First we have this in The Age this morning:
SENIOR Chinese government policy advisers have said Beijing is unlikely to have the appetite for the new round of massive spending to boost its slowing economy, casting a shadow over Australian miners’ hopes of a near-term rebound in the giant economy.
Doubts are also growing within China as to whether banks are willing to finance a planned $US156 billion ($150 billion) infrastructure spending spree ranging from railways to roads as many local governments in China are still nursing a three-year-old debt hangover.
And then on The Age website there is something else:
Weak Chinese trade data has underlined the likelihood of more Beijing-backed spending to deal with the damage done to the domestic economy by firms cutting production, inventories and imports in the face of anaemic global demand.
Imports fell 2.6 per cent on the year in August, confounding expectations of a 3.5 per cent rise. Exports grew 2.7 per cent, below forecasts for a 3 per cent rise.
Such weak data is grim news in a country where exports generate 25 per cent of gross domestic product, support an estimated 200 million jobs and where analysts already expect the economy to have its weakest year of expansion since 1999.
Here is how it is with Keynesian policy. Fool me once, shame on you. Fool me twice, shame on me. Everywhere you look, there are debt and derangement, direct consequences of the Keynesian expenditure of the past three years. No one with any sense will repeat this experiment again.
Economic theory hasn’t kept up with policy so most textbooks still peddle C+I+G and teach about the importance of aggregate demand. But if anyone thinks we are heading for another stimulus even as economic conditions are getting worse, they are just not paying attention. Policy is now going to follow pre-Keynesian classical prescriptions with a shift towards the private sector and some actual reductions in public sector spending. It is value adding production that creates growth and employment, not increased spending on anything. Most people are too polite to say it, but macroeconomic theory is now about as flat earth as it could possibly be.