Chinese and the Federal Reserve; Blogger William Merritt

William Merritt

6/23/13

Macroeconomics

Chinese and the Federal Reserve; Blogger Assignment

The article I chose for this blog assignment talked about the ways in which the market has failed recently in the United States and China. China problem is basic; interest rates are too high, and the government is unable to bail out the lenders who are being told they have to stop blindly investing, thinking that the government will be able to bail them out.  Labor interest rates are going up, and bond prices are plummeting in both America and China.  "There's no more cheap money" (Stepek, 2013)'. The credit crunch in China and the head of the Fed, Ben Bernanke, provide insight into for inflation problems and solutions.  Bernanke, Stepek noted, claims that the money printing press in America will stop producing cash. Bernanke also made a promise about the market and how it will always be supported by the central bank (although I'm not so sure how much support he is willing to lend, especially if no more money is being printed). Monetary policy is a bit firmer in China, generally speaking, but when we consider the quantity theory of money it is clear that Chinese in general have a better game plan.  Demand for money goes up, and inflation goes down.  According to Stepek, Chinese investors have been stocking up on American dollars; which is a strategic move in the worldwide market, especially in the long run. The gross domestic product of both countries is very high but the demand for supply is going down within these countries is going down as inflation continues to go up and the recession gets deeper.  The central bank of China has usually had a plan to stop the credit crunch from happening.  The market will always prove to be an unpredictable thing, especially in larger, and more industrialized countries like the United States and China, which is a factor in business cycle theory

This article was intriguing because the differences that the author points out about Chinese and American fiscal policy, and because of the author's objective, telling us about the recession that the current business cycle stage has brought with inflation, are vital the global market economy.

Works Cited

1. Stepek, John (2013, June 22) "MoneyWeek Roundup; The Markets's Worst Nightmare". MoneyWeek. (2013, June 24)

Retrieved June 23, 2013 from http://moneyweek.com/moneyweek-roundup-the-markets-worst-nightmare/