Just weeks ahead of defending her PhD on the question if China’s boom caused the financial crisis, NYU associate professor Heleen Mees wonders in The Financial Times, if the prevailing economic doctrine needs a revision.
The prevailing doctrine among economists is that fundamentals – that is economic growth expectations – rather than the cost of risk capital drive business investment. This belief is based on a single academic paper written by Olivier Blanchard (current chief economist of the IMF) and Larry Summers (Harvard professor and former Treasury secretary), that was published in 1993 in the prestigious Quarterly Journal of Economics. But if the findings in that article are incorrect or do no longer apply, the Fed may just as well be putting the cart before the horse with a third round of quantitative easing. In that case Bernanke would be wise, if he were to employ the printing presses following the FOMC’s September meeting, to buy stocks instead.
- Heleen Mees joins China Speakers Bureau (chinaherald.net)
- Why do stock markets react on China figures they do not trust – Heleen Mees (chinaherald.net)