directly into the economy (what Milton Friedman referred to as “helicopter money”) because they borrow very little on the international market.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.