My comment: I mean short term crisis, the wave that started to be perceived around two years ago. I do not the long term crisis that started several decades ago and will not end up until ten or twenty or maybe later.
We already have countries in fourth phase (such as India or Indonesia), others such as China that has entered into fourth phase in September or October, and others into third phase (such as Japan or the Eurozone) or entering now into third phase (such as USA). As a reminder, third phase begins just after bottomming, growth is not robust and sustainable yet, in fourth phase growth is robust and sustainable and policymakers have to decide on how to dismantle exceptional rules used during crisis, somehow how to clean the house of dust after we refurbished it in depth. Fourth phase is not "happy days" as it might look like, it must be taken carefully, as much as when we decided apropiate rules to fight against crisis. Depending on how we return to "ruling as usual" we are either risking another crisis or providing robust, healthy and sustainable economy for years ahead. Let me show first how China has been approaching to this, to review later options in US economy. Yesterday, in Peking university, Mr. Yi Gang, deputy governor of Peoples Bank of China (China s central Bank), told that inflation is not a big risk in China right now. It implicitely means that loose financial policies should not be removed yet. Fortunately, the state council Center for Economic Reasearch is not so optimistic once we watched the difference between Production Price Index and Consumer Price Index (almost 5 percentage points). Therefore they will pay close attention on those indicators and how they evolve. Government has stated clearly through permier Wen that they will not break relaxed financial policies within the very short term but they will be tighten to avoid unnecesary risks. In my opinion, that is exactly the right approach right now, to conduct it step by step while monitoring carefully inflationary indicators as much as growth indicators. Also, we can watch at India and Indonesia, as they exited earlier, where inflation is now a serious concern that might become out of control if their emergency rules would not work as good as expected. In fact, if we all are honest, China has been releasing exit rules even during crisis. Yuan internationalization, stricter and stricter regulation of credit, etc. are means to contain inflationary pressure that should be reinforced. But structural rules such as investments abroad, even higher focuss and investents in less developed areas, etc. are even more important and will produce stronger and more durable results. The start in January 1st of the ASEAN-China free trade zone will help to accomplish it, and even more important is the huge agreement Russia-China to develop the Asian side of Russia and its connection with Western Russia and with Northern and Western China inked few weeks ago between Mr. Putin and Mr. Wen that, if successfull, probably will change for better the history of that area of our planet. Not forgetting the giant growth of China s investments in Latinamerica, Africa and Central Asia, and cooperation with local governmens to create modern infraestructures in the Middle East. Those structural rules not only help receivers to create wealth inside their countries, they also help China to take advantage of their growth while not producing inflationary pressure inside our country. Now in the USA. It is too early to put an exit strategy in place, but not too early to get it ready. In US economy, inflationary pressure is inmense as right now they have the opposite policy: to increase the amount of US dollars to fund deficits. Printing and repatriation of funds has been its policy during crisis, as they arrive later, there are not many places abroad where the can put those US dollars busy. They will produce inflationary pressure on US economy. Rise of stock markets, housing markets, etc. or in other words, another bubble might alleviate that pressure for a while amid it "hides" US dollars, but that bubble will explode again sooner or later. The only way to "hide" those US dollars that are floating in the air is producing real and physical wealth inside the country in form of durable goods and equipments, while they cut step by step the amount of US dollars around the world and they balance government deficits and householders savings through lower consumption. If they do that, the foreign trade issue will fix itself. If they believe that lower US dollar helps them they are headed to another chapter of the long story of decline. Robust and healthy development starts always from below, not from the roof. Also, growth of nano-economies would play a decissive role into that recovery in US economy as they have the ability to create real wealth without adding more US dollars to the economy and therefore without inflationary pressure. And more important, it would make US economy more robust, healthy and sustainable. Peace and best wishes. Xi Maybe you want to watch this video about this short term crisis although it was produced one month ago. http://www.youtube.com/watch?v=PZ5FSqR8j2o --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. 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