Monetary Policy Is In A Global Dilemma, Raising Interest Rates Will Cause More People To Lose Their Jobs.

Data released recently by the General Administration of Customs show that China's export growth slowed sharply in June to below 20% of the average growth rate.

In the first half of this year, the cumulative trade surplus was 99 billion 30 million US dollars, down 11.8% from the same period last year and a net decrease of US $13 billion 210 million.

This means that China's trade surplus is likely to have a real turning point.

In contrast, imports surged faster and faster. Crude oil imports increased from 11% to 90 million 530 thousand tons in January to June. For example, iron ore imports from January to June were 2.3 million tons, up 22.5% from the same period last year.

Judging from common sense, this is a bit surprising.

The first half of this year is the fastest growing period of iron ore and crude oil prices. According to the general supply and demand relationship, price increases will inhibit import demand, but this rule is totally out of order. It seems that China does not want to reduce aggregate demand. The only effect of exchange rate appreciation is to continue to stimulate the expansion of total import demand. Even if international commodity prices soar, the Chinese people are willing to use the exchange rate increase method to undertake the "responsibility".

There is no "free lunch" in monetary policy. The upstream economic part of the import of International Commodities (steel, petrochemical, aluminum and so on) enjoys the benefits of expanding imports, while the export sector (such as clothing, clothing, textiles, toys, electronics and other industries) is under pressure, and their export capacity has declined sharply.

This is only part of the story.

Another aspect is China's inflation problem.

The weight of food in China's CPI setup is 32.7%, and the price change of food is largely seasonal. Generally speaking, there will be a brief drop in the summer. But from a structural point of view, the upstream sector of China will continue to push the price of international commodities to the lower reaches of the river under the signal of the expansion of total import demand. (the Austria school has clearly portrayed this game of upstream and downstream power), forcing the downstream enterprises to "turn over profits", which is reflected in the continued surge of PPI.

This actually means that the divergence between CPI and PPI is false. Finally, CPI will perceive and reflect all the effects of conduction.

In the process of pmission, downstream enterprises will reduce profits, lay off workers or even go bankrupt.

Inflation pmission can effectively eliminate jobs, but people often think that raising interest rates is the fundamental force to create unemployment.

Kenneth Rogoff, a professor at Harvard University, wrote in the "global economy is a runaway train". "When it came to the brakes, but no central bank was willing to do so, governments struggled to prolong these unsustainable prosperity, and further pushed up commodity prices. The higher commodity prices were eroding fiscal reserves without restraining demand.

Increased the risk of a once in a blue moon economic and financial chaos.

No doubt, at present, it is like a prisoner's dilemma. The rational approach is that all countries should adopt a tightening policy to control inflation. However, they believe that "if other countries do not adopt similar tightening policies and implement the Keynes stimulus policy, then the adjustment cost of unilateral tightening countries will be increased".

According to Bernanke's recent congressional testimony, it can be concluded that the United States will not be expected to have a leadership style.

So we see that most countries in the world have turned the philosophy of growth into a hyperarousing hyperactivity.

Stiglitz, the famous economist, sees the inflation targeting system as a disaster with interest rate control. He ridicules the inflation control countries like Britain, Chile and Israel in the the failure of inflation targeting, and thinks that all the problems are caused by the United States, and the United States should raise interest rates.

One of his words is true.

Americans will certainly not raise interest rates as Europeans do. The Americans' calculation is to try to stabilize US financial assets by means of currency injection, and let those loose countries of currency take over. At the same time, the US dollar depreciation means US assets are being discounted (increasing attraction), and it can also promote US exports.

Frankly speaking, emerging market countries seem to be entering the "urns" of Americans.

For these economies, any practice of maintaining hyperactivity will result in the loss of reasonable economic factors, making the recession time and bottom longer and deeper in the future.