August 24, 2009

Evil Big Government?


I noticed something strange, a conundrum as a former Fed chief would say:
the same people who are convinced the U.S. Government's greater involvement in the economy spells doom for the U.S. stock market are also wholeheartedly embracing the Chinese economy and stock market.

Now I haven't really looked into this so don't quote me on the numbers I'm going to throw out there but if I had to give a ballpark estimate I'd say the U.S. economy is 25% reliant on the government and the Chinese economy is 95% reliant on the government. So, even if that percentage were going up in the U.S. and down in China (which is actually not the case - I believe the state has increased its control over the Chinese economy as a consequence of the financial crisis), we still have a situation in the U.S. where the government is relatively small compared to the private sector.

So my question is this: why is the government bad for the economy in the U.S. but good for the economy in China? And don't tell me about the U.S. budget deficit: that's another subject altogether.

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