Are the Chinese THAT Smart?
Is China going into recession? That's what some are saying now. Smart investors like Jim Chanos have been "shorting" China for years based on the premise that the Chinese growth story is exaggerated and that China is due for a big fall. ("Shorting China" means he's betting his money that certain Chinese companies shrink instead of grow.)
On the other hand, some pretty smart people believe that China's ruling elite can keep the growth going, even in the face of a slowing Chinese and world economy. They can do that through the policy decisions they make. They can do that through regulations they impose on their banks which would control when and how much they lend to businesses.
I don't know if China's headed for a serious fall, but I can't understand why otherwise smart people believe that China's ruling elite can control the economy so effectively. Are these elites that much smarter than the rest of us?
China is huge. They've got over a billion people spread over 9.6 million kilometers - the second largest land mass of any country. Do you think that a few hundred decision-makers in Beijing know how to make economic decisions for that many people spread out over such a large area?
Now, let's assume for a moment that the Chinese leaders aren't some superior race of beings that landed here from outer space. Let's assume they're people, just like you and me. And let's assume that you and I are relatively smart people who have access to the best other smart people in the country.
OK. We're going to decide what interest rate JP Morgan should charge on its loans. What, the Fed already does that? Oh, right. The Fed has been intervening in the marketplace and lowered interest rates starting in 2008. But what's this? Businesses haven't been borrowing much? They haven't been expanding much since 2008? Why not? The Fed has hundreds of economists it pays to give it research and advice on what's best for the economy. But the economy continues to chug weakly along. Why haven't low interest rates made businesses borrow lots of cheap money and expand their businesses, thereby causing the economy to grow quickly?
Oh, right. Most of the Fed officials and the economists they hire aren't Chinese. That must be it.
So maybe we should just recruit those Chinese government officials and economists and ship them over here. Forget that blind lawyer who we invited here - the guy who was protesting the Chinese "one child" policy of forced abortion. Who needs him? OK, maybe he can teach us something about respect for human life. But he's not going to help our economy, right?
Let's offer some incentive packages to the smart boys who run the Chinese economy - that economy that's been so successful and so dominant for so long. That same economy that's going to ignore the world downturn in the coming months and spring back to life due to the really ingenious decisions their government officials and economists make from Beijing about how high or low interest rates should be, how much money banks should lend, and who they should lend it to. Let's get them over here and replace some of the sluggards sitting at the Fed and their clueless economists.
Sound like a good plan?
On the other hand, some pretty smart people believe that China's ruling elite can keep the growth going, even in the face of a slowing Chinese and world economy. They can do that through the policy decisions they make. They can do that through regulations they impose on their banks which would control when and how much they lend to businesses.
I don't know if China's headed for a serious fall, but I can't understand why otherwise smart people believe that China's ruling elite can control the economy so effectively. Are these elites that much smarter than the rest of us?
China is huge. They've got over a billion people spread over 9.6 million kilometers - the second largest land mass of any country. Do you think that a few hundred decision-makers in Beijing know how to make economic decisions for that many people spread out over such a large area?
Now, let's assume for a moment that the Chinese leaders aren't some superior race of beings that landed here from outer space. Let's assume they're people, just like you and me. And let's assume that you and I are relatively smart people who have access to the best other smart people in the country.
OK. We're going to decide what interest rate JP Morgan should charge on its loans. What, the Fed already does that? Oh, right. The Fed has been intervening in the marketplace and lowered interest rates starting in 2008. But what's this? Businesses haven't been borrowing much? They haven't been expanding much since 2008? Why not? The Fed has hundreds of economists it pays to give it research and advice on what's best for the economy. But the economy continues to chug weakly along. Why haven't low interest rates made businesses borrow lots of cheap money and expand their businesses, thereby causing the economy to grow quickly?
Oh, right. Most of the Fed officials and the economists they hire aren't Chinese. That must be it.
So maybe we should just recruit those Chinese government officials and economists and ship them over here. Forget that blind lawyer who we invited here - the guy who was protesting the Chinese "one child" policy of forced abortion. Who needs him? OK, maybe he can teach us something about respect for human life. But he's not going to help our economy, right?
Let's offer some incentive packages to the smart boys who run the Chinese economy - that economy that's been so successful and so dominant for so long. That same economy that's going to ignore the world downturn in the coming months and spring back to life due to the really ingenious decisions their government officials and economists make from Beijing about how high or low interest rates should be, how much money banks should lend, and who they should lend it to. Let's get them over here and replace some of the sluggards sitting at the Fed and their clueless economists.
Sound like a good plan?
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