Consumption, which accounts for 55% of China’s GDP, fell by 3.9% in terms of social retail sales in the second quarter, on top of a 19% decline in the first three months of 2020. Some argue that consumption will now surge and become the main growth driver in the remainder of the year. But this is unlikely, because households will be anxious to replenish the savings they depleted during the lockdown. The government can and should provide relief to households affected by COVID-19, but it cannot do much to stimulate consumption.
What he notices is that consumption is a result of economies of scale. China as lost depth in thier value chains due to covid and trade collapse. No government can conjure up more economies of scale with simple deficit stimulus spending.
Quite the contrary, short term government bailouts defer the search for better economies of scale. Enterprises have to await the bailouts and look at the resulting surpluses to set scale. The mistake was all about economists no knowing the science of self sampled systems and assuming the existence of a central planner. This is the Lucas criteria which Keynesians ignore. A major blunder in theory lasting hundreds of years.
There are no Godots in a self sampled system. Learning this fact is causing Wile E Coyote moments among Keynesians, they are getting a bit hysterical.
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