Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Sure and if they do, the Yuan will zoom to the sky, their export market collapses and the Communist dictators have a big big problem with the billion+ people there, with no constitutional rights, who can't be sustained without out it. It would cause a lot of issues for the USA as well, but it's something we need to happen.
i am not saying that it wouldn't be problematic for china, but i still think we would have a bigger problem since we are the ones living in debt. if a bank cuts your credit off, who gets hurt worse -you or the bank? if you look at trade statistics we may be significant but we are clearly not china's only trading partner: US-China Trade Statistics and China's World Trade Statistics
government has allowed the outsourcing of our manufacturing for profit to benefit corporate america and now we are in a pickle, all due to greed and the amazing ability that government officials have to keep kicking the can down the road.
There is a line from "The Good, the Bad and The Ugly" . There are two types of people in this world, those who have guns and those who dig. So start digging. Keep this in mind when viewing the US China economic relationship. Right now Blondie has the gun...but it may not always be this way.
There is a line from "The Good, the Bad and The Ugly" . There are two types of people in this world, those who have guns and those who dig. So start digging. Keep this in mind when viewing the US China economic relationship. Right now Blondie has the gun...but it may not always be this way.
guns kill guns kill
try studying and working hard and competing fairly.
China has been wanting to bring Taiwan back under it's wing since the 1949 revolution. China has started to buy it's way into Taiwan, and in another 5 years or so I would not be surprised if they ramp up the reunification effort. China may use it's clout with dollars to get the US to agree to a "hands off Taiwan" policy. That would give China permission to bring Taiwan into "greater China" even if it is a special autonomous region (like Hong Kong) with a different set of political and economic rules.
Sure and if they do, the Yuan will zoom to the sky, their export market collapses and the Communist dictators have a big big problem with the billion+ people there, with no constitutional rights, who can't be sustained without out it. It would cause a lot of issues for the USA as well, but it's something we need to happen.
Incorrect. The dollar is world reserve currency, if the creditors (China owns 24% of US government debt, Japan owns 23%, the rest is held by allies) decides dollar is worthless, US will take the brunt of the pain, imagine every import skyrocketing, especially US's lifeline, oil. Oil at $4 a gallon is enough to squeeze the middle class, $4 a gallon is actually dirt cheap to most of the world, just imagine oil is not priced in USD and it goes up to $10 per gallon, or $15 per gallon, the US economy slows down drastically, rampant inflation.
Floridasandy has already covered why if US as a export market collapse, China will be just fine. US has 300 million, there's a whole world to export to: Latin America, Southeast Asia, Oceania, and Africa.
Quote:
Originally Posted by recycled
China has been wanting to bring Taiwan back under it's wing since the 1949 revolution. China has started to buy it's way into Taiwan, and in another 5 years or so I would not be surprised if they ramp up the reunification effort. China may use it's clout with dollars to get the US to agree to a "hands off Taiwan" policy. That would give China permission to bring Taiwan into "greater China" even if it is a special autonomous region (like Hong Kong) with a different set of political and economic rules.
Taiwan's businesses have plenty of investment in China, it could be said that Taiwan is already a part of China today, the current parliament of Taiwan is very pro-China.
Quote:
Originally Posted by lumbollo
There is an old saying that goes something like this. If I owe you $1000 then you control me. If I owe you a $1,000,000 then I control you.
That saying does not apply here, not when China is barely holding 24% of US government debt. If you owe somebody a million, that person still controls you.
There's a lot of wishful thinking from folks who ignorantly assume China needs US more than US needs China. It's ridiculous.
Look at the numbers, US has 5% of the world's population with negative savings rate and most of the spending is borrowed with negative future cash flow (half of the federal budget goes to empire upkeep, might as well throw money down the drain).
China has 20% of the world's population, most of the cash the consumers and government of China have are saved from earnings and investments in positive future cash flow such as infrastructures. By calling up the 300 million middle class Chinese consumers with 50% saving rate to spend, the Chinese government can replace US market in one fell swoop.
Incorrect. The dollar is world reserve currency, if the creditors (China owns 24% of US government debt, Japan owns 23%, the rest is held by allies) decides dollar is worthless, US will take the brunt of the pain, imagine every import skyrocketing, especially US's lifeline, oil. ....
You seem to lack a basic understanding of what this means. China nor Japan can't simply decide the dollar is worthless. If they do this, then they are essentially writing off huge amounts of "assets" from their economy and they can't do this without causing major disruptions to their economies. Japan could probably handle it, China would have people revolting in the streets.
Furthermore, you are confusing the reserve status of the US $ with countries buying US governmental debt. The two are not equivalent. However the US is using the fact the $ is a reserve currency to export our debt.
I also think you have overstated the value of China's future positive cash flow investments. There is a huge amount of misspending there on projects that are not going to amount to anything, and the system is full of corruption. True the upper estimate of their middle class is that it has 300M, but there is the issue of 700M-800M that are living in poverty conditions and this is causing huge amounts of resentments that is forcing the communists to walk a thin line which is why I say, they won't be making fundamental changes anytime soon.
You seem to lack a basic understanding of what this means. China nor Japan can't simply decide the dollar is worthless. If they do this, then they are essentially writing off huge amounts of "assets" from their economy and they can't do this without causing major disruptions to their economies. Japan could probably handle it, China would have people revolting in the streets.
I haven't said China nor Japan can decide the dollar is worthless, no one is looking for a immediate drop in the value of the USD, that would be foolish. The divestment from the USD will be slow.
Quote:
Originally Posted by lumbollo
Furthermore, you are confusing the reserve status of the US $ with countries buying US governmental debt. The two are not equivalent. However the US is using the fact the $ is a reserve currency to export our debt.
I am not confusing the reserve status with countries buying US governmental debt. I have not made such leap.
Quote:
Originally Posted by lumbollo
I also think you have overstated the value of China's future positive cash flow investments. There is a huge amount of misspending there on projects that are not going to amount to anything, and the system is full of corruption. True the upper estimate of their middle class is that it has 300M, but there is the issue of 700M-800M that are living in poverty conditions and this is causing huge amounts of resentments that is forcing the communists to walk a thin line which is why I say, they won't be making fundamental changes anytime soon.
I have not stated anything about how large or small China's future positive cash flow is, I just said future positive cash flow. The 700+ million living in poverty has been living in poverty, poverty is what they are used to.
On top of misguided notion such as China needs US more than vice versa, there's another notion that China will collapse or go in ruin. Such misguided view among fellow Americans are all too common because most understanding of Chinese history is lax. Communism China is an brief inception in Chinese history, most of China's history have been very capitalistic and mercantilistic, as such is why they are known for non-interventionist because trade flourishes under peace. The Chinese civilization state has the longest experience in fiat currency management, and it is the civilization with the longest experience in maintaining cohesion.
We will make good on our debt to China, like UK has to US. USD status as world reserve currency depends on it.
China is already caught in a massive Catch-22. They can't stop buying our debt lest we raise tarriffs on Chinese products to such an extent that it cancels the trade deficit, which would have a drastic effect on their own economy, and ours to an extent until manufacturing moves to other countries, mainly in SE Asia or Latin America.
They have pegged their currency at 6 RMB to the dollar, so no matter how devalued our currency is, theirs will fall with it, and that's another reason why they buy our debt - if they stopped, and we defaulted or said "*********" then basically hyperinflation will result as people who bought RMB will flee to more safe investments, like the Euro.
Further, if they didn't buy it, someone else would.
It's a fact that when it comes to global engines of growth, the USA is the only horse in the stable. It boils down to cultural ideals on saving vs. spending, government programs vs. lack thereof, and the ability to spend (credit).
Facts:
1) The USA has the most fluid monetary system in the world. That leads to easy availability of funds to consumers who want it, which drives growth globally with the growth of the USA population.
2) Let's talk domestic demand. The US savings rate is now finally positive, and that's a good thing (it shouldn't be negative), but all this talk about the US consumer being replaced is stupid in the short to medium term. Here's why:
- Chinese people save roughly 50% of their income. Why? To save for their grandparents' retirement (they have no social security or good retirement plans), their children (again very little in the way of grants or debt to fund university), themselves, and "just in case" (i.e. no disability plans, no insurance for if you get hurt ... hospitals can and do throw people on the street whether they're healthy or not if you can't pay). Hardly the recipe for creating a market for spending. Don't count on it getting better with a one-child policy, either.
- Indian people are forced into a crushing caste system that few escape. The ones that do have money save it for much the same reasons as China.
- Japanese people have a cultural pressure not to accept credit, which is tendered at the point of sale (with exception to houses and cars). The rest is to save up for their own retirement and to support their parents. Further, they learned their lesson from their own real estate crash.
- Most European countries are way too expensive to live in and have a similar demographic crisis. Further, their governments support programs to save up to 15% of their income for retirement. They also abhor the American ideal of consumerism so they simply go frugal or spend their money on holidays.
- The middle east, Africa, and Latin America aren't mature enough economies to have robust domestic demand.
So basically what you have left is the USA and Canada, which has a paltry 30 million people who tend to save culturally with pockets of consumerism. I don't see these things changing anytime soon.
3) Thus, while most government begrudgingly admit they would like to move away from the dollar as the world's reserve currency, they can't, and thus buy up our debt.
4) The world's government prefer stability and predictability when it comes to debt, and it's a fact that the USA is still the most innovative, fluid, dynamic economy in the world.
So, all these "doomsday" scenarios and "rise of all the 3rd world" scenarios are stupid. Maybe it will change in 50 years, maybe not, but in the next 0-5 years ... nuh uh.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
