Friday, July 10, 2009
chinese loan growth
It seems that few things are more dangerous than the belief that governments can eliminate or sharply reduce the risk of financial crisis. The idea that a country’s financial system can act as crazily as it likes as long as the government is willing to protect it from its folly runs not only into the problem of undermining government credibility as bad debts surge, but the very belief almost guarantees that the financial system will act in a crazy way.
china is indeed not only backstopping its banking system but attacking the collapse of finance by forcing loans into its economy, very likely with no consideration of need or quality.