China’s pursuit of economics’ ‘impossible trinity’ is a sure path to disaster
A claim by China’s central bank that it has achieved the ‘impossible’ – a stable yuan, open borders and control of its own interest rates – is nonsense
The mainland’s central bankers have done the economically “impossible”, finding a way to have a stable yuan, a free market and effective monetary policy.
That is the assessment of two central bank researchers who claimed in a paper published on the People’s Bank of China website yesterday that Beijing would continue to realise the “impossible trinity.”
– SCMP, March 31
And I claim to have invented a perpetual motion machine. It’s easy. I just did what these two so-called “researchers” did. I published a paper. You hold it in your hands. Hey Presto, the impossible achieved.
I once saw the late economist Milton Friedman deal with the particular impossible trinity that these two say the PBOC has made possible. It was at an informal lecture that he delivered here at the Academy for Performing Arts in Hong Kong.
[China’s approach] is just a muddle of confused bouncing back and forth, of monetary policy held hostage to whatever scream of distress happens to be loudest at the time
He sat alone on the stage on a chair that was unfortunately a little too high for his short stature so that his shoes barely touched the floor, a huge contrast with his stature as an economist. Someone asked him what he thought of China’s monetary policy, whereupon he hopped off his chair and drew on a whiteboard a triangle representing the elusive trio of factors.