Thursday, August 27, 2015
If you read the Chinese Communist Party newspaper, there is no crisis in the stock markets there. There is no denial in print. Rather, there is nothing at all. This is hiding in public. A few dictatorships and oligarchies can get away with this kind of sham but it is impossible in democratic countries with press freedom. The cost of silence is damage to reputation. Incidents line this can turn the public against the government and create long-term problems from strikes to rioting to a fall in leadership. The Chinese government understands this. The mystery is why it persists in silence. It might be that it doesn't know what to say, and it is trying to fix the problem before speaking. The problem with this approach is that it might take a long time for the equities markets to stabilize. Meanwhile, millions are watching their life savings disappear. It would be better if the government made some public gesture other than an interest rate cut.