From the Readers

Letter

(China Daily)
Updated: 2010-03-11 07:51

For lack of economic logic

In "The domino effect of the US rate hike" (China Daily, March 5, 2010), Liu Junhong explains the relation between the interest rates of bank loans, which are decided nationally, and the ultimate repercussions they have on the global exchange rates, for instance among the US dollar, euro and yuan. He concludes that we should heed the International Monetary Fund suggestion - not to withdraw economic stimulus measures too early - and avoid falling victim to the political games played within G20.

On the same day, Andrew Sheng ("Waltzing around exchange rates") started his argument saying that the dollar has had "a good store of value". But can anyone sensible put paper dollars under his/her mattress as a guarantee to possess purchase power in the future. Money has many functions, but only if we store gold or silver coins can it have a store of value.

From 1972, all countries stopped using gold reserves to determine the currency exchange rates because after World War II, the world started producing such a fantastic amount of commodities that all the gold mined in the past, present and future would not be enough to equal those commodities' cumulative value. This kind of inexact affirmation, unfortunately, is not new for Sheng.

In an article published in China Daily on Dec 30, 2009, he drew readers' attention to "the differences in economic thought and philosophies between the East and the West", obviously meaning that the US and European economic theories have not been able to deal well with the global economic crisis. Everybody would agree with that.

But then Sheng concluded: "Sadly we do not have anyone remotely like John Maynard Keynes to show us the way." The obvious questions one would ask are: "Wasn't Keynes a Westerner? And has not history proved that Keynesianism doesn't work any more?" This lack of logic shows Sheng has a long way to go before showing the world the true "difference between Eastern and Western economic thought and philosophies", or the differences between Chinese and Western ways of controlling and improving economic processes.

Claudio Cervini, via e-mail.

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(China Daily 03/11/2010 page10)