Tuesday, July 28, 2009

China's Regulators Don't Get the Business Cycle

Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channelled into the "real economy" and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming.

What Chinese regulators don't get is that the bubble is wherever the money goes. The money printed by China's central bank is the problem. When they stop printing, areas of the economy where the money flowed will crash--even if all the money went to Mao posters.

No comments:

Post a Comment