Chinese economist sounds off on US monetary policy
Posted by WARREN MOSLER on December 10th, 2009
Right, this is the nonsense that’s been moving the speculators and portfolio managers, but not the underlying fundamentals.
If an asset inflation does materialize it will be for an entirely different reason.
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> On Wed, Dec 9, 2009 at 2:03 PM, wrote:
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Yesterday, U.S. Fed Chief Ben Bernanke declared the U.S. economy is facing “formidable headwinds†and effectively vowed to continue printing paper dollars like there’s no tomorrow.
The reaction from China came quickly, as Andy Xie, recently named by BusinessWeek as one of China’s most influential economists, pulled no punches.
Xie accused the Fed chief of “poisoning†the U.S. economy by keeping interest rates near zero and creating a tidal wave of newly printed paper dollars. He warned that the next global crisis will be driven by asset inflation.
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December 10th, 2009 at 1:43 pm
“Xie accused the Fed chief of “poisoning†the U.S. economy by keeping interest rates near zero and creating a tidal wave of newly printed paper dollars.”
The natural rate of interest is 0. Mr. Xie should read “mandatory readings” on this site.
As far as the Fed printing new dollars, I can see his point. What’s the difference, from his perspective, between Mr. Bernanke printing at the Fed and Mr. Joe Blow printing in his basement?
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JCD Reply:
December 10th, 2009 at 1:54 pm
Perhaps Mr Xie should have thought about that before China lent the US $1 trillion. Of course he could sell now, but that might let his currency appreciate …
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RSG Reply:
December 10th, 2009 at 2:16 pm
Of course that’s only if you believe we borrowed $1 trillion from China…which we didn’t. We bought their goods and they got our dollars and simply put them in an interest-bearing account (treasuries). When those treasuries mature they will simply shift back into non-interest accounts or roll into new treasuries.
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warren mosler Reply:
December 10th, 2009 at 3:04 pm
you’re hired!
;)
December 10th, 2009 at 4:54 pm
Mr Xie just sounds like an old lady complaining about getting 1% on a CD. Welcome to the club! The only difference is he has no other banks to shop the US Treasury against!
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December 10th, 2009 at 5:24 pm
Latest Z1 is out and it shows debt growth total of both the public and private sectors slowed in 2009 Q3 to 2.8%. Government does seem to be increasing debts at rates last seen in the 70’s but the 70’s didn’t have falling private sector debt.
http://www.federalreserve.gov/releases/z1/Current/z1r-2.pdf
With December’s Job Summit to add maybe $80 billion in spending, things are looking more and more like a double dip. I just can bring myself to the conclusion that Obama would let this happen so am still heavily invested in the markets (still hasn’t said its time to sell).
Figured if there was a market sell off, it would be in January after Goldman Sachs gets their bonuses but purely to push a more aggressive political agenda. Can’t imagine government/GS would allow the market to go down very far.
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