The Fed agrees with us about China
Federal Reserve Chairman Ben Bernanke said in a letter obtained on Friday that chances of an economic crisis in China were low, but that the possibility of a “hard landing” for the economy could not be dismissed….
“Although the banking sector is burdened with an enormous and probably growing stock of problematic loans, the government possesses sizable resources and is unlikely to allow the banking system to fail,” Bernanke told the Alabama Republican. He also said Beijing’s large foreign exchange reserves made a currency crisis unlikely. “However, we do not entirely discount the possibility of a ‘hard landing,’ in the form of significantly slower growth, as authorities attempt to reduce investment growth from its current rapid pace,” he wrote.
The Fed chief said the rapid pace of investment in China was leading to overcapacity in some industries and likely adding to bad loans already on bank books….”They have taken some steps to try to encourage consumption. However, they still have not allowed a substantial appreciation of the renminbi (currency), a step that many analysts argue would be the most effective way to address the imbalances in the economy,” he said.
Sounds similar to what we were saying just the other day.
UPDATE
Meanwhile, Chuck Schumer and VP-in-waiting Lindsey Graham continue their dopey quest:
Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, told Paulson in July they want to see the yuan rise by Sept. 30 or they will proceed with legislation to impose a 27.5 percent duty on Chinese goods. They accuse China of holding the value of the yuan artificially low to keep Chinese products cheap on international markets. Graham said their legislation has the support of at least 67 of the 100 members of the Senate.
Are we surprised that 67 illustrious dunderheads agree with these geniuses of the world economy? No, sadly, we are not.
September 5th, 2006 at 5:58 am
Wal Mart, and by extension China, save the average family what was it one or two thousand dollars a year?
Schumer, the most cynical individual in the Senate by far, wants to screw this up. I think he knows better, but Bush is president so Bush will get the blame.
Graham is just stupid.