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The recent China's economy data shows China is facing serious economic problems now, which is called stagflation.It performs as a high rate of unemployment and high rate inflation.When economy is stuck in this situation,Keynes' policy will be useless.
This situation is like western countries have experienced in 1970s,Friedman and other out-standing economists developed new theories of classical economy to explain why Keynes' policy lost its power and try to solve the problem of stagflation.
One of these theories is we need to controll people's expectation.That is to say, we need use deflation conquer inflation.And as is known already,deflation always connected with economy recession.So we need to sacrifice our econmy's short-term prosperity for long-term health.
Our economy's inflation mainly caused by the fiscal stimulation of 4 trillion yuan several years before.That plan stimulated our economy in short term but resulted in the dilemma now.But we have to do that that time when the global economy was facing serious financial crisis.
Now, get a conclusion.The government is fighting with stagflation,sacrifice of short-term's economy growth is a no-choice cost.But we need also have confidence with our country's long-term economy development,all in all, we are the biggest developing country in the world!
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