Andy Xie's latest sees the liquidity war getting worse in 2011.
More Here..
America will continue to pump the financial system with liquidity via tax cuts and quantitative easing. China will keep the yuan cheap and avoid clamping down on inflation.
The tense equilibrium can't last for long, as either sovereign debt or inflation gets too heavy to bear. Whoever lasts longer, wins.
The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.
On the other hand, if China has a hard landing, the U.S.'s trade deficit can drop dramatically, maybe by 50 percent, due to lower import prices. It would boost the dollar's value and bring down the U.S.'s treasury yield. The U.S. can have lower financing costs and lower expenditures. The combination allows the U.S. to enjoy a period of good growth.
Xie notes that China may have the advantage here. While America has committed to a liquidity hose, Beijing still has the opportunity to crack down on inflation:
More Here..
". . . American or China . . . " I think should read "Both American AND China . . ." I think our economies are more tied than most people think. (This year, how many of our presents for Chanukkah and Christmas were made in China or Hong Kong?!)
ReplyDelete- David
Top 10 Aloe Vera Juice Benefits
Holistic Nutrition and Health
China needs America to consume their goods. This is the only way to keep its 1.3 billion people working and prevent protests and cause social instability. America has lost it manufacturing bases. They have only the printing press to print fit currency. America needs cheap imports from China to keep the illusion of high standard of living that they are used too.
ReplyDeletewho needs and who is dependent on whom in the long term?
ReplyDeleteDialectical relationships between mutually opposed economic interests have to be resolved in struggle .
The new the strong and the productive will rise out of the resolution of that struggle and the old and the now weak empires then passes out of history.
Currently is a long term struggle between the productive and the unproductive over who gets the advantages from the exchanges in international trade of value, This struggle is now taking the form of currency wars .
Each country tries to export its own inflation to the other.
In one corner
Theee biiig baaaad woooolf UUNCLE SAAM
the first world champion and great white hope defending his sole superpower champion title .
Mr Dollar Ponzi , noisily huffs and puffs that he is still the dollar hegemony superpower of world trade and finance !
But is really only bankrupt de-industrialised and financially already worn out from all its deficit spending for costly war making . Desperately it can only print and throw its paper about in more deficit spending for bailing out its worn out manufacturing and finance sector.
It still pretends its $ paper is a mighty invincible weapon and is backed by all options on the table military threats .
In the Third world corner.
The contender .
The maaaarvel of the EEEEAst PRAAACTICLE Piiig!
China is trying to be the third little pig ,still trying to build a house of real bricks and has now built up its own strong military missile and H bombs defense system and so now laughs at the empty increasingly valueless dollar and military threats of the big bad wolf.
So, the wolf is now only burning up its own house with its own paper debts crises and the wolf cubs have already turned from wolves into future Debt Peon sheeple and paper debts tigers ,with little future now for the American dream and fairy tale as real rich strong wolves .
China hopes to be the survivor ,the hard working practical pig to survive its own potential inflationary crises ,after the worn out wolf collapses from all its own huffing and puffing and useless money printing of fiat paper counterfeit value and is only burning its own house down.
What a piss weak debt ridden insolvant old sham, this has been wolf is , that now can only claim in its war prapaganda to be solving its debt problems with more debt creation and money printing !
Practical pig is looking the strongest of the two long term in round one and its allies the poorer and the developing countries are placing their bets on China.