Usury and monetary policy

2011-10-17  / Andy Xie Summary ------------- The bankruptcies of many private enterprises, especially in Wenzhou, are mostly due to speculation with borrowed money gone bad. It is totally wrong to characterize this phenomenon as monetary tightening squeezing SMEs. Normal businesses don't go bankrupt because they cannot borrow. Only money burning speculation needs to borrow constantly to stay afloat. Loosening monetary policy now to ease the liquidity crunch for speculators would do enormous harms to the economy. Indeed, the excessive monetary expansion between 2008-10 squeezed real businesses through cost push and rewarded speculation through asset inflation. Another wave of excessive monetary expansion will magnify manifolds the speculation in China's economy by proving again that...

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Posted in: monetary policy

Start the international board now

A country becomes a financial center because it has succeeded in becoming the trade center. Germany's plight today should remind everyone that, when the financial center and the source of money are disconnected, bad things happen to whoever has the money. Even though Germany amassed the biggest trade surplus in the past decade, its financial system was woefully underdeveloped and relied on London bankers to recycle its money into other countries. With the benefit of hindsight, it would be natural that the London bankers wanted to screw Germany, because they were paid to do so. In a decade or two, Germany may become a poor country. When people look back then, they would conclude that its decline was due to the combination of a hyper competitive manufacturing sector and a woefully inadequate...

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Posted in: China,finance,stock market

The global crisis lingers

If you hear actions to increase the capital base for French and German banks, expect Greek default soon. When multinationals call East Asia home, they will invest enough to treat East Asian consumers like their western counterparts. The investment process will lift the salaries of the Asian workers to the western level. They then have the consumption power to make the investment pay off. This would be a gigantic project to build a new global economy. 2011-09-26 / Andy Xie summary ------------ The global crisis has turned into a chronicle one. The eurozone's response to its recurring debt crisis is another bandaid that would ease the pain for the time being. So are the expected Fed's QE 3 and the Obama Administration's $447 billion fiscal stimulus proposal. The structural headwinds and...

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Posted in: global crisis

2012: Beyond leadership crisis

Steve Jobs is dead. Tim Geithner is still the US treasury secretary. That pretty much summarizes the affairs of the world. 2011-10-10  / Andy Xie Steve Jobs represents the best of capitalism. He created, contributed, and was rewarded. For one generation, Apple Macintosh was the first IT device that was not only functional but also beautiful, a pleasure to use. His genius was to aggregate all the existing technologies to invent products that people didn't know they needed but couldn't live without after seeing them. Steve Jobs is an exception in capitalism rather than the norm. Most corporate leaders have climbed to the top through politicking and showmanship. I had my first encounters with America's corporate titans while doing summer jobs. They looked impressive, like Hollywood...

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Posted in: capitalism