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This post was edited by abramicus at 2015-9-21 01:17|
All the artsy pretensions of trying to rescue the Chinese economy with fiddling around with interest rates, reserve ratios, and the bravado of wasting half a trilion dollars buying back Yuans with hard-earned dollars, and giving up more than half a trillion dollars of export revenues that are being taken up for free by Japan and Vietnam, seemed to have done NOTHING, except let the annual GDP slide some more, and let some more factories shut down, and let thousands more of workers become jobless.
The ONE USEFUL THING that the monetary authorities and their political higher ups should have done, and could have done, was to let the Yuan exchange rate reach the market equilibrium where the demand for Chinese goods will drive its production, rather than where the lack of demand for Chinese Yuans will suppress its production. Without real production, consumption only leads to the depletion of the foreign reserves of China, as is now happening every day. Without real production, there won't be real earnings either, leading to the decline in the valuation of the entire stock market. There is nothing mysterious about why the stock market declined. No real earnings, how can there be real price appreciation, unless prices are driven up by speculation fueled by irresponsbile margin lending? All margin trading will have to face the reality when earnings reports come out, and there are not enough earnings to justify the share prices. Looking for insider trading is one aspect of keeping the market clean and efficient. It will not solve the problem of the real companies not having enough earnings to support their share prices. The real solution is the Deng solution. Let production lead the way, not consumption, at least not until China can "buy" anything it needs by just printing Yuans and forcing other countries on pain of regime change, to accept the yuan as payment in full. That is not China's national goal, so why is this hidden assumption behind all the "growth by consumption" theory being imposed on the economy from above, not recognized as the limiting factor, and Achilles Heel, of the present "re-structuring" movement? The real solution to China's economic decline is to let the Renminbi devalue down to at least 6.50 Yuan per Dollar, just as Deng diagnosed the problem to be, one of inadequate production to support the population, and therefore, he devalued the Yuan from 5.80 to 6.37 in one stroke, and within the year, let it devalue to 8.00. China's real economy boomed, 300 million or more people were lifted out of poverty.
With the present overvaluation of the Yuan exchange rate at 6.36, Chinese products remain overpriced in dollars abroad and in yuans at home, and production will continue to decline, foreign reservs will continue to decline, and unemployment or underemployment will continue to rise.
THIS ONE AND ONLY USEFUL THING THAT THE PBOC AND ITS POLITICAL HIGHER UPS COULD HAVE DONE REMAINS TO BE DONE. YES, THEY SAY, THEY HAVE "ROOM FOR ACTION". THERE IS A ROOMFUL OF THEATRICS THAT CAN STILL BE DONE, TO BE SURE. BUT THERE IS ONLY ONE ACTION THAT WILL SAVE CHINA, WHICH THEY ARE UNWILLING TO DO, WHICH IS TO LET THE YUAN DEVALUE TO 6.50 - 7.00, WHEREVER THE MARKET DECIDES TO GO.