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Zhou Qi Ren: currency like honey_ the last or water

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					Zhou Qi Ren: currency like honey, the last or water



Zhou Qi Ren
June 19, 2009 Friday
Test the new currency of human progress. See the world, Europe, the
United States and Japan's benchmark interest rate the central
bank control of nearly all zero; see China, money supply faster than
economic growth day comeback. That "monetary
injection" (monetary emissions, German Chancellor Angela
Merkel's term), what will the impact of the economy?
Most of the comments read, think no big deal. Anyway, the price index
is still down. Although no accurate statistics on unemployment, but
the coastal orders or negative growth in export industries, but China
was the focus of employment. Financial income? Good times higher than
the economic growth doubled over, the first few months of this year
also declines. Given this situation will continue, even if domestic
investment, consumption booming, experts or identified, "the
year of inflation can not occur." June 10, Mondale and even
CCTV, said: "China needs a more expansionary monetary polic
in order to achieve this objective, the Fed and the Bank of China
needs to increase the amount of money in circulation" - even
if the central bank not to the Friedrich name the Nobel Laureate,
Father of Euro toe, the general estimate, "loose monetary
policy" will continue.
This brings a rare opportunity to see huge amount of money into the
real economy and the market, what will happen along with the
phenomenon, what will be the effect? That rare opportunity, because
the economy is the economy itself is the laboratory study, which cost
the experimental subjects are not cheap. The world's major
economies, open the monetary spigots together, the most generous ever
experiment, learning from the experience in economic studies find
fault not miss the opportunity.
Experience that with a question into the situation, far better than
"pure objective observation." Not enough, the best
expected an answer for the problem again, and then take the results
observed in the tests. It remains to be tested expected answer is
"hypothesis" of. Good hypothesis, we observe the
complex phenomena of the wizard, is behind the law of detecting key.
So, "put a lot of money, what will happen with the market
economy," this issue, any hypothesis should be brought to the
next observation and tests?
I am interested in two, said. One said "money like
water." The effect that no money he is simply acting as a
commodity trading medium. Therefore, the excess money into the econom
and the market will not increase the goods, but will certainly improve
the general level of prices. Analogy, helicopter mini state in a
closed hand to throw over big cash, so that the "lucky
country" every person holding cash are doubled. Then what
happens? Where everyone is more than double the goods received, or the
country's price index rose by double? If you have an answer
after the election, then congratulations to you, the monetarist Milton
Friedman should be sentenced to master your right. However, why the
helicopter throwing cash on hand the money to make everyone have
doubled the number? The answer: money like water, flow to the world
quickly, evenly flowing to mean equal opportunity for all.
Another said, "currency like honey": the new money
injected into the economy and the market, as has the viscosity of the
liquid such as honey generally, in the process flow may be in a
position to muster a package to, and then slowly flat. This means that
an excessive amount of money at different speeds in different types of
assets or goods between the "Odyssey", results in a
certain period of time, changing the different types of assets or the
relative prices of goods. Therefore, the first invention of the said
Hayek, more emphasis on inflation has "fluid
balance" (a fluid equilibrium) nature. (1) changes in
relative prices, for some people is the emergence of new investment
opportunities. However, if there is market speculation follow the
trend of behavior and fanaticism, "hot spots" are
difficult to sustain. This is because "honey flows"
will continue to drum up the "package" for a time
after all, is to become flat.
Said the two are interesting. Importantly, the two that can come to an
unambiguous inference of propositions, in order to receive the test
results can be observed. Among them, "said money like
water," set off, the economy needs more than money into the
economy and the market will inevitably push up the general price
level. "Money like honey said," is inferred, excess
money in the economies walk, wherever friction different, so can
temporarily change the relative prices of assets and goods, and
stimulate investment and consumption behavior. Whether we agree with
what said, or both suspect, so clear inference is always receptive to
testing. By comparison, possibilities are those who say a little
vague, "forecast", apart from the future claiming
that "long Liaoshirushen", on the understanding of
the law behind, help is not great.
That there are important differences between the two. "Money
like water, said" the focus of the total, in the general
price level; "money like honey said," more concerned
about the process of change in relative prices. However, we should not
see the differences between the two that much. After all, Vladimir old
leader of the monetarist and Hayek adhere to the Austrian school, have
a common starting point, that is, the "legal non-cash
currency" system, have a rational doubt. China's
economy since 2004, combined with thrilling ups and downs, first
"structural overheating" from the iron and steel,
cement, electrolytic aluminum sector roaming into a range of
investment, then real estate, the stock market's historic drop
on impulse and then to the general price level Dou Qi steep drop,
perhaps we can merge the two, said: money into the market, dominated
by the viscosity change in relative prices, and then push the overall
level of high prices. Yes, money like honey, sticky finally with
water.
Notes:
[1] thanks far away in the Northwestern University School of Law
Xuezhao Feng, sent in 1969, Hayek published the 77th volume in the JPE
article (Three Elucidations of the Ricardo Effect). Article available
at JSTOR web site for: http://www.jstor.org/

				
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posted:8/30/2010
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