mike904

Savings, Debt and the Global Economy

I think you have that backwards. The rise in savings was a result of the Chinese drop in debt demand. The Chinese don't have a "voracious demand" for US debt. The China trade is American manufacturers in China selling products produced by American companies and calling it "trade". That's labor rate arbitrage, not trade.

The Chinese aren't "buying bonds", they're exchanging cash for cash equivalents. The fact that Wall Street spent 7 years manufacturing cash equivalents is what made this "demand" appear.

The whole idea that central banks "invest" in government bonds is loonie. Governments NEVER pay their debts. Treasury bonds are just a debasing mechanism. Global free trade is lipstick on a tradewar pig.

Depression, PMI and China

It's hard to argue the merits of Smoot-Hawley in today's economic environment because the general consensus is "S-H bad, period." Often, economists are university theorists who seem unable to understand that we live in a POLITICAL world.

In the 20's the US funded much of it's overseas trade just as China did from 2000 to 2007. When liquidity dried up, the US attempted to hold onto the value of it's manufacturing by limiting imports. I suspect that unless our country is run by college professors with dictatorial powers this will happen again.

China is doing the same thing now. It's first fixing prices, by limiting farm export licenses. It's "helping" domestic farmers by setting up a crop reserve, which will help increase yuan grain prices and ease the transition of millions of people leaving the cities for their old lives back on the farms. It's using infrastructure projects, including 5 bullet trains, to hire excess workers. Sound familiar?

Rather than judging this to be right or wrong I would judge it to be natural, predictable and inevitable. China's goal, as it has been for 2,000 years is stability. In the US, 90% of economists are in complete agreement as to the solution to this problem, a situation I find terrifying.

As to the conclusion to the effects of Smoot Hawley, I have no clue other than to say Naill Ferguson said it had a minimal effect on the US.