The China situation is simple: they need capital equipment, and they need energy. At the point where they have sufficient capital equipment and the ability to design their own, and access to energy, they can collapse the system and become the new lynch pin economy - the source of consumption. This is not going to occur for quite sometime, however, which is why everyone is pretty sanguine about the world economy. They are, however continuing along this road. If a new energy infrastructure is not in place - and it seems like that it is not going to be in place in time - then this is a long term threat. But not an immediate one.
I'm just wondering how China and Asian economies in general can handle us not buying their junk?
I mean we are their biggest importers and IMO a depression here would tank the economies of asia to some degree as a result, i would think.
Also has anybody run scenarios as to what happens to the asian economies when exports to the U.S. drop say by 30-70%?
Posted by Rodger at November 18, 2004 06:22 PM
This is a catch-22 argument people seem have backed themselves rationally into a corner with. By definition the strong US currency allows it to be a consumer, not because it is a consumer it has a strong currency. If Europe, Russia, and China see their currencies rise then they can consume just as well as we can. It takes no virtue to be able to consume.
If their currencies are stronger then they can consume as well.
Somehow economists have tricked Americans into thinking that well if we weren't around to consume stuff then nobody would consume stuff. Given a currency realignment then there are many billions of people around the world happy to pick up the slack for us.
It is not consumption which is at issue. We have a privileged position as far as consumption because we have a unique role. Take away that role and it's like being fired from a sinecure job. You can no longer eat lobster every night. But someone else will eat it.
Posted by oldman at November 18, 2004 06:30 PM
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