Friday, June 3, 2011

The ugly truth about our trade deficit with China.:-(

The China Question premiers on CNBC on Friday night, June 3rd at 8pm.

This looks like it is going to be the story that I've been looking for years. The symbiotic relationship that we have with trade-deficit to China. 

They subsidize our spending habits (US & EU) with their artificially cheap currency. Then with the $ dollars and Euros from their trade surpluses,  they buy stuff. They buy our Treasuries to keep our Federal Debt a float. They have a high savings rate, where we have a fractional private savings rate (deficit for government, of course). They keep their currency artificially low so they can continue to export. Literally they are paying us to buy their products of toys and such. But that relationship cannot, and will not, last forever. The relationship is NOT sustainable.
Both a trade deficit and a federal deficit are automatically “fixed” over time by the devaluation of the currency.

Let’s see what the show has to offer.

1 comment:

  1. Interesting, but not quite as good as I had hoped.
    One of the points that I have not really worked my way through previously related to the China Syndrome is full impact of the balance of payments. The trade deficit with China doesn't stay with the sovereign state of china. Much of it goes to profits. And not that much of the profits go to the Chinese.

    Turns out that Much (most) of the profits go to the multinationals involved. And the granddaddy of all MNCs in this sandbox is....

    Wal-Mart (WMT).