Sunday, December 21, 2008

"If You Build It" Stimulus

As if China needed more stimulus of artificial demand...The National Development and Reform Commission announced a 100 billion yuan stimulus spending plan for next year. It includes
*construction of low-cost housing that will reconstruct urban migrant squatter settlements (10 billion yuan);
*rural gas, drinking water, electrification, roads, and postal service projects, water management, rural cultural centers and other rural infrastructure stuff (34 billion);
*railroads, highways, airports and other big infrastructure (25 billion);
*basic health and family planning service system, repair and construction of schools in central and western provinces, medical clinics, education, cultural and social development (13 billion);
*urban water treatment, solid waste disposal facilities, focus on water treatment and pollution prevention, energy conservation and ecological projects (12 billion);
*independent innovation and production restructuring projects (6 billion).
Financial departments have already allocated the funds quickly. The emphasis is on spending the money quickly, high impact, clear measures of success.

Aren't stimulus measures giving us more of what got us in trouble in the first place? Interest rates of 0 in the U.S. and even more artificial demand in China!

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