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Would the China economic miracle been possible under a gold standard?

August 7, 2011

China’s economic policy over the last 30 years raised more people out of poverty more quickly than any other program in history.

But could it have happened under a gold standard?  What China did was to put vast amounts of people to work through massive government spending in a currency that had little or no value to the outside world.   Even today, the Yuan/Renminbi isn’t freely exchangeable.

Could China have done what it did under a pure gold standard?  I think not.  Even under a currency like the ECB, it would have been difficult or impossible.

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  1. August 9, 2011 at 6:17 am

    Great question. I think the answer is no. Any type of zero sum system like a gold standard is incapable of lifting aggregate wealth over extended periods. It is always taking from one to give to another.

    • TC
      August 9, 2011 at 1:26 pm

      Thanks. I’ve been thinking about China blowing up, and it struck me their problems are probably impossible under a gold standard. But so is the 30 years of great growth prior. I’d say China is way better off with a fiat currency then they could have ever been under gold or a Euro like structure.

  2. August 9, 2011 at 1:48 pm

    Agreed. I also didnt know that their currency wasnt freely tradeable. Thats kind of like making all the employees of WalMart only shop at Walmart. It would work for a store like Walmart since they carry everything (not the best of everything but ….) and China certainly produces everything. There will be a time I would imagine that the Chinese consumer may want more. Although I hear the Chinese are quite good at making knockoffs, maybe they will just make their own version of everything. They have enough people

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