When the invisible hand of the market fails, try China’s ‘two hands’ approach

Berno: The Obama Administration maintains a very difficult hybrid stance towards restoring faith in the US financial industry without much success. America has long championed faith in the hands of the free market. However, the Federal Reserve was repeatedly forced to prop up crippling financial institutions like Citigroup and AIG from collapse with massive public funds injection without outright public ownership (ie nationalisation).

The article below takes a step back and examines the China Government’s direct and forceful approach to support their economy when the invisible hand of markets gives up.

“The visible hand of Beijing might look excessive to people in the West, but many Chinese are pleased to see the government intervene and feel it will win time for China to ride out the global crisis. Elsewhere around the world banks are unwilling to lend and the U.S. Federal Reserve has had to bypass commercial banks to lend directly to corporations. Beijing just needs to send out a few directives and the banks do their bidding — Chinese banks posted a record 1.62 trillion yuan in new loans in January, already one-third of the total extended in 2008. “

Continue reading “When the invisible hand fails, try China’s ‘two hands’“.(Forbes)


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