FX MONETARY POLICIES
sovereign risk. Te Chinese government oſten relies on bank credit to finance government stimulus programmes. . . . China’s sovereign risk is extremely low. Importantly, the balance sheets of the Chinese state-owned banks, the government and the People’s Bank of China are all interconnected. Under these circumstanc e s, a debt crisis in China is almost impossible.
Chinese state- owned banks are not going to need a Wall Street- style bailout from the government. Tey are the g o v e r nme n t , and the Chinese government has a massive global account surplus. It is not going bankrupt any time soon.
What to Do When Congress Won’t Act
Rather than regarding China as a national security threat and putting our resources into rebuilding our military defenses, we might be further ahead studying its
to be political. They would kill the privatization cash cow of the vested interests calling the shots behind the scenes.
What alternatives are left for cash-strapped state and local governments? Unlike the Fed, they cannot issue money directly; but they can establish their own
banks.
Fifty percent of the cost of infra struc ture is
financing, so
Chinese not
style state-owned from the
What about the risk of inflation? As noted by the Citigroup economists, Chinese- style “qualitative easing” is actually less inflationary than the bank- focused “quantitative easing” engaged in by Western central banks. And Western-style QE has barely succeeded in reaching the Fed’s 2 percent inflation target. For 2017, the Chinese inflation rate was a modest 1.8 percent.
38 FX TRADER MAGAZINE April - June 2018 banks
going to need a Wall bailout
successful economic policies and adapting them to rebuilding our own crumbling roads and bridges before it is too late. The US government could set up a national infrastructure bank that lends just as China’s big public banks do, or the Federal Reserve could do qualitative easing for infrastructure as the PBOC does. The main roadblock to those solutions seems
are Street- government
having their own banks would allow them to cut the cost of infra struc ture nearly in half. The savings on infra struc ture projects with an income stream could then be used to fund those critically ne c es sa r y
projects that lack an income stream. Ellen Brown
Chairman of the Public Banking Institute
Author of:
Web of Debt and
Te Public Bank Solution
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