It doesn’t work as the math is surprisingly simple. That is why “sweeping” changes and reform have to be considered at each point of escalation. Taking account of what has occurred only damages further the credibility and faith that is supposed to be the keystone for everything that happens. Instead, the only way to solve the historical deficit is to appeal to acceleration and intensification so as to make everyone forget that it didn’t work – a reluctant ratchet effect.

It’s unfortunate that I could use that paragraph as an opening for any number of economic systems spread throughout the world – an alarm in and of itself. In the latest version, the Chinese are back again threatening more “stimulus”, only this time they mean it. From the Wall Street Journal:

China’s central bank succumbed to political and market pressure and cut interest rates for the first time in more than two years, in a sign that the country’s leadership is leaning toward more sweeping measures to bolster flagging economic growth…

The bank’s move contributed to a surge in global stock markets as well as a strengthening of the currencies against the U.S. dollar in countries anticipating higher demand from China.

From Bloomberg:

China cut benchmark interest rates for the first time since July 2012 as leaders step up support for the world’s second-largest economy, sending global shares, oil and metals prices higher…

“Targeted relaxation wasn’t strong enough to boost the real economy so now they realized they have to relax policy overall,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing, who formerly worked for the World Bank. “The economic reason for the rate cut is very strong.”

You would be forgiven for thinking either of those quoted passages is current, but they are not. Those were both written in late November 2014, one of the prior installations of “sweeping changes” and increased effort from the PBOC that “shocked” economists and financial markets with escalation. It set about a continuous period of more and more “stimulus” which resulted in less and less actual liquidity and order. For all the positive commentary about last November, it should be remembered now that the yuan blew up anyway along with any number of open monetary breakouts (ongoing) of quite serious disarray.