Who is going to buy China, Germany, Japan, and SKs stuff? If they don’t recycle into US assets (and they often hide these purchases or buy alts like MBS), then US consumers can’t afford to consume. All of these countries are deeply structurally imbalanced to exports. There just isn’t anyone big enough to absorb their trade. Quite frankly…
Who is going to buy China, Germany, Japan, and SKs stuff? If they don’t recycle into US assets (and they often hide these purchases or buy alts like MBS), then US consumers can’t afford to consume. All of these countries are deeply structurally imbalanced to exports. There just isn’t anyone big enough to absorb their trade. Quite frankly the US in general would be better off long term if people stopped buying treasuries. There’d be dislocation and Wall St would suffer but it would reshore more manufacturing and spur US growth. So I’m all for it but I doubt the exporters are going to commit suicide if they don’t have to. I think they are stuck.
I think causality is the other way - US consumes way more than any other nation on a per capita basis, and hence needs to import. Its the US demand that drives the export led model, not the other way round. But politically that works in the US - growth is very popular, even if credit driven
Which is the chicken and which is the egg doesn’t seem that important. Regardless, we’ve constructed a deeply imbalanced system that suppresses the wages of workers in all the countries involved.
You can cover some of that credit fueled growth by spending in the public sector or allowing debt build ups in the private sector like the GFC but it always blows up. I see Trump as intimately tied to this issue. We shipped steady middle class manufacturing jobs off the Asia and so we have a lot of resentful working people. Same thing with Brexit.
Until we lessen the power of Wall St in favor of main st I think it’ll continue. I think in the end this is what you are saying. Anyway listen to me. I’m losing my capitalist edge.
It's true, it is difficult to see where non-US demand is coming from. Certainly the Chinese have failed in that role once they stopped building ghost cities.
I would take a look at Michael Pettis’s work in this area. I think the causality is more reflexive. For example if US behavior was causing the current account deficits one would expect the US to be forced to raise interest rates to attract funding. Most of the time this isn’t the case. This was the basis for Bernanke’s “savings glut” idea earlier in the century.
My take is that foreign nations want to reduce unemployment and over produce to accomplish this goal. The US is willing (and able) to accept this outcome for hegemonic reasons; helps keep inflation down too
The Chinese have loads of US dollars... they give loans to 3rd nations in US dollars and make the loaned to country pay them back in Yuan. This is so the 3rd nation can pay its IMF/WORLD bank loan back in US dollars since they have been cutoff from getting them directly from the fed reserve. Its an odd dynamic thats being used to hide the collusion of national governments from the national publics they are responsible to so they can pretend globalization is dead and they're not working in collusion with each other to take over the world as a multipolar Alliance..
Who is going to buy China, Germany, Japan, and SKs stuff? If they don’t recycle into US assets (and they often hide these purchases or buy alts like MBS), then US consumers can’t afford to consume. All of these countries are deeply structurally imbalanced to exports. There just isn’t anyone big enough to absorb their trade. Quite frankly the US in general would be better off long term if people stopped buying treasuries. There’d be dislocation and Wall St would suffer but it would reshore more manufacturing and spur US growth. So I’m all for it but I doubt the exporters are going to commit suicide if they don’t have to. I think they are stuck.
I think causality is the other way - US consumes way more than any other nation on a per capita basis, and hence needs to import. Its the US demand that drives the export led model, not the other way round. But politically that works in the US - growth is very popular, even if credit driven
Which is the chicken and which is the egg doesn’t seem that important. Regardless, we’ve constructed a deeply imbalanced system that suppresses the wages of workers in all the countries involved.
You can cover some of that credit fueled growth by spending in the public sector or allowing debt build ups in the private sector like the GFC but it always blows up. I see Trump as intimately tied to this issue. We shipped steady middle class manufacturing jobs off the Asia and so we have a lot of resentful working people. Same thing with Brexit.
Until we lessen the power of Wall St in favor of main st I think it’ll continue. I think in the end this is what you are saying. Anyway listen to me. I’m losing my capitalist edge.
It's true, it is difficult to see where non-US demand is coming from. Certainly the Chinese have failed in that role once they stopped building ghost cities.
Demand is easy... stimulus or pay increases act very quickly - and largely politically popular. Its just that businesses hate it
Russell,
I would take a look at Michael Pettis’s work in this area. I think the causality is more reflexive. For example if US behavior was causing the current account deficits one would expect the US to be forced to raise interest rates to attract funding. Most of the time this isn’t the case. This was the basis for Bernanke’s “savings glut” idea earlier in the century.
My take is that foreign nations want to reduce unemployment and over produce to accomplish this goal. The US is willing (and able) to accept this outcome for hegemonic reasons; helps keep inflation down too
but is it? the Chinese have been unable to do it for more than a decade effectively
The Chinese have loads of US dollars... they give loans to 3rd nations in US dollars and make the loaned to country pay them back in Yuan. This is so the 3rd nation can pay its IMF/WORLD bank loan back in US dollars since they have been cutoff from getting them directly from the fed reserve. Its an odd dynamic thats being used to hide the collusion of national governments from the national publics they are responsible to so they can pretend globalization is dead and they're not working in collusion with each other to take over the world as a multipolar Alliance..