Fantastically Informative AP Economic Article On China’s Interest Rates!!!!

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Well, we know why.  They can’t spin this news to be good leftarded news.  Still, they could have given us the rate figures, at least.

Here’s a head line for an article from AP ……

China cuts interest rates for the 3rd time in 6 months to shore up anemic economic growth

And, here’s the article, in full ……

BEIJING (AP) — China cuts interest rates for the 3rd time in 6 months to shore up anemic economic growth.

Like the US, the cuts in the rates is probably because people and businesses in China, like America, don’t borrow enough money …… or something. 

Well, I’ve said this before, and I guess I’ll state it, again. 

When interest rates are already very low, lowering them some more is only a futile and desperate gesture.  It does nothing to address the underlying weaknesses. 

The fact is, in many ways this is paradoxical.  China wants to encourage economic growth by lowering interest rates, but, what it does is encourage businesses to borrow money, most of which should not be borrowing.  They are the weakly established businesses, else they could already afford to borrow at the already low rates, or not have to borrow, at all.  In other words, they’re encouraging future failure. 

But, worse than that, it discourages saving.  When you get paid no interest to save money, why keep it?  It only loses value as you keep it.  A person or business needs to save money for times of need and lean times.  It’s the buffer one needs.  But, now, China, like the US and the EU, is stripping that buffer away. 

Interest rates should be set fairly low, and they should stay that way.  Interests rates should only change modestly, and rarely.  This gives businesses and people the stability they require to plan for the future.  When they constantly change, you can’t plan … this goes for both borrowing and saving.  3 times in 6 months?  That’s idiocy and demonstrates flailing. 

Interest rates should only be set in response to demand for money.  They are not to be used as an impetus for demand. 

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5 Responses to Fantastically Informative AP Economic Article On China’s Interest Rates!!!!

  1. Latitude says:

    stability…..that’s the key

    We’ve got all these little Krugmans running around….jerking everything around….every five minutes

    …and not having a stable government of our own is probably the #1 problem

    • suyts says:

      Yes. 1%, 2% …… who cares? Just tell me what it’s going to be next year!!! Today, the interest rates are like the weather forecasts! It should never be this way …. this is why so many homes went back to the bank, because of the variable interest rates.

      It’s like our banks and government want people to lose everything they have ……..

      • DirkH says:

        “Yes. 1%, 2% …… who cares?”

        Pensioners who planned to live off of bond interests, and now have to find a job at a fast food franchise. And everybody who pays into such a pension scheme or life insurance, I’m planning to stop those, it will be pointless. Interest rates in a bankrupt West can never rise, it would ruin the state, so they’ll rather exchange the currency altogether. IOW, this is the end of the lifetime of the currencies.

        China cannot decouple itself from Western ZIRP as long as Yuan is pegged to USD.
        So it’s worldwide ZIRP for the moment.

        Now how are zero interest rates created? By central banks buying MORE bonds than all the governments issue. Currently the ECB and the Bank Of Japan are absorbing this, the Fed allegedly pauses. BUT it’s jerky, 10y treasuries and Bunds etc just jerked up in a loss of confidence and it looks like the plunge protection team or somebody like that has to step in every day now. (Probably using Exchange Stabilization Fund money or interest rate derivatives to stabilize)

        So the RATE of moneyprinting is ATM BARELY enough to maintain ZIRP.

  2. Latitude says:

    We’ve got F-18’s and helicopters going down……Russia has tanks and missile launchers catching fire in parades…
    …..what’s going on here

    OH WAIT…..

    http://thehill.com/policy/defense/241677-gop-senator-presses-dod-on-pro-sports-contracts

  3. Lars P. says:

    Not sure what is it now, but in February it was this:
    http://www.zerohedge.com/news/2015-02-28/china-cuts-interest-rates-takes-number-central-banks-easing-2015-21
    “it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%.”

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