China Economy

[drsteph]

Quote from achilles28:

Western dollars built China.

And Western demand drives its growth.

The key question - when will Chinas middle class, still in its infancy, stand on its own?

Given exports account for nearly half Chinas' GDP, the embryotic middle class needs at least another decade to develop. More like two.

Blowing out the American middle class only to rebuild it decades later is silly and wholly counter productive. Slave labor is a cheap fix for companies that otherwise loathe R&D investment Its that very R&D, or technological innovation, that provides the only lasting driver for long term economic growth.

This is how we, as a nation, lost our manufacturing base - multinationals bought off politicians to push "Free Trade". And the American public was too distracted and stupid to realize they had voted themselves out of work...


America is an unmatched entrepreneurial powerhouse. No doubt.

But our enterprising business class in no way offsets the disastrous fiscal path our "wise" stewards have led us down.

Inflation will get out of control soon. We are really headed for major stagflation or a major recession. This will bring serious pain for everyone except the most rich.

This tumultuous period could easily last 5 years, or more. Look how long it took Japan to recover from their late 80's credit bubble. Almost 10 years!!

Floating the Yuan would only serve as an immediate catalyst to the inevitable.

A 5-10 year deflationary episode like Japan is almost singularly what the CB's and Bernanke are trying to avoid. Yes, there will be pain. But the tweakers expect they can avoid such pain for a longer term period. That's where the point is.

You don't need to float the Yuan anymore - dollar is weakening to put the hurt on China. Look back to when the chinese dumped treasuries this summer as a warning and then we allowed the USD to plunge to 1.43 vs the euro as a result. Note that Paulson hasn't been back to china lately?


FYI - most political instability has been brought about by a disenfranchised middle class - they have the education, but not the means; as opposed to the upper class which has the means but often not the education/information/wherewithal. You can argue that as we become more of a meritocracy, there is convergence, but I would argue that is nowhere near well established. The lower middle class is toast.

 

[trefoil]

Quote from PohPoh:

So...3 trillion is ignorant..
and 10 trillion is bullshit..

which is it??

Read it again, slowly this time.
The idea that Japan is the second largest economy is pure, unadulterated bullshit. China surpassed them a while ago. In PPP terms, they're gaining on us rapidly.

 

[trefoil]

Quote from drsteph:

Tre -

Gotta disagree with you here. Taiwan is toast, unless we have not made sufficient strides to move chip fabs from there that have significant defense importance. (not sure if that reserve capability exists. Anyone?)
You have until 2015-2025 however until Taiwan does down. US will not defend it at that point. That's the deal for leaving Japan & possibly Korea alone which are other vulnerable asian nations to China with Japan of more importance financially (but probably not geopolitically).
I will state it publicly here, and have said it before. The US will not go to war with China over Taiwan. (Now either Iran, Iraq, or the Stans are a potentially different story) It is not important enough, and may even be absorbed by political means (like HK).

No Prez, especially not a Dem one, would be able to survive Taiwan's forcible takeover by China. And as of now, between Taiwan's own defense forces and our own, we can still stop them from succeeding in a military attempt.
However, a political absorption would go over peacefully.

 

[dhpar]

Quote from drsteph:

Tre -
etc etc.


Quote from trefoil:

I see this one's flushing out the usual anti-Americans.
The idea that the US would stand idly by while China absorbs Taiwan is just completely, utterly, absolutely fantastical.
As for us suffering if China let the yuan float, yes in the short term. In the long term, no way. The US didn't become the richest country on the planet because of resources, accident, or anything else. It got that way by way of the enterprise of its citizens. That will defeat any and all comers until it goes away. And that ain't happening for a long time.
As for Iraq, we won the war part. What we lost was the political part. In the Rep debates, Brownback got that one right.

nice to see that trefoil is still as dumb as before. i usually do not see his posts because he is one of the few that got on my ignore list - certainly an achievement given that people like eagle488 (who for instance threatened to kill families of other posters) or more recently sisepuede (definition of hatred ) did not have this privilege.

 

[trefoil]

An expected honor from a closed mind.

 

[achilles28]

Quote from drsteph:

A 5-10 year deflationary episode like Japan is almost singularly what the CB's and Bernanke are trying to avoid. Yes, there will be pain. But the tweakers expect they can avoid such pain for a longer term period. That's where the point is.

Key Phrase: Longer Term. Thats 10 years out.

At which point, the country will be knee deep in the Social Security/Medicare crisis. How do you reckon the Treasury Department plans to meet all those unfunded liabilities?

Central Bank "Tweakers" are more political functionaries than economic purists. Their role is to cajole the economy into financing the political agenda of the sitting Administration, or the promises made by those before it.

Paulson and Bernacke rollover when Congress demands another 400 Billion for Iraq or Wallstreet wants a bailout.

Quote from drsteph:

You don't need to float the Yuan anymore - dollar is weakening to put the hurt on China. Look back to when the chinese dumped treasuries this summer as a warning and then we allowed the USD to plunge to 1.43 vs the euro as a result. Note that Paulson hasn't been back to china lately?

No, its not.

The Yuan/Dollar valuation appreciated a meager 5% in the past 1.5 years.

The Chinese mini-dump was a shot across our Treasury's bow that was more symbolic than real.

Sure, the Chinese are getting the shaft on T-Bills. But that doesn't impact the Yuan / Dollar exchange or the price of Chinese goods, does it?

The Chinese Government is getting screwed. But its a small price to pay to keep their number#1 customer buying.

When the landed cost of Chinese goods starts accelerating, thats when problems start.