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To: TobagoJack who wrote (66977)	8/5/2005 2:37:05 AM
From: elmatador	Read Replies (3) \| Respond to of 74559

TJ isn't going to like that: China vulnerable to shocks, says Nobel laureate "Prescott said democratic institutions in India inspire more confidence in that country's growth path." O God! This guy is a nobel laureate on what? China vulnerable to shocks, says Nobel laureate Fri Aug 5, 2005 1:49 AM ET Printer Friendly \| Email Article \| Reprints \| RSS SINGAPORE, Aug 5 (Reuters) - China's breakneck pace of growth may not last and the world's seventh largest economy could be vulnerable to external shocks, said Edward Prescott, the Nobel 2004 economics prize laureate. Prescott, who teaches at the Arizona State University and also works for the Federal Reserve Bank of Minneapolis, compared China's growth with that of Brazil's from the 1960s to the 1980s. ELMAT: And that is the caliber of the teacher the US has in a state Univeristy? This doesn;t augur well for the kids in those state universities!!! "China's spectacular rate of growth may not be sustainable, and the country risks the same shocks that hit Brazil in the 80s," he told an economics conference in Singapore on Friday. "Good things happened in Brazil, but they were hit by shocks and they couldn't handle it in the 80s. And they lost all that ground that they made from the 60s to the 80s," he said. ELMAT: He forgets that the military regime in Brazil made several mistakes (not saying Cina is not doing mistakes) but Brazil's mistakes were plainly stupid: Closed economy, State-owned enterprises, protectionism, wrong education policies, exacerbated nationalism, poor investment decisons (roads in the Amazon, railways, scared the brain power away from the country and gave free rein for the dumb that agreed and didn't criticized... In the early 1980s, several Latin American countries suffered a sharp deterioration in their terms of trade and suffered from a spike in debt servicing costs as oil prices and interest rates rose and as industrial economies went into recession. ELMAT: The shock was created by Paul Volcker who jacked up interest rates to double digits. The rest of the world sucked capital out of Brazil to the tune of USD12billion a year and the rest is history. "At some point, the spectacular growth in China has to stop," Prescott said but declined to predict when that might happen. ELMAT: That is a wish. But I want the teached nobel alureate to tell us, how exactly this shock will happen. Prescott, who has warned that Asian banks cannot continue accumulating U.S. dollars forever, said China should avoid buying large amounts of low-interest rate yielding dollars. "The Chinese are saving like mad, but they are not getting a very good return on their savings," he said. Prescott said democratic institutions in India inspire more confidence in that country's growth path. Oh, boy! As if "democracy" in India mattered...