Article

2010-10-12 China-Japan-Koreas

China's hoarding $$ contributing to recession

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by gorb 2010-10-12 02:02|| || Front Page|| [3 views ] Top

#1 It is true that China's 'hoarding' (or you could call it 'saving', a totally un-American idea) has contributed to the Great Recession. (Remember Li Six-pack does not have communist-supported health care or social security to count on.) It does not answer the whole question, though.
To keep the exports moving, China must keep the currency cheap. To keep the currency cheap, China manipulates its banking system so the accumulated surplus dollars never get spent.
Instead, the Chinese lent the dollars back to us..
The article begs the question of why the US is compelled to borrow so much money from China, as if borrowing were a natural phenomenon, like the rain. In a healthier world economy, instead of borrowing from China, the US would simply TRADE with China, thus recycling the dollars right back to the homeland & preventing destructive imbalances. However, the US has had a huge IMBALANCE OF TRADE with the entire world for many years, and this imbalance has to be associated with either (1) the US running out of money or (2) the US running up huge debts (borrowing from the entire world) to support the imbalance going forward. Guess what we did.
If the US were to somehow and suddenly balance its trade, China would suffer greatly. Most likely in the US goods such as those currently being imported from China would also get more expensive.

Posted by Anguper Hupomosing9418 2010-10-12 07:56|| 2010-10-12 07:56|| Front Page Top

#2 The recession is due to deleveraging from excessive borrowing, which means develeraging from the reckless lending by both banks and the Chinese government.

Both want the US Government to save them from the consequences of that reckless lending.

Posted by phil_b 2010-10-12 08:27|| 2010-10-12 08:27|| Front Page Top

#3 'Hoarding' (as some call saving) is nothing new over the course of Chinese history.

It used to be quite common for extended Chinese families to 'pool' their money in savings and every working member would contribute to this pool. Very agrarian in its concept.

As I've been told by my Chinese friends, back in the 50's-60's (and possibly later), a typical family in Hong Kong or Macao (don't know about the mainland) would live on about 20% of their income and place 80% into the larger family's pooled savings. This gave the family (because the individual by himself was 'nothing') enormous clout financially and ongoing mutual security in hard times and collective capability for purchasing large investment items (like buildings, farmland and factories).

Posted by Mullah Richard 2010-10-12 10:25|| 2010-10-12 10:25|| Front Page Top

#4 Frankly I see this article as crying "Sour Grapes" saving is good (If we do it) and BAD (If they do it)
Bullshit.
Nobody forces folks to "Buy Chinese".

I look at this and instantly understand why Zero, is forcing inflation, it makes the chinese holdings worth less each digit point.
And NO it hurts ALL who save, not just the Chin.

Posted by Redneck Jim 2010-10-12 12:40|| 2010-10-12 12:40|| Front Page Top

#5 Nobody forces folks to "Buy Chinese".
RN Jim

No, I suppose not. But how many men are willing to pay $265. a pair for American made Allen Edmonds loafers. Barefoot is not an option.

Posted by Besoeker 2010-10-12 12:47|| 2010-10-12 12:47|| Front Page Top

#6 Our toaster oven gave out after many years. I told the wife we would scout around and buy one made in the good old USA. There is none made in the USA. Today we looked at Martha Stewart dog toys. Made in China. Everything you look at in the stores is made in China--except our food supply. This prompted a letter to my Congressman and Senators about why we are giving our industries and jobs away. We have a huge inbalance of trade with China. We import about 4-5 times as much from them as we export to them. The point is try to buy American if you can.

Some of the reasons given for this inbalance: i) China restricts access to its markets while aggressively supporting exports by its domestic firms; ii) Chinas low-wage/low-cost advantage; iii) Chinas artificially undervalued currency. This is not free trade.

China has little regulation. On the other hand we have just about regulated ourselves out of competitive existence. Consider that the US has OSHA, EPA, all kinds of regulations concerning nuclear power, oil exploration, coal extraction, labor, transportation, etc. Our politicians have screwed us. That is why a recent poll found 85% of Americans are mad as hell about our economy.

The loss of our manufacturing capility, our spending, lack of energy independence, and entitlements, have security implications. During WWII we were the arsenal of democracy. Without America supplying everything, the war could not have been won. Reagan said America is a shining city upon a hill whose beacon light guides freedom-loving people everywhere. If we don't take care of things at home soon we will soon be reduced to a third world country that will not be a beacon for anyone.

Posted by JohnQC 2010-10-12 17:36|| 2010-10-12 17:36|| Front Page Top

#7 Everything you look at in the stores is made in China--except our food supply.

Check your food labels, JohnQC. My main grocery store carries frozen fish from China and Viet Nam as well as Alaska and Chile. The pine nuts come only from China, they seem to have discontinued the Italian ones. So we still eat salmon, but it's been about a year since we've had pine nuts.

Posted by trailing wife 2010-10-12 18:06|| 2010-10-12 18:06|| Front Page Top

#8 People do not understand balance of payments unless they have taken at least second year college economics.

A trade balance is only one side of an equation. The other side is investment balance to get the entire balance of payments picture. Basically, if we are running a trade deficit, that means that America attracts enough capital to buy more than it produces. If we ran a trade surplus, it would mean that we could no longer buy all we produce.

For every dollar we run in trade deficit, a corresponding dollar comes back in capital investment, the two accounts balance to zero.

You generally run a trade surplus only in unusual times and it is not sustainable over the long term. The Chinese people, for example, can not buy all that they can produce. They have a trade surplus. That surplus means they accumulate foreign currency. There is nothing they can do with that foreign currency inside China so they send that capital abroad ... mainly to the US.

Running a trade surplus is generally not a good thing and is not a sign of prosperity of a country's people.

Posted by crosspatch 2010-10-12 18:33|| 2010-10-12 18:33|| Front Page Top

#9 Practically 100% of all apple juice used in the US comes from China. Juice apple operations in the US are nearly extinct.

Posted by crosspatch 2010-10-12 18:34|| 2010-10-12 18:34|| Front Page Top

#10 If it is of importance to you, Martinelli's is 100% American apple juice. You'll find some other local or regional brands, too, often of apples locally harvested and pressed.

Posted by Private Eye 2010-10-12 18:49|| 2010-10-12 18:49|| Front Page Top

#11 I find the "Balance of Trade" argument highly deceptive. 'Example.
You go to the store (Unnamed) and buy food.
what have you sold the grocery store?
NOTHING
Damn you've got a serious trade imbalance right there, Now just what are you going to "Sell" the store to even that "Trade Imbalance"?

Get the point, it simply doesn't "balance" whatever you do.
And don't say you're "Trading Money, the imbalance is all one way, food from them to you, Unless you have a farm and sell the store your crop, there's an Imbalance.
Now I know that's a odd example, the whole point is there's NO "Imbalance" trade evens out eventually.
OK the Chin are hoarding cash, doesn't do them any good sitting in a vault, Money is designed as a TRADE tool, don't use it and you might as well not have it at all.

Posted by Redneck Jim 2010-10-12 22:12|| 2010-10-12 22:12|| Front Page Top

#12 POTUS BAMMER repor wants to sell C-130's to China.

D *** NG IT, TODAY ITS C-130's, TOMORROW IT'LL USAF HEAVY/STRATEGIC BOMBERS.

[post-Asteroid + Solar Storm + Peak Oil, etc. of course].

* ION CHINA DAILY > REPORT: CHINA'S GLACIERS[Continental + Ocean Ice]IN DANGER OF DRASTIC SHRINKAGE [30% by Year 2050]???

Posted by JosephMendiola 2010-10-12 23:29|| 2010-10-12 23:29|| Front Page Top

#13 To keep the exports moving, China must keep the currency cheap.
I usually agree with David on most issues, but in this case I must disagree.
The consensus is that theu do keep their currency cheap, but are they?
There are two currencies that governments have a lot of problems trying to control, gold and silver.
Before the invention of options most international trade was done in gold., because of its lack of volatility and ease of computation. So if you compare the main currencies with gold, you find;
each of the currency has dropped against gold from their respective October 2008 highs.

The US dollar 52.70%

The Pound 48.53%

The Yuan 45.75%

The Euro 44.75%

The Yen 39.84%
So if anyone is manipulating it's currency to keep it cheap, it would have to be the US followed by the UK.

Posted by tipper 2010-10-12 23:34|| 2010-10-12 23:34|| Front Page Top

#14 FUTURE CHINA > IMO its greatest single problem will remain the MILITANT/OBSESSIVE UNWILLINGNESS OF ITS GOVT + LT POLITICOS TO GIVE UP OR SHARE POWER FOR A GREATER GOOD, i.e. NATIONAL ECON IMPROVEMENT + EXPANSION.

Even when to its own unilateral advantage or benefit.

IOW, DA SPACE ROCK + SOLAR FLARE, ETC. WILL ONLY KILL OR DESTROY WHAT DESPOTIC GOVT + CORRUPT NEPOTISM HAD ALREADY KILLED OR DESTROYED LONG LONG BEFORE, only they won't know it until its too late.

Posted by JosephMendiola 2010-10-12 23:39|| 2010-10-12 23:39|| Front Page Top

23:49 JosephMendiola
23:39 JosephMendiola
23:34 tipper
23:29 JosephMendiola
23:19 JosephMendiola
23:17 JosephMendiola
23:10 JosephMendiola
23:06 Procopius2k
22:55 JosephMendiola
22:50 JosephMendiola
22:44 JosephMendiola
22:43 Old Patriot
22:30 Scooter McGruder
22:20 Old Patriot
22:18 Redneck Jim
22:12 Redneck Jim
22:01 badanov
21:59 jefe101
21:42 bigjim-CA
21:34 bigjim-CA
21:29 Yakov Smirnov
20:43 anymouse
20:40 jefe101
20:26 Pappy