Tuesday, February 9, 2010
China makes the same mistake as the West.
An article in the Wall Street Journal describes China’s stimulus package. $4trillion worth has gone to local authorities which have set up “investment companies”. Exactly what these “investment companies” have spent their money on seems to be a bit of a mystery.
Do doubt it is extremely profitable being on friendly terms with those running these investment companies, just as it is profitable for Goldman Sachs to be on friendly terms with those running the U.S. dollar bill printing press.
The ultimate source of demand is the consumer. Thus if one wants more demand, such demand needs to come from consumers. But powerful, important people dressed in smart suits and shiny shoes just cannot abide ordinary people – ordinary consumers. After all, ordinary consumers don’t wear smart suits and shiny shoes. So called “communist” leaders in China and so called “socialist” members of the Labour Party in the UK regard anyone not dressed in a smart suit and shiny shoes with contempt.
For a good description of Gordon Brown’s infatuation with bankers, see here.
Japan builds bridges to nowhere. China sets up “investment companies” which make equally doubtful investments. The U.S. prints billions of extra dollars, hands it banks, who then sit on it. You don’t know whether to laugh or cry.