Posted on 12/02/2011 4:40:15 AM PST by SeekAndFind
China's move this week to keep its economy afloat isn't generating the big headlines that Europe's actions got, but is no less important in keeping the world's economic engine churning.
While coordinated action by the world's other central banks to enhance liquidity for Europe's banks stole the focus Wednesday, China's decision to cut reserve requirements for banks was even more important, some believe.
That's because the developed world has come to depend on China for a variety of reasons from buying up American debt to providing loans to growing businesses to keeping its mighty manufacturing base growing.
Easing the amount of money banks have to keep on hand, as the People's Bank of China did with a lowering of the rate by half a percentage point, helps accomplish those goals by keeping the lending spigots flowing.
"A change in the reserve requirement literally either frees up or delimits real lending by that nation's banks," hedge fund manager Dennis Gartman told subscribers to The Gartman Letter. "A lowering or raising of funding costs is a fly on the mule's skin, but a change in the reserve requirement is a board laid straight away to the mule's forehead."
Worries over China's economic growth have come as a surprise. Whereas the nation actually had been trying to slow down and control inflation that peaked above 6 percent over the summer, it now finds itself fighting to avoid a slowdown triggered by the European crisis.
Fresh data Thursday showed the Chinese factory sector contracting for the first time in three years, as a purchasing managers' index slipped to 49.0, the lowest since February 2009.
(Excerpt) Read more at cnbc.com ...
The big question is....once it happens, many will say this was all caused by capitalism.
They will keep trying to “fix” it with the very things that caused the collapse in the first place.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.