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Affluent Christian Investor | March 25, 2019

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Chinese Government Isn’t God, and Can’t Suspend the Laws of Economics

18th National Congress of the Community Party of China (2012)

18th National Congress of the Community Party of China (2012)

You know there is a problem when you hear something like this: The Chinese authorities have halted all new listings on the stock market. The reason? They want people to buy shares, not sell them. They think more buying is needed to halt a market that has declined about 30% in the last month

In case you’re not paying attention, a 30% drop is not a correction. It sounds more like a collapse.

According to one report, about one quarter of stocks on the Shanghai and Shenzhen exchanges have been suspended from trading.

What has caused this enormous decline in the market? Selling, is what has caused it. Sellers have dumped stocks as if they were hot potatoes.

The solution? Ban selling (i.e. no more stock listings for a while) and encourage buying.

Duh! I’m afraid to ask: How can you have buying without selling? For every buyer, there must be a seller. Why journalists don’t pick up on this stuff amazes me. It’s one of the most basic economic concepts of all – the concept of exchange.

Attempts by authorities to halt the free fall have not worked. It is a problem beyond government intervention. This should not be surprising, because the problems of the world, according to secular humanism, are insufficient education and insufficient governance. (Thank you to Dr. Voddie Baucham for that insight.)

The solution to the Chinese problem is more governance – more government interference in the market.

But if government manipulation of credit is the cause of the boom-bust cycle, as von Mises understood so well, there can be no expectation that government will fix a problem of its own making. Unless, of course, it got out of the money manipulation game. But then there really would be a massive correction of maybe even greater magnitude than the one under discussion.

People in the world may hate what is going on in the marketplace, the disruption for the goal of personal peace and affluence. But they hate even more, the only alternative. A recognition that this is God’s world and his laws of money and finance are the only true pathway to wealth. This would require a turn-around in the way people view themselves and money, their employment, their purpose on earth, and their hopes for the future. There is a word for such a turn-around. It is the word “repentance.”

But I am of the opinion that repentance is not worth very much on the Chinese Stock market right at this time. Unless you call bailing out of overvalued stocks repentance.

 

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