Now sweeping the United States at the beginning of the crisis spread to global credit, no one could give no thought to who. For the United States, the consequences of the financial crisis is paralyzing the financial system, rising unemployment, increased depreciation of the dollar. The involvement of other countries (especially China), the sub-loan bonds directly to the loss, foreign exchange reserves and national wealth has shrunk sharply, the dollar lost a large number of assets, capital market turmoil, many years of economic growth mode can not be held following the . On loan at the causes of the crisis, which will involve complex financial derivatives, it is difficult to see what happens behind what can only be attributed to financial institutions, irrational impulse to innovate, as well as risk control and supervision of adverse regulatory authorities. Economics from the academic point of view, this explanation is far-fetched, unconvincing. To explore this true of the last century since the Great Depression of the largest financial event, and China and other countries of how the economy will cause adverse effects, as well as the future of the international financial system to understand the crisis with sustained long-standing imbalances in the global economy And the global liquidity surplus, we have to take a broader, more rigorous Perspective to look at the impact of international financial structure of the United States and the United States, and its financial and economic policy-making level. Under the dual goals of the Federal Reserve System Federal Reserve System (Federal Reserve) in the global financial system in a pivotal role. As the U.S. central bank, the Federal Reserve in the 1990s has gone through a period of global economic and financial instability is more of the times, and won a high reputation. As the leading U.S. monetary policy, Federal Reserve policy is characterized by "two goals, a tool." In accordance with "the Federal Reserve Act" stipulates that the Federal Reserve's goal of domestic price stability and maximum employment, and two goals to equal treatment, if there is conflict between the two, the Fed is responsible for coordination. Taylor is well-known law of its policy brief summary of the strategy. And the European Central Bank's inflation target of a single, who is due to the inherent conflict shoulder the dual task of the Federal Reserve's monetary policy is difficult to ensure that strict self-discipline. Is a tool for the federal funds rate, that is, bank reserves at the time of loan interest rates. It will affect the short-term mortgage interest rates, interest rates on bank loans, corporate bonds and commercial paper rates, as well as the real exchange rate to the residents through the wealth effect of consumer spending, as well as through the purchase of newly issued shares of the impact of cost-effective option to finance business investment. U.S. Federal Reserve can adjust the federal funds rate affect aggregate demand to achieve the twin objectives. Signs of economic recession, reduced the federal funds rate to encourage borrowing and spending in order to stimulate economic growth, or even to maintain the inflation rate is to lower the federal funds rate to ensure the effectiveness of monetary stimulus. Interest rates as a tool to regulate and control economic policy is seen as production and consumer costs, the Federal Reserve's policy of generally ignoring the social functions of the savings, not to encourage or even ignore the will of the U.S. national savings. And the dual goals of the interest rate tool, the Federal Reserve is not inclined to data clearly show that the inflation situation, to use monetary policy to regulate the total demand in order to stimulate the economy to achieve the objective of full employment. This is close to the market to provide any additional liquidity needs of the commitment of its covers quite wide. Monetary stimulus in one country will cause consumer prices to rise, in other countries, has resulted in inflated asset prices. Even within the same country in a period of tension caused by the labor market, rising wages, has resulted in another period of prosperity in the real estate market. However, theory and experience have proved that the continued monetary stimulus will inevitably rise in consumer prices, that is manifested in the form of inflation, even in the context of economic globalization, but also occurred at a time delay. The negative U.S. personal savings rate U.S. personal savings rate from the early 1990s about the rapid decline of 9% at the end of 1999 to about 2%, -1% in 2006. If the U.S. is not the world's reserve currency status, such a low savings rate will be long and difficult because of inflation. To raise savings rates, reduce credit financing and reduce the savings to promote the consumption of the two conflicting. The Fed also constantly worried (and many export-oriented countries worried) if residents sector to increase savings rates, lower consumer spending will reduce aggregate demand, the economy into recession. As part of its huge trade deficit with a performance of the United States maintained a huge current account deficit, even if the RMB appreciation has been oppressed, in 2005 the U.S. trade deficit still reached 725,000,000,000 U.S. dollars, accounting for 5.8 percent of GDP of the United States. In 2006 reached a historical record of 758,500,000,000 U.S. dollars, accounted for 6.5 percent of GDP, declined in 2007 for the first time, in order to 711,600,000,000 U.S. dollars. To address the huge current account deficit means the savings rate is to raise or lower the rate of investment in a high degree of rich countries to increase the savings rate is not difficult, and the Federal Reserve's low federal funds rate were not the solution. In order to the huge U.S. current account deficit financing, foreign governments and other public organizations, such as China, Japan and the Organization of Petroleum Exporting Countries, such as the U.S. balance of payments account for a huge capital account surplus. At present, the Ministry of Finance in the United States 9,500,000,000,000 U.S. dollars of the balance of government bonds, other than the United States Government and the proportion of bonds held by investors as high as 27.9%, the ratio is still rising. A large number of foreign governments and investors to buy long-term U.S. bonds, to maintain a low interest rate bonds in the United States and the United States, consumer demand for imports in these countries. Of course, logic can, in turn, the rest of the world's capital by the United States capital markets to attract the inflow of the United States, the United States so as to promote long-term interest rates low, so American consumers and businesses is very easy to borrow money on favorable terms, but also to ensure that the other National demand for imports, which is a balanced world economy. Both have impeccable logic, is on global imbalances is the U.S. excess countries in East Asia or the savings glut argument (Bu Nanke, 2005), from the world, including China are taking place in the inflation point of view, the facts do not support the anti - Over logic. International financing conditions needed to support a strong dollar, we can see the back of the weak dollar terms, the United States to rely on more international cooperation in macroeconomic policy, foreign official to seek long-term capital to the U.S. capital markets. Federal Reserve monetary policy and the federal funds rate movements Figure 1 U.S. dollar so far in 2000 with the U.S. Federal Reserve benchmark interest rate trend Source: Bloomberg 2:2000 map to the present dollar exchange rate and inflation trends Source: Bloomberg In early 2001, the stock market crash, the Federal Reserve that the stock market was down due to the negative wealth effect, economic growth may slow down, start to cut interest rates cycle. This process, as the data continue to show the extent of a serious economic slowdown, unemployment has continued to worsen, consumer confidence continued to decline, the Federal Reserve to cut interest rates persist. Data show that in times of economic recession and the stock market, the housing market, consumer spending and economic expansion frequently repeated. , 911 in response to the terrorist attacks could lead to greater risks of economic recession, the Federal Reserve to use all possible means to the United States liquidity into the economy and the rapid expansion of the scale of open market operations. In January 2002, then-director of the Federal Reserve's warning Bu Nanke after-effects of a burst bubble, that is, as the United States may face the risk of deflation, like Japan, the Federal Reserve to reach an internal consensus that the face of slow economic growth, should not Ningsong Remember to take prompt action to maintain and inflation is to form a buffer (Meyer, 2005). U.S. Federal Reserve hinted that the market's fear of deflation, at the same time encourage the market is expected to be a longer period of time in the federal funds rate (short-term interest rates) remain at a lower level. Long-term interest rates can be expressed as a certain period of time than the average short-term interest rates coupled with the risk premium, "prior commitments" at the time quickly turned into a lower long-term interest rates in order to stimulate economic activity. And the market is not only expected the federal funds rate will be a longer period of time low, and thus further interest rate cut speculation. Despite early 2004, GDP price index and other indicators of inflation rose to around 3%, but the fear of deflation, the Federal Reserve in 2003, the federal funds rate will be reduced to only 1%, and maintain a 1-year-old, to take The method of raising interest rates gradually, each step or only 25 basis points. Very low federal funds rate and the federal funds rate will rise gradually to slow the expected, leading to long-term interest rates continued to decline and fall 2003-2007 in the United States long-term interest rate treasury bonds in the 4.1-4.6 range. Long-term interest rates and mortgage in close contact, the 10-year bond yields is that most of the mortgage interest rate, mortgage rates in 2001 than 7% in the second half of 2005 and its other interest rates began to rise together before , Fell to only 5.75 percent. 2004, new data and projections show that the unemployment rate reached 5.7 percent, close to the level of non-accelerating inflation rate, the Fed changed its stance immediately begin to raise interest rates to curb rapid inflation. In June, the Federal Reserve into raising interest rates cycle officially. In January 2006, Bernanke to succeed Alan Greenspan as Chairman of the Federal Reserve to continue raising interest rates policy. 17th consecutive rate hike, the federal funds rate from 1% up to a maximum 5.25 percent. But the tightening cycle began, the economy has not, as hoped, to achieve a soft landing. When the federal funds rate continued to rise, all to promote the duration of bond yields rose, the national debt in the long-term interest rates higher soon be reflected in higher mortgage interest rates on the real estate market recession, sub-loan crisis Appear. Mid-2007, sub-loan crisis highlights, the Federal Reserve to cut interest rates quickly in a row, the current federal funds rate further to 2%. Rate hike was triggered by the Federal Reserve will be crude oil and raw materials prices are rising as the external threat of inflation. From the map can be seen, all the way down the dollar, or more than 30% (relative to a basket of currencies), the weak dollar trend is clearly, therefore Global inflation will be reduced to oil and commodity prices is not accurate. From the monetary point of view, inflation is the real reason the U.S. dollar's ongoing decline, which should be the root cause of the Federal Reserve's loose monetary policy. In this regard, the United States could easily pass the buck to a variety of prices of goods classified as China, India and other developing countries the demand for the new. Also on the international market to pay the U.S. dollar, the stock of the incremental demand and the demand to make the distinction between these countries Nanbian mouth. Second loan crisis: the Federal Reserve to stimulate the monetary consequences U.S. world's reserve currency status so that the U.S. Federal Reserve monetary policy resulted in the rapid global expansion of credit. Federal Reserve monetary policy under the influence of low long-term interest rate expectations, together with the U.S. government has encouraged people to have their own housing policy, such as "bedroom" that is, there are government guarantees for buyers low-interest mortgage loans Joint-stock companies, to stimulate the housing prices are rising, banks and even for the buyers to provide 100 percent financing, long-term interest rates low to promote a real estate demand and increased employment, the crisis in the United States before the owner-occupied housing rate of 70% Since 2001, the United States to create new jobs, 30% (1,400,000) and related to the prosperity of the real estate market. 2005 annual meeting of the NBER-CCER, an economist Martin Feldstein noted that low mortgage rates led to an unprecedented volume of mortgage financing. With a new mortgage to replace the old mortgage to pay, not only on lower interest rates, but they can refinance when the funds. Since the early rise in housing prices, making the securities available for extraction of a large number of often. A small portion of the funds used to reduce debt or other financial assets invested in other, for most of the consumer spending (because of the negative savings incentives), to stimulate economic recovery has become a powerful driving force. Reason is bound by the conditions of optimal choice, the federal funds rate low and housing prices, the financial institutions do not miss the opportunity to expand their use of credit has not even solvency of the buyers into the mortgage market , The sub-rapid growth in housing loans, mainly through the risk of mortgage securities or assets as a means to resolve. U.S. financial institutions to speed up financial innovation, the loan will flow into the securities assets will be securitized housing loans, derivative products trading of the corresponding size of the rapid growth. Loan-to-time in the United States has contributed to economic prosperity, but when forced to change the position of the Federal Reserve raise interest rates, decentralized systems can not risk that there will be. With the dollar's depreciation along the way, the world's oil, gold and commodity prices, the U.S. current account deficit to expand rapidly, growing global economic imbalances. The global spread of excess liquidity and inflationary pressures force the Federal Reserve raising interest rates 17 times in a row, the promotion of housing borrowing costs rise, mortgage applicants have the level of assets and liabilities into a negative, real estate price bubble and the collapse of the credit market crisis , Increased depreciation of the dollar, the global financial situation of the general deterioration of the economy. Second loan crisis brought about by a warning First of all, must be a clear understanding of the market economy, the money market (bank) and capital markets functions. Financial institutions, the basic task should be to absorb as much as possible of savings deposits, and in the distribution of the most productive investment, that is only able to afford the current rate of investment plans in order to gain capital. On the one hand, because of inflation should not use the savings to provide the community with economic resources. On the other hand, the interest rate is a price, and price are the same as the allocation of funds and resources to regulate supply and demand balance. Than the interest rate decision from what is more important is that what determines the interest rate, the interest rate determines the price of the most efficient investment projects or opportunities for the lowest cost of funds. In the Fed's monetary policy implementation, we can see that the savings were not as a social function can only be caused by the lack of effective demand, causing unemployment and interest rates only production costs are low to low national savings rate has been lower Habits as a national policy and monetary authorities had nothing to do. How financial innovation and mobility. Wall Street investment banks of all kinds of financial innovation and monetary, economic activity can provide liquidity and payment, reduce transaction costs. To the community, the need for such innovation as the basis of national savings, or the mobility of savings left to become only the highly leveraged credit creation, and the resulting inflationary pressures. On the same is true of individual companies, Goldman Sachs, Morgan Stanley changes in bank holding company showed that absorbed on the importance of savings deposits (Now, of course, it is more in order to obtain the Fed's discount funds). U.S. Federal Reserve's Open Market Committee statement stressed that the Federation of monetary stimulus is aimed at providing adequate liquidity. In fact, after the establishment of the Great Depression of the Federal Deposit Insurance Corporation so that the lack of liquidity can not be a reason for the closure of banks, because banks can issue loans to raise interest rates, as long as there is a little bit of bank solvency, to raise interest rates a half yards (.125 percent), Any bank will lend money to the bank, is also available in the market to attract household deposits, household deposits in any case, know that if a bank fails, the Federal Deposit Insurance Corporation will be responsible for payment of interest on their "earnings." So mobility is no longer the issue, the real concern is that the Federal Reserve Bank or other institutions loss of market liquidity, in which case liquidity is injected into a credit expansion policy. Thus injecting liquidity in order to achieve full employment and economic growth goal is to create inflation. In addition, the need to pay attention to the monetary policy transmission mechanism. The labor market is not independent of the existence of the market, there are many elements of the market and commodity markets. Federal Reserve fixed inflation target, only the final goods market. In order to ensure full employment of monetary stimulus will be possible in any other market conduction through the world financial system to the conduction of the global market. Through personal consumption, investment decision-making, these markets will ultimately lead to higher consumer prices and eventually catch up with the pace of credit expansion and inflation through the forms, and the more extended periods of time, the more serious consequences. The stock market, for example, the stock market "irrational exuberance" and can not be a long-term solution to the mobility of the channel, because through the wealth effect (positive or negative), personal consumption and investment decisions will be rational distribution of resources so that all aspects of the marginal efficiency Line, with the emergence of the policy interest rate to control the huge bias in asset prices will rise to the conduction of inflation, consumer inflation or interest rates rise sharply to correct, causing economic turmoil. This is the Friedman "There is no free lunch" in monetary policy is all about. Inject liquidity to ensure full employment Another reason is that for the provision of social production of "lubricating", to increase production and solve the problem of excess capital. In theory the problem of excess capital and can not rely on monetary stimulus to resolve in implementing it has not been reached. National economic growth depends mainly on the will of the savings and savings of production able to invest in the most efficient investment decision, which the United States and developing countries around the world have repeatedly confirmed by experience. After all, the labor market should be marginal labor input to output and the marginal decisions, that must be supported by productivity in order to ensure the effective allocation of resources and avoid inefficient and eventually into inflationary pressures. The goal of full employment is the existence of a potential Federal Reserve's monetary stimulus direct purpose of the loan is at the root of the crisis. Finally, look at how the current international financial situation and the trend of U.S. policy. If there are no U.S. economic globalization and the world's reserve currency status, the Federal Reserve's monetary stimulus will be more exposed to earlier, there is a crisis now, it is already difficult to contain the rapid spread of global financial turbulence. At present, a new Bretton Woods (the emerging countries, including China's monetary policy pegged to the dollar) can be sustained depends on U.S. policy choices. If the United States hopes to continue to maintain reserve currency status, it is necessary to safeguard the dollar at the same time internal and external stability of the currency. To this end, the Fed must abandon its "double goal", that is, to give up full employment and to focus on inflation targeting, at the same time the United States should strive to balance the federal budget and current balance of trade, it is the United States to increase national savings rate. U.S. Federal Reserve has never been interested in with other central banks to coordinate their policy actions, and always according to stimulate domestic economic growth by appropriate to the scale and speed of action, rather than with other central banks to take action to establish a consensus because of U.S. foreign By the Ministry of Finance is responsible for currency issues. The maintenance of stability both within and outside of the U.S. dollar means that the goal of central banks on monetary policy coordination, the Federal Reserve will take on the real world, the role of the central bank (that was pegged to the U.S. dollar to the U.S. Federal Reserve would be wishful to be taken for a world central bank.'s Federal Reserve The functions of the United States is to achieve full employment and inflation targeting, the dollar's external value by the Ministry of Finance is responsible). To resolve the two functions of the internal conflict, relying on the conventional wisdom in economics, control of inflation is not hard to do, from the theoretical and historical experience, from prevention of inflation and inflation are the most effective way to slow down The growth rate of the currency, control the scale of the money supply. In order to the economy's long-term healthy development of the United States must undergo a short period of austerity, must also find new economic growth mode, which is obliged to pay the price. Can learn from the experience of history, the 1980 Volcker, former chairman of the Federal Reserve decided to give up control of interest rates, just take the money supply and interest rate allowed by the capital market to decide. Although the market experienced short-term interest rates high (20%) and the economic recession, but the long-standing problem of inflation in the United States will soon be Ezhi Zhu, 90 for the performance of the U.S. economy has created a good environment for the currency. If the United States does not abandon the goal of full employment, no intention to keep the dollar in foreign currency, for the sake of their interests, should give the new Bretton Woods system. As the first out of the Bretton Woods system of the establishment of a unified European currency euro zone, Japan, or as a floating exchange rate, or do not like Hong Kong and the Central Bank of the pegged exchange rate In short, countries suffer huge losses, learn from its mistakes, familiar with the current financial System no longer exists. Now the U.S. government from the measures, monetary policy or the instinctive reaction of monetary stimulus. Bu Nanke, under the leadership of the Federal Reserve to quickly inject a large number of market liquidity and payment tools, to stimulate the economy is still a matter of fact, the weakness of the U.S. economy hit arm. The federal funds rate down to 2% of the world's major central banks of the Joint Federal Reserve to cut interest rates, the U.S. Treasury Department put a huge relief plan passed by Congress and to raise the statutory national debt limit size. In the negative savings incentives, the taxpayers do not want to bear the cost, it can only be caused by the substantial depreciation of U.S. dollar assets and global liquidity flood again, and may even cause global stagflation, and passed on to the national crisis is more likely , May also be caused by the crisis as the Federal Reserve's monetary policy will be the same again for the time being the cover up and wait for the next trigger. U.S. government to rescue the market may be a result, countries (especially China) to buy U.S. government bonds, U.S. government bonds with replacement of non-performing assets of financial institutions, the United States financial institutions or other investors and then use the funds to increase exchange of assets invested in various countries This is equivalent to countries with better earnings and asset quality, low profitability of the replacement of the U.S. national debt. To this end, China must reconsider the current world financial structure is reasonable. China is facing the difficult situation In 2001 out of the cycle of deflation, China has accumulated rapidly 1,800,000,000,000 U.S. dollars of foreign exchange reserves, a large number of investment dollars in assets. U.S. government bonds as the second largest creditor and the world's largest foreign exchange reserves of the country, together with the apparent export-oriented economy, China in the crisis can not only watch, and the suffering is real. Data show that in July 2008, the Chinese government to hold the balance of U.S. treasury bonds increased to 518,700,000,000 U.S. dollars, second only to Japan's 593,400,000,000 U.S. dollars, accounting for 5.3 percent of the total balance. The problem is the primary foreign exchange reserves shrink, this part of the loss is very difficult to estimate, but will be substantially lower over the past few years China's real economic growth. Since 2007, China's first domestic inflation, currently facing an economic recession and deflation and the risk of over-regulation and control. All along, due to exchange rate pegged to the U.S. dollar caused by the release of huge amounts of foreign exchange liquidity pressure, domestic prices began to rise, CPI price index at a high level, while industrial production dropped happen. After government regulation, the current prices down slightly, in August 2008 CPI dropped to below 5%, but the impact of rising raw materials prices, PPI index more than 10%, the growth rate of industrial production continued to fall. Export-oriented operational difficulties faced by SMEs, in the first half of 2008 has been 67,000 more than the size of the closure of small and medium enterprises, a large number of workers have been dismissed. RMB appreciation in order to control credit, improve the reserve ratio and interest rates to prevent inflation, monetary policy and adopt appropriate macroeconomic regulation. But the dollar lost its anchor in the name of, easy to over-control policy has seriously affected the social investment, income and economic growth, increased economic volatility, as well as to reproduce the shadow of deflation. China's current economic growth mode to face external demand short-term risk of recession. China's open-door policy to imitate the newly industrialized countries of the new export-oriented industrialization model. In this process, China's foreign trade dependence has reached an alarming extent, in 2006 China's total foreign trade / GDP ratio as high as 0.7. From 1979 to 2007, China had absorbed a total value of 750,000,000,000 U.S. dollars of FDI, The world's second-largest FDI recipient countries, only to the United States. In 2005 together with the private individual to collective economy for investment in fixed assets 2,586,000,000,000 yuan, foreign direct investment to 842,400,000,000 yuan, foreign investors in an efficient capital ratio was 0.32. At the same caliber, only three of the world recognized the country dependent on foreign investment than China, Singapore (0.34), the Netherlands (0.33) and Ireland (0.71). China's relatively efficient economies of scale, China's foreign investment and foreign trade dependence is very large. This is determined by China's reform and opening up the process of opening up to other less serious. China's growth model led to the need of China's economy and external imbalances, as well as the huge foreign exchange reserves, the U.S. and global financial and economic impact of great. Therefore, the crisis of China, should be a profound lesson and a severe test. China's monetary and economic policy First, the foreign economic policy issues, China must take steps to reduce dollar-denominated assets have been lost. In order to avoid devaluation of the national debt held by the United States could, including China, a major investor in U.S. treasury bonds and the need for creditor countries to take joint action to ensure that the investment risk control, was to share the growth of corporate rescue. This is not to advocate the so-called reverse operation, through the sovereignty of the Fund into Wall Street's opportunistic behavior, the sovereignty of the Fund's investment efficiency is very worrying. Opportunistic behavior may be the result of both "the worst thing in the world," On the one hand, Wall Street did not support the savings of credit derivatives, on the one hand, there is no restriction and supervision of the Chinese national savings, the results can only be deepened Loan-to-time settlement of the crisis. China should take advantage of the U.S. Treasury's second largest creditor and the world's largest foreign exchange reserve status, and actively urge the U.S. to adopt a more responsible and more long-term-oriented economic policies, and the formation of a new stable international financial structure. China could become the world's economic hopes, not their ability to sacrifice their lives to rescue ailing U.S. financial system (China should not be able to accomplish this task), and its domestic policies can balance of international payments, the buffer drop in external demand, The stability of monetary policy and improve the efficiency of the domestic economic growth and domestic demand. Balance of Payments should be first in the short term to address the issue of import restrictions, to accelerate the liberalization of imports of goods, control, in order to restore the balance of import and export trade. The relative export growth of Chinese imports has been slow (some acceleration in 2008). This situation has caused a lot of reasons, such as the domestic part of the industry's overcapacity, in order to protect domestic industries in some of the government import restrictions. Limit the growth in imports, to keep the huge current account surplus, that is, goods and services, net exports will finally stop at the central bank's foreign dollar-denominated assets account and not really into the country, only an increase of the domestic currency supply But the ultimate result of inflationary pressure. If those policies do not change, China will never be able to accommodate the real capital input. At present, China's per capita capital is low, foreign exchange surplus should be used to develop the necessary resources, technologies and products (Lin Yifu, 2008). To that end, should be free import of goods as soon as possible, so that the inflow of foreign exchange funds in order to immediately enter into real products, to reduce inflationary pressures, but also to accelerate the effective capital formation. If China's next step is to upgrade industrial structure, to the development of capital-intensive industry, which is a necessary requirement. If the opening up of imports, the trade surplus is still too much, then consider another appreciate further to address the imbalance in international payments. Address the issue of import restrictions, we should slow down the appreciation of the renminbi. RMB appreciation for the settlement of domestic inflation expectations can not be too high, while China's labor-intensive export-oriented model of a high degree of competition in the exchange rate of increase in exports to combat the growing business. Like the general public to today's China and Japan in the 1980s compared to the belief that it will encourage enterprises to higher value-added industries, so as to speed up the process of industrial upgrading, in fact, for many years as a result of the discriminatory policies of private enterprises, domestic private enterprises is And not in the 1980s Japanese companies in the upgrading of technology and innovation capacity on a par. A large number of foreign labor-intensive industries gradient transfer more cheap labor in Southeast Asia, and the new business has not grown up, which is Chinese for "foreign dependency" pay a high price, the price will take some time to digest. In order to implement in order to promote development and stability of monetary policy, the existing exchange rate system must be further adjusted. Meeting in 2005 following the change of exchange rate system is still a big flaw, is a floating management system is to reduce the weight of more than U.S. dollars. Over the past few years to implement the effect of view, the domestic monetary policy is difficult to play a role in the stability and promote development. Once the exchange rate pegged to the U.S. dollar out of line with the target appeared intermittently jump of the exchange rate adjustment, capital controls in name only, caused by highly speculative foreign exchange and currency fluctuations in the supply, and even damage the normal trade. Can not effectively control the hot, hot money is not defined precisely because of the exchange rate system, the only defect of the so-called hot money flows. As a result, a clear understanding of China's monetary policy and how the situation becomes a choice of pressing issues. Monetary theory and experience has shown that the stability of a country's goals or "nominal anchor" There are several possible options: the level of prices, money supply, exchange rates, wage rates or the price of gold. Put it another way, a country can choose to commodity-based system, based currency system, based foreign exchange system, or the gold standard-based wage system. China's economy "in the name anchor," in fact the exchange rate. In 1994 when domestic inflation rate of serious reform of the People's Bank of China will be the significant depreciation of the RMB exchange rate, the very success of the RMB exchange rate will be locked in the dollar. China has been "imported" from the United States at that time the credibility of monetary policy to stabilize the public's inflation expectations. Long-term solution to the problems of China's super-currency issuance, the check was a serious domestic inflation. At present, the situation is similar to what happened in 1994 is just the opposite. 1997 Southeast Asian financial crisis, China insisted in not devaluing the renminbi exchange rate, contraction of the domestic money supply and thus the prospect of deflation. The Federal Reserve began in 2001 to stimulate the economy, China's exports and money supply growth out of deflation. Therefore, the Chinese currency situation in the United States under a fixed exchange rate monetary policy decision. However, since the 90's the same as the fixed exchange rate anchor in the name of the country there have been a lot of currency crises, such as the ERM crisis of 1992-1993, the 1994 Mexican peso crisis, the 1997 Asian financial crisis, in 1998 the Russian ruble crisis. When these countries can not maintain exchange rate, monetary collapse, the outbreak of the crisis, most countries are not voluntarily give up the fixed exchange rate system. In the face of the U.S. sub-loan crisis, the current situation in China and other countries in different currency crisis. China is the U.S. situation is difficult and self-discipline, the United States to boost the economy of the monetary policy transmission to China, resulting in huge foreign exchange reserves and the depreciation of U.S. dollar assets and fluctuations in the domestic economic situation. In other words, China will continue to maintain the existing exchange rate system is costly and uncertain, the dollar has lost "in the name anchor". With regard to exchange rate issues, there have been a lot of discussion, debate the impact of these continues to this day. McKinnon scholars in September 2007 speech at the CCER has referred to the Balassa - Samuelson effect, insisted that the fixed exchange rate, wage adjustment in order to achieve the effect of the appreciation, citing Japan's example. But over the past few years from the Chinese point of view, adhere to the fixed exchange rate effect is not that good. Balassa - Samuelson effect referred to the wage level should be increased relative to the increase in trading, that is, the imported goods have strong purchasing power, prices are not adjusted for inflation. But as I said before, China's import growth has been hampered. Does not import growth to China's huge trade surplus, that is, goods export to foreign countries, the final purchase domestic goods may be less and less on the contrary, wage levels do not rise significantly. The results can only be the elimination of its purchasing power to inflation, but also to eliminate or decrease the trade surplus to make it into a deficit so far. The inflation pressure that is not from the outside into the purchasing power of foreign exchange. Therefore, the Balassa - Samuelson effect, but is likely to be offset. At present, China should use in August 2008 to abolish the compulsory foreign exchange settlement and sales opportunities to further adjust the exchange rate system. After the abolition of the compulsory foreign exchange settlement and sales, businesses can choose whether or not to retain their own foreign exchange earnings. If the enterprises do not want to settlement, which is part of the funds will be retained in the business of the foreign currency accounts. Importers and exporters should be allowed to use this part of the funds to set up a foreign exchange market, and the formation of market prices, adjust the exchange rate to achieve the transition to a floating exchange rate, time to import and export trade can make use of long-term exchange rate fluctuations in the foreign exchange market to eliminate, to overcome some of the floating exchange rate system Disadvantages. Exchange rate is a price, if determined by the market, improving foreign trade import and export of resource allocation efficiency, the promotion of China's economy from external demand to domestic demand-led very favorable. Floating exchange rate for China's independent monetary policy put forward a very high demands reform of the exchange rate and interest rate reform, relaxation of capital projects are very difficult reform, more than the savings on social functions, the mobility of the discussion on China's monetary policy also applies to, In addition to the RMB to the dollar reserve currency status, and thus China's monetary policy should be more self-discipline. The long-standing problem of China's domestic demand. 30 years of reform and opening up China's economic miracle in the world, the reasons for the system from the point of view, China's economic reform success can be summed up as, progressive reform, the newly industrialized countries to imitate the labor-intensive products of export-oriented development model, as well as local government area The separation of powers
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