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Chinese Official: Loose Money OK…for Now


Over the weekend, we noted that the US Treasury put the Bank of Japan on notice regarding its newly announced quantitative easing program, warning it not to artificially depress the yen in order to gain a trade advantage. We went on to speculate that the Chinese would complain even more loudly given the heightened tensions between the two countries.

Well, for now anyway, the Chinese appear to be holding their fire. Jin Liqun, chairman of the supervisory board at China’s sovereign wealth fund, seemed to pull back from the kind of heated rhetoric Chinese authorities have thrown at money-printing central bankers in the past. The Financial Times quotes him:

“Monetary easing might be helpful but the role is very much limited,” Mr Jin said. “It is a necessary but not sufficient condition.”

Contrasted with previous officials’ statements, which described US quantitative easing as “crazy money printing” among other things, this is certainly a more measured response. And given the ongoing tensions between Japan and China, the restraint is notable. Nevertheless, it fell short of an actual endorsement, and certainly left the door open to China taking a harder line in the future.

These are unprecedented monetary moves in a particularly difficult time for the world, and China’s wait-and-see attitude in this case reflects this uncertainty. After all, in normal times China would have much to lose in the face of a plummeting yen.

[Yen photo courtesy of Shutterstock]

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  • So now the whole world is into quantitative easing? Not such a bad idea if you ask me. It will cause inflation which will get real wages down, increase employment, reduce government debt/GDP ratios, help get homeowners out from under water, students out from under college loans, etc.

    Which is not to deny that inflation has a lot of downsides too, not least of which is that we may not know how to control it once it gets started. Bernanke says he does. We’ll see.

    • Jim Luebke

      Why don’t more quantitative easing programs simply pay off government bonds early? It seems to me that if you’re going to risk serious inflation, you might as well get rid of a chunk of your debt problems at the same time.

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