Thursday, October 16, 2008

BBC uses Credit Crisis to Big Up China (again)

Will China bail out the West?

With nearly $2 trillion (£570bn) worth of foreign currency reserves, China is being touted by some as the potential saviour of the Western banking system.
China's booming exports have enabled it to mass huge foreign reserves

In order to bail out ailing financial firms, Western governments need money - and China seems a good place to get that much-needed cash.

Please, please, can someone who knows something about international markets go work for the BBC?

China would be much better off if it had two trillion dollars worth of national infrastructure, two trillion dollars worth of low-polluting industry, two trillion worth of well-fed, well-looked after Chinese people; rather than two trillion worth of dollars steadily decreasing in purchasing power. Having billions and billions of currency is not directly representative of wealth- go to Saudi Arabia if you don't believe me. America is not wealthy because it has lots of dollars- it is wealthy because its people produce a huge amount of goods and services. A vast majority of those goods and services are provided to other Americans and therefore Americans feel wealthy. The Chinese produce enormous quantities of low-quality products which they sell to us, and in return we give them dollars and euros and pounds. Do Chinese people feel wealthier? Only if they happen to own a bank, which is a very circumscribed group of people. The Chinese are gradually getting wealthier- of that there is no doubt- but they are starting from a very low point and they haven't gone very far yet. In a comparison between an average Chinese person and an average Briton or American or French person, the average Chinese person has vastly less means to access to high quality goods and services.

So what about all those dollars and pounds in Chinese banks? If the Chinese lend them to us, what will that achieve? I'm guessing inflation in our economies, and not much genuine gain. It seems to me that the scarcity of credit at the moment is providing a bracing challenge to businesses in the developed economies. It is sorting the wheat from the chaff. Well-run, well-capitalised businesses are hardly affected by the current situation, whereas badly-run, under-capitalised businesses are going to the wall. Whats wrong with that? Thats exactly what is supposed to happen in Capitalist economies. Workers and resources are freed up by this process to be utilised in productive enterprises- viz the Thatcher revolution.

Taking money from Chinese banks at bad rates sounds like a quick-fix, bad-judgement behaviour to me and I hope very few Central banks and/or governments take the option. But then the guys who run them probably know this much better than the BBC...
to whom this situation is simply another excuse to shit on Britain and America and tout their favourite new 'superpower' with all the schadenfreude at their disposal. Honestly, they are pouty children. Will we ever get dispassionate, well-analysed business stories from the BBC?

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