China, all the Cunning of the Planned Economy.

Over the next few months, we will no doubt see economic history begin made. On full display will be all of the tools and strategies of a Centrally Planned Economy. As China deals with the full ramifications of the Novel Coronavirus, now labeled Covid-19.

In the next few months, we will no doubt see economic history begin made.

On full display will be all of the tools and strategies of a Centrally Planned Economy. As China deals with the full ramifications of the Novel Coronavirus, now labeled Covid-19.

Three things happened this weekend, which bear the unmistakable fingerprints of the Chinese Central Government.

First came the announcement on Friday, by the Chinese Finance Minister that they would immediately lower short term interest rates.

Further, that tax cuts would be coming soon.

And finally, that east loans will be made to help businesses through these tough times.

All an indication that the Central Government will take direct action to ease its monetary policy during this crisis. Lower taxes, lower interest rates, overall easy money, this has all been standard fare in the US, at least going back to the Fed Chairmen Alan Greenspan.

Although both expanded the power and scope of the Federal Reserve, the basic proposition that Central Bankers can/should interject themselves into the economy is now generally accepted.

If nowhere else, then at least with the investing class.

Beginning with Greenspan and his careful orchestration of the economy through interest rate manipulation, and then Yellen and Bernanke with their introduction of Quantitative Easing, and the purchase by the Fed of US Treasuries.

The role of the Central Bank in America has been well defined, and open.

And now  as indicated by the Chinese Finance Minister we will see all of these strategies utilized by Beijing.

But I don't think the Chinese will stop there.

For Xi Jinping, and the CCP, this crisis is now an existential threat. They must master the Pandemic, or go down in flames.

So we will likely see their control over the economy, in ways that many have no envisioned. Ultimately they will exercise as complete control over their economy as they now exercise over their population.

Let's direct our attention to the recent announcement by Foxcomm, that we mentioned last week.

Foxcomm is the number 1 producer of many of the products of Apple Computer, including the iPhone. Foxcomm is also a publicly-traded company. On their Investor Relations Page, back on February 8th, they noted that their plant operations would follow the directives of the Central Government. First, by following all of the current health and safety recommendations of the government.

Foxcomm notes that their future operations schedule will be following the Government's recommendation. Translation: the Government is running this now. Foxcomm will opens when the government tells them.

That's really stunning and very different from the economic system of this Country.This is a degree of control, that we are simply not used too.

It also puts the further responsibility for this economic crisis squarely on the shoulders of Chairman Xi and the Central Planners.

So that's why I took a special interest in two stories that came to light this weekend.

The first was the news that Ant Financial, a division of China's largest company Alibaba, would offer special low-interest loans for businesses throughout China. These loans would offer rates 20% below, the best corporate rates currently available. And for those companies in Wuhan, and the surrounding area, they would have interest waved for the first 90 days.

How can they make such inexpensive loans, especially in a time like this? When corporate income is so uncertain?

The answer, very likely, is that Alibaba isn't offering these loans by themselves. Oh, sure the loan documents will be from Alibaba, and Alibaba will most likely service the loans. But these funds probably originated from the Central Bank.Its another way that the CCP can get money into the economy.


And it demonstrates the degree to which a Centrally Planned, Government can operate in a seemingly "Capitalist" Economy.

There was another example of micro-management this weekend. Macau, the world's largest gambling complex, and a favorite destination for the Chinese will re-open.

Now thousands of gamblers rubbing elbows in giant Casinos is not my idea of prudent health care in the middle of a Pandemic. But I'm sure that the Chinese officials are keen to get things back to normal. And so, the Casinos in Macau will be open once again.

Extend this type of command and control throughout the Chinese economy and you see how the entire economy is micro-managed.

For years there has ragged an argument between the West and their the capitalist market system, and the East, and their Control Economy. With China especially arguing the virtues of a Centrally Planned economy.

Well, we are going to see how those Central Planners perform in a historic crisis.

The world will now see, whether China can prevail.

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