Sunday, November 9, 2008

Whats China Stimulating?

China announced today that they're going to do a 586 billion dollar stimulus package. These packages seem to be the in thing, so with the Chinese spending virtually nothing, it seems like a good idea to pump money to citizens who will then spend money. but wait, there going to invest in infrastructure like highways, subways, and airports. i don't understand what that's going to do to stimulate the economy? Better highways aren't going to increase spending according to me. maybe im wrong. anyway, after reading a second article, this one from the UK, i learned well actually infrastructure and social programs, and top priorities would include low cost housing, and environmental projects. that doesn't seem like its going to do a noticeable amount much stimulating.
in America, we sent money straight up to people to increase spending. April and May people got their checks, and when the economic reports came out, spending was significantly up, thus business spending was up, and that lead to more money circulating, and the stock market being up. Now we obviously cant do that all the time, but it is very helpful.
i dont understand why China doesn't just do that. They need to increase spending NOW. They cant wait around, there GDP is dropping hard. They've cut their growth rate from 12% a year, to 4%.
A stimulus package similar to ours would make the most sense to me, but apparently Hu Jintao knows something i don't. i hope it all works out for them, because it their stock market/economy crashes, the US will be deeply affected no matter how well Obama does here.

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