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2009-02-12 China-Japan-Koreas

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Posted by Steve White 2009-02-12 00:00|| || Front Page|| [1 views ] Top

#1 Must we learn economics from a nation that uses slave labor, or does it really matter since we appear to be..... "too big to fail?"

Posted by Besoeker 2009-02-12 06:19|| 2009-02-12 06:19|| Front Page Top

#2 ..does it really matter since we appear to be..... "too big to fail?"

For now. However, what ever you think of the Chinese, they do appear to be fast learners who are not hobbled by over regulation and lawyers [or the dire need to bring pork back home to the district]. Darwin's thesis is that successful 'adaptation' to environment is the key to long term survival of an entity. The Chinese do appear to be both pragmatic enough and in possession of long term vision to alter that state 'for now' in a number of generations. It's their own internal structural issues that they need to address to allow it to happen.

Posted by Procopius2k 2009-02-12 08:38|| 2009-02-12 08:38|| Front Page Top

#3 If they don't buy them demand drops considerably, the price drops, the value of the ones they already hold drop, no? They don't really have a choice do they?

Posted by Hellfish 2009-02-12 08:41|| 2009-02-12 08:41|| Front Page Top

#4 It doesn't matter if they continue to buy them. All else being equal, they would need to more than double the *rate* at which they buy them, *and* other bond holders, especially Japan, would have to not continue to sell their bonds as well.

At this point, the Chinese are reinforcing defeat, hoping not to lose what they have already invested. They're too late.

Posted by Anonymoose 2009-02-12 09:04|| 2009-02-12 09:04|| Front Page Top

#5 They don't buy them, we don't buy what their factories make. Their problem. Borrow $5,000 you've got a creditor. Borrow a trillion, you've got a partner.

Posted by Nimble Spemble 2009-02-12 09:06|| 2009-02-12 09:06|| Front Page Top

#6 Hellish, "If they don't buy them demand drops considerably, the price drops, "

As I understand it, the current rate on bonds is virtually 0%. Given that, why is there any demand at all?

The best I can come up with is that T-bills are the mattress under which the Chinese are hiding their cash. It's not going to earn a thing, but, they figure that they can always get the principle back.

That must mean that they figure every other investment is worse, no?

Posted by AlanC 2009-02-12 10:10|| 2009-02-12 10:10|| Front Page Top

#7 So, like it or not, we and the Chicoms are in this together. I think that with the out of control debt that Congress made, we are both trying to muddle through. This is not good policy for the world's largest economy.

We have 2 years before we have a slim chance of turning this whole economic mess around with the Congressional elections in 2010. The question is: how close to the tipping point are we?

Posted by Alaska Paul 2009-02-12 11:19|| 2009-02-12 11:19|| Front Page Top

#8 Moose is right. China will take a hammering on it's US treasury holdings. Buying more would be like a gambler doubling up in order to get out of the hole.

2009, the year countries went bust.

As a practical matter, you are bust when no one will lend you more money.

Posted by phil_b 2009-02-12 16:17|| 2009-02-12 16:17|| Front Page Top

#9 $2 trillion in US bonds is a damn good reason for the Chinese to not let the Yuan float. However, there is no way they can soak up a likely $2 trillion 2009 US gov deficit, so the dollar will have to (free?) fall against floating currencies.

And so goes the Yuan. Import costs will dramatically rise while exports will fall in this economy, leading to Chinese (and even larger US) trade deficits and more wealth being sucked out of both economies. So the Chinese can take their medicine now or take a larger dose later.

Posted by ed 2009-02-12 17:20|| 2009-02-12 17:20|| Front Page Top

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