China Business says China May Announce 4 Trillion Yuan Stimulus.

China will announce in August a new stimulus package of possibly 4 trillion yuan ($586 billion), the China Business newspaper reported on its Web site, citing unidentified sources.

The plan, from China’s National Development and Reform Commission, will likely cover nine industries including information technology and new energy, the report said.

I have no idea if that is true or not. What I do know is how insane that is, if it is true.

China has the biggest property bubble in the world. Another massive stimulus would fuel that bubble. In turn, increased demand for commodities would further stimulate the property bubbles in Canada and Australia.

If the recovery was genuine, we would not need to see round after round after round of global “stimulus” none of which has created any jobs. Indeed, all this stimulus has done is push up the price of financial assets and commodities everywhere, while fueling property bubbles in Asia and the commodity producing countries.

The one thing Bernanke has wanted but not gotten is stabilization in the US housing market.

The thing about stimulus plans is governments can throw money at problems, but they do not really get to decide exactly where the money goes in the global economy.

The US wanted housing and jobs, it got increases in equities, commodity prices, and gold instead.

China being a command economy can do a bit better at throwing money where it wants, but China cannot control the resultant property bubbles in Canada or Australia.

The net effect of all this stimulus was to create renewed speculation in financial assets and equities with the real economy sucking the gas of blowhards talking nonsense about the nascent recovery.

Mike “Mish” Shedlock
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