American scholar: China's response to the economic crisis, than United States gaoming | | the Federal Reserve _ the economic crisis news

　　American scholar believes that China's response to the economic crisis, than United States smart

Summary: shock therapy could promote sustained recovery fed error was inferred.

　　Reference news net reported on June 3 World Press Syndicate Web site on May 29 speech titled the China United States of psychological traps of op-ed articles, authors United States Senior Fellow Stephen Roach, from Yale University says in the article, extrapolating from the temptation is hard to resist. This trend on the market, policy makers, families and businesses to play a strong hand. But discerning observers understand the limitations of linear thinking, because they know that will bend the line, sometimes broken. This is today in its assessment of two key factors shaping the global economic situation. Both of these factors is United States policy-related risks, as well as China's economic conditions.

The article says that QE began as a noble effort--as the Federal Reserve's desperate antidote to a painful crisis, is timely and is fully described.

Product-specific financing operations together and the first round of quantitative easing, making the Fed's balance sheet by the end of March 2009, soared to $ 2.3 trillion and the summer of 2008, before the crisis remains on the level of 900 billion dollars. Suffered a crisis of the market's deep freeze is thawing.

Shock therapy can not only save the patients fed error was inferred, would also encourage a sustainable recovery. From the end of 2009 to today, two further rounds of quantitative easing, the Fed's balance sheet expanded, $ 2.1 trillion, but has little effect in the real economy they are started.

United States depended to a large extent the Central Bank efforts to ease the crisis and promoting the recovery of different implementation of China's 4 trillion yuan fiscal stimulus in order to start its weak economy during the worst of the crisis. China's efforts to bring about immediate and drastic increase in infrastructure projects.

Note that the most important thing is that Beijing was not fanatical reasoning. Chinese officials argue that their action is a one-time measure in 2008 to 2009. Than their United States counterparts is much faster to confront the dangers of policies adopted by the worst of the crisis.

Fed to continue its quantitative easing policy on asset markets and the real economy shrugged off the negative effects may be. In contrast is that Chinese authorities during and after the crisis to the crisis produced a much more sober awareness of new risks. Them to take prompt action to eliminate many risks, particularly by excessive lending, shadow banks and the risks of the real estate market.

On the question of whether Chinese officials had done enough not settled. Articles, thought they had made it, although the view today, persons belonging to minorities. In front of the current economic slowdown, China was entirely possible to resume to its previous approach. But it did not do so, it shows that China's leaders would chart a different course.

The article said that China has fulfilled the commitment on this front, as it gave up has successfully steered a growth model for economic development of the country for more than 30 years. It recognizes, it is necessary to give up concentrated in export and investment-led production (through manufacture) mode, switch to a private consumption (by service)-oriented mode. The change would give China a better chance, so that it avoided the dreaded "middle income trap". This trap is most developing economies stuck in a bind, because its policymakers mistakenly believe that early takeoff stages of growth strategy to give access to developed country status.

Article, United States and China does not exist in a vacuum. Interdependence between China and the two tied together inextricably involved. The next problem is that two different policy strategies--United States of stagnation and China's rebalancing--what are the consequences.

The result is likely to be "rebalancing the asymmetry". With China's changing economic patterns, it's going to shift from saving to absorption of savings--to use their assets to finance the social safety net, so as to ease the fear-driven precautionary household savings. Instead, the United States seems intent on maintaining the current course--namely that, proven low savings, excessive consumption patterns in the past will continue to operate smoothly in the future.

The article says that to reconcile these two approaches will have a sequel. As the citizens of China's surplus savings to support themselves, remaining savings would be used to support savings-short America less. This is likely to affect the United States conditions for attracting foreign funds, which can lead to a weaker dollar, higher interest rates, higher inflation, or some combination of all three. In response, the United States economic headwinds blowing harder.

It is often said, the crisis should never be squandered: politicians, policymakers and regulators should face harsh moments, assume the burden of structural repair. China appears to be doing so. United States did not. Interdependence points to one inescapable conclusion: the United States is in danger of being trapped in a linear thinking.

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(Edit: SN077)
12:46 June 04, 2014 Reference news network