China Smackdown On U.S.

Following Standard & Poor’s downgrading of the U.S. credit rating, China – the largest foreign holder of U.S. debt – demanded the U.S. government to “confront its addiction to debt,” and “come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.”

china-premier-wen-jiabao

China's Premier Wen Jiabao

China predicts “global financial turbulence if the US fails to learn to “live within its means.”

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What do you think about this?

Do we Americans live within our means?

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World News Wednesday

4 thoughts on “China Smackdown On U.S.

  1. China will whine and whine but it has locked itself into a system where it has no choice but to buy American debt no matter how bad our economic outlook is, which is the result of them trying to keep their favorable exchange rate. Otherwise the value of the rmb will go up and exports will drop.
    And no, Americans don’t live within their means. That’s why a guy who makes 50k a year buys a $300,000 house and families have more cars than people. It’s the result of lax credit companies and poor government oversight. 😡

    • Thank you for this thoughtful comment. I completely agree with your assessment about us living outside of our means. Economics is not my area of expertise, but don’t you think we are as dependent on China as they are on us?

      • The only reason China’s influence is so pervasive in the American economy (providing most of our cheap stuff) is that it won a commerce war with Mexico about 15 years ago. Do you remember when McDonald’s Happy Meal toys used to have “Made in Mexico” stamped on them?

        China has some major turmoil brewing right now and signs are pointing towards a bubble burst like what happened in the US except far far worse. When that happens, foreign companies will probably close up shop and go back to their old hangouts in Central and South America to make things for cheap.Their entire economic growth is driven by exports and construction. The demand is down right now due to the trouble in the US and Europe so exports are declining. Construction is actually becoming a big problem because they are building entire cities but no one can afford the obscenely high prices and so their are dozens of ghost cities. But they can’t stop because then tens of millions of people will be out of a job and the economy will slow.

        So they’re in a position where they have to decide whether they want the economy to go bad now or later. China’s debt is actually projected to be much higher than America’s. Some even say it’s as high as 150% of GDP but it’s hidden from the central government. In conclusion, we just need to pay off our debt to them as soon as possible then we can throw them under the bus when they step out of line. That was a little long and wordy but hopefully you learned something! =D

        • I definitely did. Thanks for sharing this detailed accounting. Very informative. Unfortunately, I don’t see us paying off our debt any time soon. At least that’s my view from inside our own bursted bubble…

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