Monday, Mar 16, 2009
A record plunge in Chinese exports may be great news for the U.S. Treasury.
Bloomberg: China Needs Another $2 Trillion of Treasuries: William Pesek
It’s simple mathematics. The U.S. economy is more than four times the size of China’s. Growth in China is wildly lopsided toward exports, many of those goods packed on ships bound for America. So, if China wants to stay afloat, it should spend less money building roads, bridges and dams and more on U.S. debt. That would give the U.S. and its consumers the access to easy credit to reignite spending, much of it on Chinese-made goods.
Posted by big chris @ 06:28 AM (470 views) Add Comment
3 Comments
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1. d'oh said...
There's something really quite perverse about a world in which it is better for your country to trade its labour for pieces of foreign paper than to invest that labour in inwardly.
2. mountain goat said...
"A record plunge in Chinese exports may be great news for the U.S. Treasury"
This is nonsense. Based on the idea that our problems are simply due to insufficient spending by westerners. The only long term solution is for saving rates to increase and debt to be paid off.
3. inbreda said...
As I see it, the measure that the US economy is 4 times as big as Chinas misses 2 key points. 1 - the US economy is rapidly going down the chitter, and 2 - in order to get a comparison you need to apply an exchange rate so that you are comparing in the same currency. And given the fact that the FX rates are fixed between the two, and could snap back at any moment, you may suddenly see china go from 25% size of US to 50%, to 75%, without necessarily doing anything. In fact, if it stopped buying US debt, that would happen very, very rapidly.
So - they either enslave themselves to help out the fat americans, or they bury the west. I wonder what those nice communists will do?