Sunday, Jan 17, 2010
You and whose army?
The Telegraph: Something has to stop the Orient express and its cargo of trade imbalances
As banker-bashing has increased, so China-bashing has receded. But the tensions between China and the West are set to rise. Either Chinese policy is going to change or we are heading for a major bust-up.
We may be not far off the point where, if the Chinese don't take steps to make their trade with the West more balanced, then the West will take steps to do it for them.
Posted by devo @ 10:24 PM (975 views) Add Comment
7 Comments
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1. stillthinking said...
I am not so sure China can encourage domestic demand. How can you pull around a culturally embedded saving mindset over a year?
Lacking Chinese domestic demand has come up before. China was acting as a silver sink because they only accepted silver and persistently ran a trade surplus, leading to a British policy of Chinese opium addiction to balance trade.
2. drewster said...
Stillthinking,
The way to stop people saving is to take away the need for them to save. People save for a rainy day - unemployment, medical bills, crime. If the government provides dole-money and healthcare then people no longer need to save.
Credit cards also remove the need to save. If you have a £3,000 credit limit then you don't need to save £3,000 in cash. This is why Britons and Americans don't save much. Interestingly, in Japan credit cards still aren't widely accepted. This probably explains why the Japanese save more than other developed nations.
3. paul said...
I think the real problem is that the west has become beholden to borrowers. Interest rates have been held down very low for as long as I can remember in order to serve borrowers rather than savers. In fact, the credit expansion that recently stalled started off with the Labour government in the 1970s when inflation was high and interest rates low - saving was for mugs and borrowing to the hilt was simply the only way to preserve your wealth over time.
In other words, central banks painted western economies into corners.
4. braindeed said...
Those pesky inscrutable Orientals……..okay they make the things we need and want cheaply – but why can’t they buy the things we make, like….erm , our showroom polished grade A CDS’s, or........ well that’s it really.
5. crash n burn said...
What excellent news! A trade war with China! Any spare capacity in the world economy will be fully utilised to compensate and thus push prices up. Interest rates will go up to compensate - home owners will go broke and us cash savers will be in a position to finally take advantage of the situation and not be screwed as we always are!!! :) The end of greedy consumerism - I truely would be happy to see this.
6. icarus said...
If this is a root cause of a major crisis which is 30 months old, and the west is able to "take steps to do it for them", then an obvious question occurs, doesn't it?
Also, could the US's unique ability to pay its foreign debts in its own currency, which it can print, have something to do with it?
Maybe the US could allow the Chinese to spend their excess dollars on buying up US companies and ports?
Let's not forget also that more than half of the increase in Chinese exports over the last several years is from western multinational branches located in China. They are doing OK thank you.
7. mr g said...
Off topic but I hope that Gordon the Moron remembers the old Chinese proverb:
"Man who scratch ass should not bite fingernails"