Comments on: China Growth – No Miracle http://ContrarianEdge.com/2009/05/20/china-growth-no-miracle/ Vitaliy Katsenelson blog on the economy, stock market, and stocks. Applying Active Value Investing approach. Tue, 07 Feb 2012 06:09:00 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Kirk http://ContrarianEdge.com/2009/05/20/china-growth-no-miracle/comment-page-1/#comment-190508 Kirk Tue, 28 Jul 2009 17:56:54 +0000 http://ContrarianEdge.com/?p=1055#comment-190508 On argument A) China won't be able to sell as much to the US, this is a matter of degree, in so far as the US is still expected to grow in 2010 (exports will be down but probably not -80%, for example) on B) that fiscal spending and monetary stimulus won't be effective in China, this is generally a question of whether stimulus is effective in a several recession as a general case. Our only data points for fiscal spending in severe recessions are the 1930's, US and Europe and 1990's Japan. Growth rates were neutral/positive (neutral in the case of Japan and the 1930 s US, positive in the case of Germany/Soviet Union) with fiscal spending in these countries, most studies assume that the economy would be flat without fiscal spending in these severe recessions so this leads to the conclusion that stimulus isn't effective, but with a model that shows some realistic decline in gdp fiscal spending is shown to have a positive impact. On argument A) China won’t be able to sell as much to the US, this is a matter of degree, in so far as the US is still expected to grow in 2010 (exports will be down but probably not -80%, for example) on B) that fiscal spending and monetary stimulus won’t be effective in China, this is generally a question of whether stimulus is effective in a several recession as a general case.

Our only data points for fiscal spending in severe recessions are the 1930′s, US and Europe and 1990′s Japan. Growth rates were neutral/positive (neutral in the case of Japan and the 1930
s US, positive in the case of Germany/Soviet Union) with fiscal spending in these countries, most studies assume that the economy would be flat without fiscal spending in these severe recessions so this leads to the conclusion that stimulus isn’t effective, but with a model that shows some realistic decline in gdp fiscal spending is shown to have a positive impact.

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