Anandakos

Shift in U.S. - China Dialogue Is Louder than Words

King,

Much of what you say has a strong element of truth, but your assumption of "an adequate social safety net" assumes continued access to borrowed capital by the government. The point of this article is that continuation of that access is in doubt. I don't see that you disproved that point, so your argument that the US middle class is an advantage is flawed.

The only way out of our dilemma here in the US is to abandon empire and redirect the resources consumed by it to productive assets here: a better energy grid, renewable energy generation, a revamp of our transportation infrastructure, and significant improvements in education.

Those steps would revitalize the social safety net over time without unsustainable borrowing.


On Jul 30 10:59 AM KingGeithner wrote:

> Feng -
>
> I completely agree. China is in the process of creating its own massive
> bubble. While its recent stimulus spending has allowed for China
> to maintain its critical 8% growth rate (again one always has to
> question the reliability of these figures coming out of China), its
> state controlled banks have been shelling out easy money left and
> right, with lending standards ever more dubious. Apparently the Chinese
> government has not learned an important lesson: that lowering loan
> and banking standards in order to spur growth will always come back
> to bite a country in the rear years down the road. The main reason
> the U.S. saw growth after the internet bubble burst was because we
> lowered banking standards and began peddling ever more complex financial
> weapons of mass destruction. Thus, China can claim they have 8-10%
> GDP growth every year over the next 5 years, much like how we had
> nice GDP growth during the mid 2000s; let's see how sustainable China's
> growth will be.
>
> I think people are too quick to write off the U.S. and upgrade China
> as the world's sole future financial power. The U.S. has the world's
> strongest middle class and an adequate social welfare safety net.
> China has no safety net for its citizens, and a nonexistent middle
> class. It will forever be dependent on the U.S. and the rest of the
> world to sustain its growth, unless it can guarantee a basic safety
> net for its citizens and close the income gaps so that a healthy
> middle class can actually develop. China is essentially at the mercy
> of the economic situation of the U.S.

Shift in U.S. - China Dialogue Is Louder than Words

Pax,

It doesn't matter that the US has been keeping "ancient and deep enmities" in check in various parts of the world. While that may have been a beneficial result, it occurred as a result of actions taken from less than altruistic motives, at least for the past three or four decades.

In any case, it can't continue. Every empire in history has undergone the same cycle of scrappy ascendancy, hegemony for a shorter or longer time, and bankrupt overwhelm. It seems that each lasts for fewer years than the former, but I have a feeling that China's coming one will endure for quite a while, simply because there will be no credible competitor.

You are correct that we have a highly productive agricultural base at this time. But at least 20% of our grain production is over the rapidly failing Ogalalla Aquifer and will be gone in ten years. When you fly over the region between the 100th Meridian and the Front Range of the Rocky Mountains and see all those green circles, you're over Ogalalla country.

When it goes we will have great difficulty feeding ourselves at the level to which we're accustomed, never mind exporting our golden river of wheat and barley.


On Jul 29 03:46 PM Pax Americana wrote:

> The USA is not, and will not, be "swept aside" as easily as you presume,
> the US military still is the Arbiteur of Global power reach, and
> maintains a tenuous peace in extremely fractious corners of our planet.
> Without Americas overiding Military power in these regions, Ancient
> and deep enmities would again raise their head. Secondly America
> is the "Bread Basket" of the planet, and food is, and will become
> increasingly important. We also issue more scientific patents than
> anyother Nation, "right off America at your peril!

Chinese Are Likely to Halt Purchases of U.S. Treasury Debt

Mr Big,

Sic 'em Buck Turgidson! Rattle those Minutemen! Brandish those Tridents! The PU239 in the triggers is gettin' a little weak from sittin' there in those tubes too long. Gonna have to replace the H3 any time now; poisoned with He. Gotta use 'em or lose 'em.

We can ALL ride down on the bomb!

On Mar 13 12:03 PM Mr. Big wrote:

> Sooner or later, Americans will realize that China has been waging
> a quiet war on America. You know what? China is winning. I'm just
> going to put it out there now: CHINA IS THE CAUSE OF THE CREDIT
> CRISIS.
>
> Their manipulation of their currency as decimated the US manufacturing
> base. Their massive buying of medium and long term treasury bonds
> (in support of their currency peg) as caused long term yields to
> remain depressed for a prolonged period, causing the inversion of
> the yield curve in 2005 to 2007 and setting up the conditions for
> leverage in the financial sector and the incentive for savers to
> become borrowers. They did this to America and now they have the
> gull to "warn" us?
>
> Fact of the matter is, China's currency manipulation should be considered
> an act of war on America. It is a blatant attack on America's economy
> and a destabilizing force on its financial sector.
>
> Quite the opposite should happen. America should be warning China
> to stop their blatant attacks or risk military intervention. What
> is happening now is tantamount to an embargo on America....nay....it
> is worse. And if an embargo is considered an act of war, then currency
> manipulation with the sole purpose of boosting domestic manufacturing
> at the expense of foreign manufacturing should also be considered
> an act of war.
>
> Just my thoughts....

Chinese Are Likely to Halt Purchases of U.S. Treasury Debt

Chris,

Your options are spot on, except possibly for number 9. It's already been partially done; new Federal employees were locked out of the traditional "Civil Service" retirement system by President Reagan. A "tier two" system was implemented with benefits essentially half a generous as the previous plan (the benefit was 2%/year of service but became 1%).

I gather you're advocating eliminating even the new plan and substituting a 457 system (the governmental equivalent of the 401K).

That would certainly save a little money in the near-term as boomers retire and are replaced by the new 457 only workers. But when the economy recovers -- it really will recover -- the government would have to pay significantly higher wages to attract quality talent. Washington DC is a HIGH cost city and the certainty of a guaranteed lifetime annuity benefit in retirement allows people to make the choice to live there on a lower present salary. Assuming rational investment of the employer contributions in a well-run retirement system -- which seems to be true for the FRS -- and the net present value of money, total Federal expenditures over the next century might actually be HIGHER in the absence of the FRS plan.

This is not an attack, just a "what about?"

On Mar 13 11:23 AM Chris B wrote:

> "The heretofore mutually beneficial arrangement of China purchasing
> US debt with trade surpluses generated by American purchases of Chinese
> goods is drawing to a close. China’s trade surplus has all but evaporated,
> eliminating the need or ability of China to purchase additional US
> debt."
> ----------------------...
> This is a decoupling theory based on a brief decline in US imports
> of Chinese goods. For this theory to work, either (a) Chinese internal
> demand will suddenly reach US levels and keep the factories running,
> or (b) China will decide to quit trading with the US, let the factories
> shut down, allow unemployment and civil unrest to rise, and go into
> steep economic decline just to spite the US.
>
> I'd say the Premier is just talking, exactly as our politicians do.
>
>
>
>
> "As China throttles way back on its purchase of US debt, America
> will have three choices - 1. Borrow and spend less 2. Raise taxes
> tremendously or 3. Print money. Based on what we have seen so far,
> it will be some of number 2 and a lot of number 3."
> ----------------------...
> Might I suggest a couple more multi-trillion dollar options:
>
> 4. Go one decade without a multi-trillion dollar war.
>
> 5. Eventually sell the mortgages, bonds, and stocks that the government
> has purchased so far. Obtain some return from the loans issued.
> Pay down debt with these revenues.
>
> 6. Reduce spending by cutting the number of foreign military bases
> in half, from several hundred to perhaps 200.
>
> 7. Reduce foreign oil consumption.
>
> 8. Reduce government subsidies to agriculture, oil, etc.
>
> 9. Freeze the government worker pension system.

Chinese Are Likely to Halt Purchases of U.S. Treasury Debt

Bears,

With comments like "THEY SHOULD ALL BE TAKEN OUT AND SHOT" we MAY be on the verge of another Civil War. Be careful what you wish for.

And you think it was GOOD for investment banks to leverage debt 40 to 1 just because the Ponzi securities could be bought by "fools all over the world"????? This is your idea of a functional economy that brought American prosperity?

And finally, I do truly understand that it pains your racist little heart, but the man IS the President of the United States. Learn how to spell his name.

On Mar 13 10:23 AM johnthebears wrote:

>
> I am so sorry to say that I feel like I am living in Russia, a socialist
> communist country.
>
> We now have one party government and a dictator president that sees
> himself as the Messiah!
>
> Our country is now a bankrupt nation of poor people, already losing
> $11 TRILLION DOLLARS OF REAL WEALTH, MORE THAN THE VALUE OF JAPAN
> AND PERPHAPS GERMANY, that we may never recover, since investment
> banks can no longer create money at 40:1 to be bought by fools all
> over the world.
>
> This thing is global, and all nations are poorer now as well as America.
>
>
> It may take a couple of years before the average Joe to grasp the
> significance of what he has been voting for... the Democratic Socialist
> Republic of America, but truly Oboman's mentor, Rev. Wright's forecast
> has come to be...
>
> THE CHICKENS HAVE COME HOME TO ROOST AND I BLAME DEMOCRAT LIBERALS
> AND STUPID LIBERAL REPUBLICANS.
>
> THEY ALL SHOULD BE TAKEN OUT AND SHOT!
>
> WE MAY BE ON THE VERGE OF ANOTHER CIVIL WAR.
>
> I am sorry that I must sound so pessimistic on this Friday the 13th,
> but that is my true feeling of where we stand today in America.