Monday, June 1, 2015

Keynesian Medicines are Not a Cure for China's Ill

Richard Ebeling emails:
Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, Keynesian Medicines are Not a Cure for China’s Ills.”

With the fears expressed that the Chinese economy is slowing down, the Communist government has instructed the banking system to create loans to prop up unprofitable businesses, and rollover and add to the loans to municipal governments far in debt.

In the U.S., some commentators are offering the old time Keynesian medicines of stimulating “aggregate consumer demand” to cure China’s ills, in the face of “over investment.”

The fact is China is not suffering from over investment, but malinvestment due to politically directed misallocation of capital and labor fed by monetary expansion and artificially low interest rates.

Having seen China’s twisted economy on some trips to China in recent years, it is clear that there is only one true cure – real free market reforms. But these types of policies are inconsistent with the political and economic manipulations used for power and privilege by the Communist Party, the bureaucracy, and all those who feed at the trough of the Chinese state’s largess.


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