Shen Minggao Sina Blog

Sichuan netizen Zhu Mai: Anti inflation seems like yesterday, and now experts are talking about deflationary pressure. Our general consumers are in a fog. Can you explain it to us?

Shen Minggao: The economic crisis has seriously hit people's confidence in the market, especially in prices. However, the current price signal confusion should not be a reason for not respecting prices. The price signal is the core of the market economy. Only by getting the price right can it really play a fundamental role in allocating resources.
　　 In the first half of last year, China's inflation was driven by the rapid rise of pork prices, and the CPI once exceeded 8%. The Chinese government has directly subsidized pig farmers to stabilize prices. The government also restricted grain exports and increased subsidies to food and agriculture. In 14 months, the food CPI has been reduced from double digits to single digits, and the effect is obvious. However, with the deepening of the crisis, it only took nine months for China's CPI to decline from more than 8% to negative growth.
　　 If the government did not directly limit the price

The discussion about world currency has a long history. With the expansion of international trade and the collapse of the gold standard system, especially after the collapse of the Bretton Woods system, countries are looking for or hastening the emergence of new world reserve currencies other than the United States dollar. The rise of the yen and the birth of the euro are the result of the competition in the international reserve currency market.

However, it is ultimately up to the market to decide who can truly become the core reserve currency. According to the statistics of the International Monetary Fund, in 2007, the proportion of US dollar assets in global reserve assets was still as high as 60%, and the US dollar was still the leading international reserve currency.

The biggest problem of using sovereign currency as reserve currency is that the policy of the issuing country of the currency must take into account the liquidity of domestic and international markets at the same time, while maintaining the relative stability of the currency value, which is contradictory in some cases. In order to avoid a deep recession in the domestic economy, the US government had to adopt loose fiscal and monetary policies, which increased the concern of countries that use the US dollar as a reserve currency. The discussion about finding a world currency heated up again.

After the Second World War, there was a dispute between Keynes and White when reshaping the international monetary system, and the latter won. On the surface, White represents the interests of the United States, and his victory represents the undisputed hegemony of the post-war American economy. In fact, this is also the result of market choice. The U.S. economy and trade account for a large proportion of the world, and its currency is relatively stable, making it difficult to compete with it.

Finance

Finance