Beijing's Financial Lessons for Washington

"With this data firmly in hand, let's return to issue of the moment--China's apparent decision to start scaling back her stimulus program. Indications of this plan first started to appear on my screen in July 2009, when Chinese banks began to issue fewer loans. It became much more apparent in September and October. Chinese banks halved September's lending rate during the month of October--trust me; this type of curtailment is not serendipitous. Rather, I would contend Beijing is busily trying to prevent a housing or stock market bubble that could derail China's economy with an impact similar to the turmoil caused by our once-over inflated real estate sector.

All this seems like good common sense, even if it flies in the face of Adam Smith's "invisible hand." The Chinese Communist Party has clearly come to the realization tight regulation of the domestic financial industry is good for consumers on a micro- and macro-economic scale. Too bad Washington seems unable to reach a similar conclusion. (Watching Senator Dodd's efforts on this front is best likened to skipping stones on a large body of water...strangely satisfying but completely unproductive.)"

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