Ben Bernanke on China Policy


Ben Bernanke

Ben Bernanke was the name behind the economic decisions of George W. Bush. He was an economic adviser of the former US president in 2005. After the reign of the former president, he joined the Brookings Institute. His role is prominent, since he became the famous Fellow in Residence while playing the role of the senior adviser to the Citadel in Chicago. During the global financial crisis in 2004, he took the spotlight and drew the attention of the public. That went on until he resigned as the chairman of the US Federal Reserve in 2014. He has been managing the central bank as a government and that brought him to the hardest options. He was the one who acted on the bail out American Insurance Group, yet nobody acknowledged his efforts. He added, if they will not act, then, who will dare to do that? At age 62, he still has some ideas in mind about the monetary as well as the fiscal policies that must be polished.

He was also the man behind the Target Fiscal Policy that has been suggested to China. He implies that it can help in reducing the pressure on the monetary policy and through the years, it will be of help to the entire nation in terms of their developing consumption driven economy. In an interview headed by Caixin, he elaborated the thought and he said that a well conceptualized fiscal investment may boost the productivity in the long run while giving added demand for a short period of time. Compared to some nations, he added, china has the fiscal capability to add more investments. During the interview, there were some questions thrown to him that he answered accordingly. Some of the questions Caixin threw at him are as follows.
Caixin asked, it has been deliberated upon that the Yuan must be criticized a little bit. What can Ben say about it? He answered confidently that he doesn't believe that a big depreciation will do good for the country, it is due to the fact that it will export the deflation to the other parts of the globe and that may mean a rebound on China in a bad manner. If it is not good to anyone, why, if the depreciation is not massive? What if it is just light, is that probable? Are there still any bad effects? The hardship in managing the depreciation problem is still there. If there is a definite, continuous depreciation, then it will just boost more capital outflows, since the citizens will be making an effort to get out of the Yuan as the depreciation went on. It will be best to just have a less foreseeable trail.
What was the idea of Mr. Ben Bernanke about the Yuan internationalization in the past years, has it gained a new pace? What can he say about it? It is by far good enough. That is because it shows the truth that China is really making an effort to come up with a good financial markets with more openness, more rules and more liquid as well. In that sense, Yuan is not yet used in an international manner just the same as the dollars as well as the other monetary are, however, that is not essential at all. But in time, it will be important.
How about Mr. Ben Bernanke's point of view about the China's pushing to enhance the standing of the SDR in an international monetary system? From his perspective, he doesn't think that it is realistic at all, since the SDR will just use a primary international currency. It is not about how much for now, since it does not have any fundamental infrastructure and there are no liquid markets for the SDR assets, since there are for the assets dominating the dollars as well as the euros. He recently said it's probably fair to say that looking at the markets and the economy globally, there are some positive trends. We're seeing, for example, pretty good performance in China, we're seeing some pickup in Europe, even Japan is doing better. So the increased optimism, including the optimism in markets, is not solely due to the expectations of the new administration's policies. It's due in part to a somewhat broad-based improvement in the global economy.
Lastly, what Mr. Ben Bernanke thinks about digital virtual currencies in the next years to come? From his viewpoint, technology wise, he thinks that the technologies do offer a lot of possibilities in terms of improving the payment systems and how people will go through their daily lives with the transactions. Also he thinks that the non-government sponsored currencies such as bitcoin will have a place in the international financial system. But people will still go on in using dollars, Yuan and even euros and the technological advancement will play a vital role in making the payment system more effective and organized.
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