I’d wager that 99.99 percent of Americans have no idea of the real complexities of our current financial boondoggle (and if you’re really interested, Princeton has an excellent video discussion) but I can’t get past the role China.

From The $1.4 Trillion Question:

Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States.

This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China.

Like so many imbalances in economics, this one can’t go on indefinitely, and therefore won’t. But the way it ends—suddenly versus gradually, for predictable reasons versus during a panic—will make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.

Has all the cheap plastic crap been worth the consequences?

Jeff Hess: Have Coffee Will Write.

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This entry was posted on Wednesday, October 1st, 2008 at 1018 by Jeff Hess and is filed under Banking, Capitalism, China, Economics, Wall Street. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.