Article;
China inflation hits 7-month low eases tightening fears.
Comment;
Shadow-banking reminds me of the US... Shadow banking showed a lot
of potential to boost credit used for inflating housing prices in the US... We (in China) are
expecting more inflation down the line which means nominal prices will diverge
from real prices and would inflate bubble. Recently economists have started to
think of bubbles as normal during boom... they have become common... We can not
conceive a boom without a bubble... It means it has to happen… If the economy
will grow it will produce bubbles… Brakes on credit, especially through shadow
banking because they are loosely regulated, away from normal-banks, are
difficult and not easy to apply. Shadow-banks are out of regulation. We can not
control them too much. But the system in China
is a bit different from the US.
It is not a market economy… a communist regime… which can directly control
prices by directly fixing them… different from demand-supply adjustments in a
market-economy… they are very serious in controlling prices to tame inflation… However,
China
historically has seen a few currency-redenominations due to too high inflation.
Which means historically they have relied on a loose monetary policy. But
during the communist system China
has become more serious for price-stability to contain real wages for the
proletariat…
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