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Governments using markets to manipulate the economy

July 21, 2005

While virtually everyone in the leading economic establishment were positive about today's currency reform in China, there was kind of a mixed message about whether this was a step in the direction of more or less market economy. In the BBC Business News Story on the issue White House spokesman Scott McClellan said:

"We are encouraged by China's announcement today that they are adopting a more flexible market-based currency system." Well, that sounds good. But then we hear Thomas C. Dawson from the IMF who while also being positive too towards the reform puts it this way: "Greater flexibility is very much in China's best interest, as it would provide more room for monetary independence, enhancing the government's ability to manage the economy."

So, according to this news story increased government manipulation of the economy means that it is more market-based. Interesting theory....

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