Re: China’s Economy Suffers From Hangover of Producing Too Much
The focus of this otherwise excellent article should be that China has produced too much of the wrong goods. Easy credit causes disruption in the time structure of production, making longer term projects appear to be profitable in the future. But such will not be the case. Ludwig von Mises used the analogy of trying to build too large a house with too few bricks. The project appears to hum along nicely until the builder realizes that he does not have enough bricks–i.e., real goods–to finish the house. China’s only rational option is to end the credit expansion that caused the current dislocation. More easy credit merely perpetuates and expands the destruction of capital.