The former adviser to China's central bank laments policy was influenced by supply-siders and the Maastricht criteria.Pekingology
Yu Yongding calls on Beijing to stimulate growth via fiscal expansion, believes 6% growth achievable
Yixiu Wei, Shangjun Yang, and Zichen Wang
5 comments:
Maastricht. Wow. Dredging this up from the past. Should stay dead and buried, but at least he points out that it's a failed approach.
Yes. Amazing that China would be looking at Europe for guidance on this after the debacle that Maastricht has wrought. What is the evidential basis for the 3%? None. Pulled out of the air.
Warren Buffett proposed a similarly daft figure he apparently pulled out of the air.
“I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”
― Warren Buffett
“The Maastricht Treaty should stay dead and buried.”
Unfortunately it’s still alive, since it's the basis of the EU, which led to the adoption of the euro currency by 20 of the 27 EU member states. Those 20 nations foolishly gave up their Monetary Sovereignty, which is one of the most important powers that any nation can have. The ability to create their own currency. The most recent idiot was Croatia, which adopted the euro this year.
As a result, those 20 nations live under the heel of the European Central Bank in Frankfurt, plus the European Commission in Brussels.
Poland and Hungary do not use the euro, and did not surrender their Monetary Sovereignty. Therefore they are able to say no when the European Commission demands that they accept unlimited migrants from Africa.
The UK and Sweden also do not use the euro, and also did not surrender their Monetary Sovereignty, but they do accept unlimited Africans, because their own corrupt governments choose to.
Yu Yongding: “In reality, Maastricht Treaty stipulations have no theoretical basis and were merely proposed to limit Southern European countries from excessive spending. Western countries have long abandoned these two standards.”
What Western countries is he referring to? Monetarily sovereign nations like the USA and China cannot be compared with monetarily non-sovereign nations like the 20 that use the euro. China can run deficits and national debts as high as it likes in China’s own currency, just like the USA can. Therefore Maastricht Treaty rules about fiscal deficits-to-GDP ratios and national debts-to-GDP ratios are irrelevant to China and the USA.
As for the euro-zone, it will eventually fracture and disintegrate from frictions between its members. For example, France had a fairly strong economy until France adopted the euro on 1 Jan 1999. After that, the French economy started to weaken more and more. By 2005 France had a trade deficit, which has increased ever since. Since the French government cannot create euros out of thin air, or get euros from a trade surplus, the French government must borrow its euros from banks in order to keep going. The resulting economic pressures cause France to have more and more social problems. France tries to survive by obeying Brussels, and clinging to the EU at large, but this just accelerates France’s death.
Germany still has a trade surplus, and Italy did too from 2013 to 2021. But how long can the entire EU patchwork last? As I said, the Eurozone (indeed the entire EU project) will eventually disintegrate. I give it five more years, tops.
None of this can be compared to China. I predict that Asia will eventually overcome its historic enmities.
Japan, South Korea, the Philippines, and Taiwan are still part of the US sphere, but they will increasingly join the China sphere as the US dies. They will have no choice.
Yu Yongding: “The stimulative effect of fiscal policy on the economy mainly comes from increased expenditure rather than tax cuts.”
Huh? Both measures are stimulative, although we may argue over which parts of the economy we want stimulated. Shall we stimulate development and innovation? Or shall we stimulate war and wokery? When a nation is dying (like the USA), fiscal stimulation merely accelerates the decline and corruption. What do we have to show for $2.2 trillion created for the CARES Act?
On the other hand, when a nation is not totally poisoned by corruption, fiscal stimulus can actually benefit society. The Federal Highway Act of 1956 created the US Interstate Highway System for only $25 billion (equivalent to $193 billion in 2022).
Today $193 billion will hardly even buy you a war in Ukraine.
That’s corruption. That’s a nation in decline.
"“I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”"
What's really funny about that is it would mean we could kick out congress simply by saving loads :-)
Then watch them flail around putting up tax rates and lowering interest rates all to no effect.
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