Another Sign of a Brewing Economic Monetary Crisis in China?
In the US, the government really only has one major economic policy level (at least under normal operating circumstances). And that's the Federal Funds rate, which Ben Bernanke decided to pull earlier this month to the tune of a fifty basis point reduction (an amount which surprised just about everyone). This contrast with China shows the power -- and potential danger of making too severe adjustments -- of central economic planning. In most of the West, we view the Fed -- and Fed equivalents -- as having the power of a conductor overseeing his orchestra. But China has the power to flog the musicians in just about any direction it wants to. I'm guessing we'll know soon after the Beijing Olympics whether this type of centralized economic authority will be effective in averting a prolonged monetary and economic crisis.
- Jason Busch
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