money.cnn.com— With $1.2 trillion in reserves, most of it in dollar-backed assets, China plans to launch the world's largest investment fund. It could play havoc with the U.S. economy.
May 1, 2007View in Crawl 4
"Weird. Pay your workers next to nothing, and you end up with tons of cash? "- to them it's a solid middle class income. There never was any money in manufacturing.. the "middle class" incomes of 20th century industrial workers were all artificially created, and with globalization we are seeing manufacturing decline in the USA. Any idiot can do that grunt work. By bringing third world countries into the global supply chain we are bringing them out of poverty and into the 'first world'. We are in the early stages of this right now. The money is in the conceptuatlization, design, marketing, and sale of these products. "China has a savings rate of close to 50% and not many investment opportunities for the average person. When you have a billion people saving half their income in banks, it doesn't take very much income to start adding up.Actually since the US has a very low savings rate (less than 5%, it may still be negative), the average person in China probably saving more than the average person in the US"- I've read that the US's savings rate is actually quite high if you take into account the assets we own. How many of us put all of our money into bank accounts? There may be a few teenagers on digg that do, but most of us have our money in the market. Take our debt in the form of student loans, car loans, mortgages, credit cards and consider that most of our "savings" is in stuff like 401ks and our low (i thought it was negative) savings rate isn't all that bad.
hpsauce wrote:?Good info, more questions though - if the US defaults, then what exactly have they been paying China for them to accept in return for goods??I assume dollars that have been printed out of thin air (causing inflation). The U.S. Treasury authorizes the printing of more dollars and then we all pay more interest to Federal Reserve banks. Also, we (the federal government and therefore the people) borrow by issuing debt in the form of U.S. Treasury bonds. China buys those bonds. So does Japan by the way (who owns more than anyone but they?re about to be passed by China if I recall correctly).I?m sure I?m missing lots of details or even got them wrong somewhat, so someone please correct if so.?If it just a bunch of dollars that has worthwhile value only in America, surely it would mean China snapping up home territory, buildings, supplies, things like that??That would be my guess. Remember the outcry when the Japanese began buying U.S. commercial real estate and large U.S. corporations in the late 80s / early 90s? I believe that was brought about by the same situation. Japan had decimated our auto market and dominated in consumer technology long enough that they had quite a surplus of dollars, and they perceived value in owning parts of America directly.?Or, because the US is a nation state, is it exempt from any sort of compliance they have to do legally? Who is in charge of overseeing this sort of case??More good questions and I don?t know. Maybe the World Bank and/or the International Monetary Fund? Given the U.S.?s track record of (not) adhering to agreements on the world stage, something tells me if push came to shove our (U.S.) leaders would have few qualms about ignoring international finance governing bodies.
I understand your reaction Comatose51 but hueristix had made a fair argument. There is always more than one way to look at these things.I think this is all an indication of how utterly huge and intricate all of this is and how many variables there are, and it's why no one knows or CAN know what will happen. So the only rational response is to control what you CAN control on a micro scale. If everyone does that -- and most do because people generally want to improve their station in life -- then in theory it plays out similarly on a macro scale and keeps things from collapsing.Governments may go broke and need to severely curtail their spending to get back to viability, and this does hurt the non-wealthy who can't diversify out of their country's currency and assets to ride out the storm better. So do what you can on a personal level to try to ensure that you will be okay economically when the rains come. Unfortunately, there is no reset button.
<a class="user" href="https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html">https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html</a>The US current account ballance for 2006 was -$862billionIt is correct that a large current account deficit doesn't need to be bad for the economy, because it also means that a large amount of money flows BACK into the country.However this means the US needs to attract foreign investments of $100million each hour of the day to finance it's deficit. The fact that the US is able to do this (until now) is a sign for a very well running economy...The backside is, that "attracting foreign investments" basically means putting more and more control of the economy into foreign hands. Remember the port deal with an Arab company? Well actually the Americans should be happy that there are foreigners who are willing to invest the $100million every hour of the day to keep the US economy running...
Well, there's only one person-nation really-to blame for this and that's the U.S. itself. If the greedy lobbyists weren't so interested in helping out corporations and war profiteers than America wouldn't really be in this situation. It seems like only a matter of days before China completely overshadows and even owns most of the American economy and we only have our "great" corporations and politicians to thank for this.
Closed AccountMay 2, 2007
"Weird. Pay your workers next to nothing, and you end up with tons of cash? "- to them it's a solid middle class income. There never was any money in manufacturing.. the "middle class" incomes of 20th century industrial workers were all artificially created, and with globalization we are seeing manufacturing decline in the USA. Any idiot can do that grunt work. By bringing third world countries into the global supply chain we are bringing them out of poverty and into the 'first world'. We are in the early stages of this right now. The money is in the conceptuatlization, design, marketing, and sale of these products. "China has a savings rate of close to 50% and not many investment opportunities for the average person. When you have a billion people saving half their income in banks, it doesn't take very much income to start adding up.Actually since the US has a very low savings rate (less than 5%, it may still be negative), the average person in China probably saving more than the average person in the US"- I've read that the US's savings rate is actually quite high if you take into account the assets we own. How many of us put all of our money into bank accounts? There may be a few teenagers on digg that do, but most of us have our money in the market. Take our debt in the form of student loans, car loans, mortgages, credit cards and consider that most of our "savings" is in stuff like 401ks and our low (i thought it was negative) savings rate isn't all that bad.
phyreflyMay 2, 2007
-So you're suggesting economic suicide? Cheer up emo kid.
santeMay 2, 2007
hpsauce wrote:?Good info, more questions though - if the US defaults, then what exactly have they been paying China for them to accept in return for goods??I assume dollars that have been printed out of thin air (causing inflation). The U.S. Treasury authorizes the printing of more dollars and then we all pay more interest to Federal Reserve banks. Also, we (the federal government and therefore the people) borrow by issuing debt in the form of U.S. Treasury bonds. China buys those bonds. So does Japan by the way (who owns more than anyone but they?re about to be passed by China if I recall correctly).I?m sure I?m missing lots of details or even got them wrong somewhat, so someone please correct if so.?If it just a bunch of dollars that has worthwhile value only in America, surely it would mean China snapping up home territory, buildings, supplies, things like that??That would be my guess. Remember the outcry when the Japanese began buying U.S. commercial real estate and large U.S. corporations in the late 80s / early 90s? I believe that was brought about by the same situation. Japan had decimated our auto market and dominated in consumer technology long enough that they had quite a surplus of dollars, and they perceived value in owning parts of America directly.?Or, because the US is a nation state, is it exempt from any sort of compliance they have to do legally? Who is in charge of overseeing this sort of case??More good questions and I don?t know. Maybe the World Bank and/or the International Monetary Fund? Given the U.S.?s track record of (not) adhering to agreements on the world stage, something tells me if push came to shove our (U.S.) leaders would have few qualms about ignoring international finance governing bodies.
santeMay 2, 2007
I understand your reaction Comatose51 but hueristix had made a fair argument. There is always more than one way to look at these things.I think this is all an indication of how utterly huge and intricate all of this is and how many variables there are, and it's why no one knows or CAN know what will happen. So the only rational response is to control what you CAN control on a micro scale. If everyone does that -- and most do because people generally want to improve their station in life -- then in theory it plays out similarly on a macro scale and keeps things from collapsing.Governments may go broke and need to severely curtail their spending to get back to viability, and this does hurt the non-wealthy who can't diversify out of their country's currency and assets to ride out the storm better. So do what you can on a personal level to try to ensure that you will be okay economically when the rains come. Unfortunately, there is no reset button.
cyberdorkMay 2, 2007
<a class="user" href="https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html">https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html</a>The US current account ballance for 2006 was -$862billionIt is correct that a large current account deficit doesn't need to be bad for the economy, because it also means that a large amount of money flows BACK into the country.However this means the US needs to attract foreign investments of $100million each hour of the day to finance it's deficit. The fact that the US is able to do this (until now) is a sign for a very well running economy...The backside is, that "attracting foreign investments" basically means putting more and more control of the economy into foreign hands. Remember the port deal with an Arab company? Well actually the Americans should be happy that there are foreigners who are willing to invest the $100million every hour of the day to keep the US economy running...
tdr25May 3, 2007
Well, there's only one person-nation really-to blame for this and that's the U.S. itself. If the greedy lobbyists weren't so interested in helping out corporations and war profiteers than America wouldn't really be in this situation. It seems like only a matter of days before China completely overshadows and even owns most of the American economy and we only have our "great" corporations and politicians to thank for this.
adrianpabloMay 3, 2007
The major emerging industrial power in today’s world is China, with an economy that has been growing in giant steps over the last decade and the first half of this. But there are many indicators that this fast growing can't last. China's economy may be heading towards big troubles...<a class="user" href="http://www.1-forex.com/China-Economy-News.htm">http://www.1-forex.com/China-Economy-News.htm</a>