Skip to content

Even in the heart of communism the central planners can’t agree

July 5, 2011

Chinese Pundits at Odds Over Interest Rates – China Real Time Report – WSJ.

The premise behind a centrally-planned economy over a free-market economy is that a small group of elite superhumans can manage the lives of million (or billions in China’s case) economic decisions better than the multitude – it is hubris in its most inefficient and destructive form.  Assuming that premise is correct, wouldn’t you think that there would be some consensus on what to do?

Scientific socialism is supposed to be as predictable and repeatable as mathematics or physics – everyone agrees 2+2=4 right?  So how come there isn’t one sure-fire answer to the problem China faces with its currently strict monetary policy?  Well, there is, but it rests in the free-market, non central bank controlled economy, but that discussion is for another day.  Within the realm of socialism, there should be a simple choice to make since it is supposedly based off a rational incorporation of concrete scientific data.  There shouldn’t be any guessing.

If you were to read the story I linked above, you would see some obvious parallels to problems we are facing in the supposed “capitalist” American economy – strict monetary policy is being used to keep inflation low coupled with an increase of the minimum reserve banks must keep on hand is resulting in less capital available to small business.

So let me get this straight, the best and the brightest of American and Chinese central planners still can’t get it right?  Obviously low rates are great for a business seeking capital, but its a moot point if the banks aren’t lending.

The pundits can’t agree, but none come to the conclusion that the central bank should just get the F**k out of the way (maybe getting shot is a good deterrent?) as this bit of governmentese from the article suggests:

Another paper, the China Business News, reported on Monday that some government officials are pushing for a revision of the country’s monetary policy stance, to a term that could be translated as “relatively tight, with directed loosening.”[emphasis added]

Ahhh, nothing like a little “directed loosening” to fix the problem.

In response to some of the critics, the central bank defenders are lining up to opine:

Allies of the central bank, meanwhile, are hitting back against its critics. Li Daokui, an academic adviser to the central bank, told reporters last week that the monetary policy stance “should not and will not” be altered. He said that other measures could be taken to address the concerns of smaller companies, such as special tax breaks and the full legalization of some gray-market lenders that provide finance to them currently.

This is a pretty hard and fast rule to any economy – black and grey markets (even loan-sharks) exist to serve a function that would otherwise be covered by a free-market.

Don’t want to get much farther into this, but the take away should be rather obvious – central planners, even (perhaps especially?) in a government founded on central planning, have no freaking clue what they are doing.  The trillions of decisions made by billions of people every minute are too much for any group of ivory-tower elites to comprehend, let alone effectively control.  That doesn’t stop them from trying.

If they wanna get their central planning groove on, maybe they should just play Farmville and leave the rest of us alone.

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: