The Chinese economy is slowing
down and its government is responding to the recent crisis pumping enough
liquidity to ease the panic. An easy solution to a difficult problem. So many
people relying on their stocks to constantly grow…how crazy.
A wash of money, buying what is
otherwise untradeable. The Bank of China is doing the same thing: freeing up
cash for banks to make new loans easier, covering bad loans, weak state-owned
enterprises (that could / should fail) and so in the end…covering China’s debts
in all its various forms.
Apparently, at the beginning it
had stabilized markets but without fixing all the imbalances that led to financial
troubles (manifestations of deeper troubles). And so their stock market
is now falling (apart). The point is that people aren’t realizing they’re now
trading with free money, consequently free of risks (better: the perception of
them), weakly and temporarily.
China is obviously trying to
reach a new safe, slower, sustainable growth. An internal growth, less dependent on decreasing exports. This is what its government is
claiming, at least. In my humble view they’re hiding something at a deeper
level. The problem is that their economy is so big that is slowing the global
economy, besides easy money equals sugar rush: massive flood of money has
always failed to drive human behaviour. We’re animals with animal spirits
(ooppsss, sorry). Meaning: we MUST take/feel risks. Take the risks out of the
equation and we’re doomed to fail. As a matter of fact they are.
Why am I so worried? Because I
see so many similarities here in Europe, Japan and America as well (translated:
basically the whole world). But it's not working: the proof is that Japan is now adopting even negative interest rates. Easy short-term rescue is useless
and even dangerous without long-term reforms providing sustainable growth. These
reforms are still lacking in China, wherefore, again, they’re looking for an
easy solution to a complex series of problems.
But I’m merely a nescient. I must
surely be wrong.
I am not an expert, don’t misunderstand
me. Rates go up and down. Even before China and I merely, passively (more or
less) accept this fact decade after decade.
Well, in Europe we’re still
waiting! Who’s the expert now?
It appears to me just a game, in
reality (Imhv-in my humble view). A political balancing, a sort
of reconciliation among many forces of pressure. Careers, Presidents
out, future Presidents in, those who makes appointments, who sets budgets, who
empowers. Political parties, interest groups, lobbies. Throw in the media, the
markets, foreign governments and Countries. Enough?!
What have you deducted? It’s all
but a decision in the interest of The People. Neither in the interest of
The Chinese People. Are they realizing this? Are “WE” realizing this? We should
stop instead relying on Central Banks and do what’s necessary: reforms.
Otherwise it’s going to be the perfect recipe for a global disaster. If it has
already started or not is not up to me to decide. I’m just…
…always humble,
Angiolino
(What might you need
in your life? Please kindly visit: What do you lack?)
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