two economies, different remedies

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TWO ECONOMIES,DIFFERENT REMEDIES

Southern Taiwan University of Technology

Marketing Management

CHAMBUU

BATTULGA

巴圖M997Z207

MARIE

NIKKI

MARTINEZ

馬妳琪M997Z208

SUDIANA

COLYN

許毓殷M997Z237

MARKO

MARINIC

馬可M997Z206

ANJA

GRGIC

安利敏 M997Z205

TRAN THI

THANH

LOAN

陳氏青鑾 M997Z215

GROUP V

The socialist system’s advantages

Critics arguments

Chines strategy favors State-Owned Companies

America September 7,20104

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Contents

U.S economy situation5

Remedy problems of U.S economy6

• Chinese government has pumped public money into companies that it expects to upgrade the industrial base and employ more people.

• China surpassed Japan to become the world’s second-large economy.

• China state-directed development model is enormously appealing to poor countries.


Political system of China

Economic policy of ChinaEconomic policy of China

Reforms of ChinaReforms of China

China’s always had major industrial policy

The system of China enable to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings.

1980s reforms that unleashed China’s private sector and the 1990s reforms that dismantled great sections of the sate-run sector are being partly undone.


CRITICS ARGUMENT

Reforms that led to growth are being undone.

Yao Yang – “ The problem is that the reforms of the first 20 years, from 1978-’90s, actually did not touch the power of the government. So after the other reforms were finished, you actually find the government is expanding, because there is no check and balance on its power.”

Others argue that the government continue to expand public sector even if they lose money causing a worn out capital from government budget

Some people believe that the government, being over confident with a top-down economy strategy might push growth rates down well before 2020

Chinese Strategy favorsState-Owned Companies

• In 2009- expansion of the government role in corporate sector

• “They´re producing yogurt. They´re into real estate.”

• 8000 state-owned investment companies• Case of Zhejiang Geely Holding Group• Reasons for state´s involvement in business??

necessity for mercenaries state´s growth

• Global market vs. Local market- who needs government?

• “ profound inequality”• State-owned conglomerates are becoming new political

power centers• Some restrictions for state-owned companies to enter

the real estate or lending areas• China´s top-down strategy is successful (i.e. Japan and

South Korea)• Two questions: ? For how long can state control those vast areas of the

economy? ? If that strategy stop working, will China be able to

change it?

Chinese Strategy favorsState-Owned Companies

America september 7,2010

• Internet explosion in 1990s

• Borrowing against rising values – spending on furniture>COLAPSE of American housing prices

• hope & fear – growth or new recession

• Economic growth in 2nd quarter slowed>qovernment can’t deliver right intervention > ?

America september7,2010

• Investing against new elections

( November )• Dramatic expansion of debt during Bush

administration (tax cuts and two wars)• Increased fears among creditor like

China and Japan of rising interest rate > inflation(rising prices)

• Merchant lose faith in US$ > demend more money for oil, electronics etc.

US Economy Situation

• Great Recession

• Dearth of Policy

• Economic Stagnation

• Deflation

• Economic Turndown

The US economy has suffered a real estate collapse, a stock market crash, a banking crisis, a near systemic collapse on a global scale, a credit crisis, the worst economic downturn in the US since the Great Depression, and an unprecedented global recession. Following two sequential economic bubbles, the dot-com bubble and the real estate bubble.


Both inflation and deflation are occurring at the same time. The US gross domestic product and consumer spending are declining while stock prices are rising; that government spending is rising while tax revenues are falling; that consumers are deleveraging and that the flow of credit has slowed while the total of debts and liabilities in the US economy continues to rise; that the US dollar is falling while price inflation remains nominal; that interest rates are near zero for banks but rising for consumers.


Inflation, of course, is simply an increase in the money supply rather than rising prices, which is one of the effects of inflation. Deflation is simply a reduction in the money supply rather than falling prices, which are one of the effects of deflation. Nonetheless, the effects of inflation can always be seen in the long run in consumer prices, i.e., the dollar looses value as a function of monetary inflation thus prices tend to rise.


The Federal Government’sRole in Economy

• Monetary policy

• Fiscal Policy

• Regulation

Direct Effect of Economic Turndown’s on Consumers

• High unemployment

• High underemployment (part-time work instead of full-time, lower wages than abilities warrant, and discouraged and stopped looking for work)

• Decrease in consumer revolving credit (credit cards)

• Increased savings

• Decreased wealth, including home values, stock, mutual funds, 401k’s, etc

• Low consumer confidence

• The result of all the above – decreased consumer spending

Remedy for problems of U.S economy

The ways to attackdeflation

To inject credit in to the economy.

The Fed reserve adjusts a benchmark overnight rate for banks.

The Fed relieved American banks of trouble in troubled investments.

At first: dismissed the idea “American’s political system would allow the country to sink in to a Japan’s style quagmire”. Now: he says a lost decade now looms as “ a much bigger risk”.

Alan Blinder

Bens.Bernace:

The issue is not whether we have the tools to help support economic activity and guard against deflation. It is instead whether, at any given juncture, the benefits of each tool, intern of additional stimulus…

Ideas of experts

Q&A

TWO ECONOMIES,DIFFERENT REMEDIES

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two economies, different remedies

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