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(China Daily)
Updated: 2009-03-18 07:45

Saving not spending key to recovery

By feeding the same old bad habits, that got us into this mess in the first place, massive stimulus programs are short sighted. Trying to get people to borrow and spend more as unemployment is rising is a real bad idea.

We should be encouraging people to save their money, not go on another consumer-spending spree. People should save up a decent down payment and reverse an inevitable repeatable tide of housing price declines.

No more no-down payment mortgages and no more encouraging people to buy homes and cars and televisions they do not need. The new no-down payment mortgages issued under the auspices of government programs are now going into default faster than mortgages from before the credit crunch.

What is needed is not to stimulate more consumer spending, thrusting us all back to where we were before, but to quit the circle of credit misbehaviour cold turkey and suffer short term (five years plus) pain for long-term gains.

There is an unprecedented lack of global demand. Credit markets must be fixed. The US is failing to lay out a clear and credible plan to deal with problem banks (they are studying the issue).

A dismantling of globalization is a real threat. No economy can support itself in isolation.

J. McNaught

Via email

Regulation the visible hand

Comments on "Obama: China can have confidence in America's economy" (China Daily Website March 15)

It is timely for premier Wen to voice concern over the safety of China's hard-earned assets lodged in the US.

Indeed the US Congress and the Obama administration should seriously consider that the days of the western powers generating wealth on an insurmountable mountain of debt is over.

Unless there is serious reform of the global financial system, this is not the last time the world faces such a crisis. The global financial markets, as proven by history, are never self-regulated.

Too much has been made of the "invisible hand" of free markets. Few are aware that Adam Smith also advocated the "visible hand" of regulation in his less known work "The Theory of Moral Sentiments". This equally seminal work should be compulsory reading for all congressmen, senators and those in authorities.

The global economic and financial system requires checks and balances.

Ong Chan Hor

on China Daily website

China vulnerable to dollar nosedive

The Chinese should learn from the mistakes made by the Japanese in the late 80s and early 90s.

The affluent Japanese at the time bought lots of American real estate when the US greenback was strong. Japanese investment then suffered a huge loss when Uncle Sam manipulated the currency and allowed the US dollar to undergo a freefall. Japan was pushed into a recession that it has yet to recover from.

Today's situation is almost deja vu of the events two decades ago. China simply put herself into a very vulnerable position by buying too much US treasury bonds. Imagine the loss China will take if the US dollar takes another nosedive.

Mark

on China Daily website

Fix the system before feeding it

Comment on the article "G20 pledge further action on financial crisis" (China Daily Website March 15)

I support the belief of the German Financial Minister that fixing the financial system rather than injecting money into the economy should come first.

After governments have already pump huge money into financial sectors, now we need a period of observation and supervision.

Without fixing the financial system, the stimulus may leave us a heavy and indigestible burden in future. The leaders of some countries care too much about approval ratings in domestic politics.

Facing financial crisis, some people have to sacrifice some interests and lower living standards. If we still refuse to accede to this during recession, we will sow painful seeds for our next generation with blind stimulus.

Charles

on China Daily website

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(China Daily 03/18/2009 page9)