http://www.spiegel.de/international/world/0,1518,678026,00.htmlAmerica has been squandering money it borrowed from the Chinese. Instead of criticizing China's monetary policy, US President Barack Obama should acknowledge the financial skill being displayed by the new world power and learn a few useful lessons.
<SNIP>
So it may come as no surprise that the embattled US president, Barack Obama, is continuing where his predecessor George W. Bush left off: complaining about the Chinese. Obama recently said China's monetary policy was hurting the US job market. That strikes a chord with Americans. It's even true. But it doesn't make any difference.
The US is the world's biggest debtor and therefore not in the best position to get its way with the People's Republic of China. Of each dollar that Obama wants to spend in 2010, over 30 cents are borrowed. And a large part of the loan comes from China.
<SNIP>
The Chinese don't borrow, they save. And they do this with the kind of dedication with which the Americans spend. An ordinary Chinese person puts 40 percent of his or her salary into their bank account, while an ordinary American saves at most 3 percent. The People's Bank of China has hoarded over $2 trillion in currency reserves. America meanwhile has a small dollar reserve and an XXL-sized budget deficit which currently stands at just under $14 trillion.
<SNIP>
China Becoming a Mini World Bank America by contrast is self-absorbed with its monetary policy. It has ignored warnings of rising inflation and a new asset price bubble -- and in doing so is isolating itself, also from the Europeans. In the meantime, China is forging new alliances.
The People's Republic has quietly been taking stakes in virtually all the world's regional development banks. Like a mini-World Bank, China has been helping to shore up financially troubled countries in Latin America, Africa and Asia. It has also increased its stake in the International Monetary Fund, by $50 billion. Chinese monetary experts, not Chinese soldiers, have been driving the nation's expansion -- silently and efficiently.
The oil business is the foundation of the dollar's hegemony. The oil-producing states do some $2.2 trillion dollars' worth of business each year in the US currency. Larry Summers, Obama's top economic adviser, once compared the dollar to the English language in terms of its importance to international trade.
But China, a huge consumer of oil, is already discussing alternative means of payment with its suppliers. It would like to pay in yuan. The oil states wouldn't be able to use that currency worldwide, but they could make purchases in China. That, by contrast, would be like learning Mandarin.
China is talking down the dollar to serve its own interests. When the dollar depreciates against the euro and the yen, the yuan declines as well, because the Chinese currency is pegged to the dollar. And the declining yuan helps boost Chinese exports to Europe and elsewhere in Asia.
China now sells significantly more goods in Europe than it does in America. Rarely has a government used the instruments of state monetary policy in such a calculated way. Obama is complaining, China keeps on growing and we're all confused.
The economics textbooks never imagined a planned economy that was also run so cleverly. The world of planned economies is "a completely paralyzed, artificially distorted, pseudo-order incapable of reaction," Ludwig Erhard, the former German chancellor and economy minister widely credited with engineering Germany's post-war economic miracle, once said. It would "collapse like a pack of cards."
If he were alive today, Erhard would definitely change his mind, given Asia's successes. That's because China has a plan, and America apparently doesn't.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
