ZH - CBs as Buster Keatons

[oddlots]

Didn't know how else to describe the humourous image this piece conjures up:



"Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is "getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing the supply of dollars overseas." Oops.

The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade."

Whole thing is worth a read:

http://www.zerohedge.com/article/dar...-us-treasuries

[Mega]

Re: ZH - CBs as Buster Keatons

http://www.businessinsider.com/china...in-late-2008-1

Not sure how is right.

Mike

[GRG55]

Re: ZH - CBs as Buster Keatons

Didn't know how else to describe the humourous image this piece conjures up:



"Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is "getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing the supply of dollars overseas." Oops.

The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade."

Whole thing is worth a read:

http://www.zerohedge.com/article/dar...-us-treasuries

The shrinking current account gap is positive for everybody...everybody except the Chinese mercantile economy that is...

Although the transistion could be highly disruptive, in the years to come the USA is going to fund an increasing portion of its fiscal deficit with that rising internal savings rate instead of foreign lenders.

If it goes "too far", and the trade and current accounts imbalances shrink too much, too fast, the Chinese economic model and its economy implode. It is their worst nightmare...

[Note to Mega: We keep trying to get through to you, and rest of the "China in control" cohort, that China cannot run huge trade and current account surpluses unless some other nation(s) run equally large deficits - Econ 101 rears its ugly head again. Although China and the governments of the world's deficit nations might prefer to keep the old game going, it's no longer politically or economically feasible to run huge imbalances in an environment where global GDP is shrinking.

So although we might prefer that our policy makers voluntarily rein in these huge imbalances that constantly threaten the stability of the global economy [something they absolutely refused to do during the last reflation], the fact is that they are being reined in, despite the best efforts of the Chinese and USA authorities, by reduced private consumption, falling State spending, shrinking private credit and increased savings in the USA and elsewhere. THe gap will further shrink as the export sector of the US economy, which is showing recent signs of life, really gets into gear on the back of the depreciating Dollar.* Think of the quotation from the Chinese official above as China's version of pleading for a restoration of the previous FIRE-economy status-quo, by urging the USA government to do more to help increase debt fueled domestic consumption..."Please don't squeeze the trade account gap too much, we promise we'll keep recycling those Dollars back to America"]

* Just as an aside, rising exports of manufactures will also tend to bring down the unit costs of supplying the domestic US market, creating further displacement of Chinese sourced goods. Don't think toys and trinkets, think electrical power generating and distribution equipment, water utillity pumping systems, etc. Even if the USA resists the urge to slap on import tariffs, there is no good news in any of this for the Chinese, unfortunately...

[Mega]

Re: ZH - CBs as Buster Keatons

But i want the US/UK to be wiped out........China is my best hope!
Mike

[GRG55]

Re: ZH - CBs as Buster Keatons

But i want the US/UK to be wiped out........China is my best hope!
Mike

Suggest you send Brown and Obama on a joint mission to China, and arrange to have them arrested for "industrial espionage". They might never get out...

[Master Shake]

Re: ZH - CBs as Buster Keatons

But i want the US/UK to be wiped out........
Mike

Why?
......................