The story:
Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”.
“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.
China would have a stronger leg to stand on if they hadn’t recently increased their money supply by 26% and then ordered the banks to lend it on easy terms…thus creating a stock market and real estate bubble and the appearance of continued growth while China’s real economy (ie, the exporting part of it) declines for 9 straight months. No doubt about it, we’re being monumentally stupid in printing money to buy our own bonds – but China is the home of the economic geniuses, either.
The whole system of global finance is what has failed – and shooting it up with more fiat money isn’t the way to fix it. This is because it can’t be fixed – we’ve bankrupted ourselves and until we create new wealth, we can’t even begin to pay back the debts we’ve already got. This, in turn, means that any borrowing we do will be counter-productive…as will any increases in money supply as that will just drive down the real value of the already battered wealth we’ve currently got. We need sound money and all we’re getting from everyone is printing presses on steroids.
Its all going to fly apart – and quite soon. A the maximum, we can stave off disaster for two years – but I think we’ve got less than six months before all this stimulus nonsense (here and around the world) comes back to bite us.
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