The China Syndrome I: A Case for Rate Increases
Another reason that rising rates are more probable. China. Foreign cash flows due to low interest rates are overliquifying their economy as well as ours. The severity is to the point where raising their own interest rates has had no effect. Over speculation in real estate, bad lending decisions and fraudulent book keeping are all contributing. Sound familiar?
As long as their currency policy leaves room for RMB revaluation expectations and US monetary policy leaves interest rates low, Chinas problems are likely to continue. Should the Chinese property bubble burst, the banking system could suffer enormously and could lead to a financial catastrophe.
By raising interest rates here, we will help prevent China from imploding and causing a whole new round of Asian currency contagion;which would make the 98 Asian currency crisis look like a walk in the park.
As long as their currency policy leaves room for RMB revaluation expectations and US monetary policy leaves interest rates low, Chinas problems are likely to continue. Should the Chinese property bubble burst, the banking system could suffer enormously and could lead to a financial catastrophe.
By raising interest rates here, we will help prevent China from imploding and causing a whole new round of Asian currency contagion;which would make the 98 Asian currency crisis look like a walk in the park.
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