China rebounded quickly from the global downturn, powered by a 4 trillion yuan ($586 billion) stimulus and a flood of bank lending. But communist leaders worry about surging home prices and a possible spike in bad loans at state-owned banks. They have imposed curbs on lending and investment, key drivers of growth and demand for raw materials.
But government spending is bad -- or at least I thought it was. But then the Chinese government spent 4 trillion in stimulus and got a growth rate of 11.9%. Surely that can't be due to the government spending, can it?
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How much did they spend in Iraq and Afghanistan? How much did their military empire spend to maintain 100 bases around the World? How much did they spend to privatize their Governmental functions?
When leaving a $10/day FoxConn job meant going back to making a meal out of tree bark, your government's stimulus money tends to go a bit further. Here, spending goes towards billboards praising how much is being spent.
For instance, what gives a better return -- extending unemployment yet another 3 months, or providing 3 months of full-day training to those same individuals for 3 months?
It is not a matter of austerity working or not. Austerity has a cost. So does stimulus.
Maybe it's clearer stated as pay now or pay later.
But in general austerity is best practiced at the top of the business cycle. Alas, thats something our elected leaders don't understand.
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