Could it be that China has specifically targeted the United States economy by lending to us in an unsustainable way to purposefully implode our economy? Does China have good Austrians working for them, showing them how their lending and vendor financing would lead to an erosion of the manufacturing base and the destruction of the U.S.'s super power status, especially given our political system and politicians obviously willing to take the easy way out in order to get reelected?
China has not done, and cannot do anything to the US economy, but help. If they charged anyone, be it Mises himself, with the task of purposefully haring the US it could still not be done. The US will go down ONLY because of its twisted incentives system and culture of depredation and envy.
That being said, it would be interesting to see what damage could be done by China unloading all its dollar reserves at once. The death of the dollar? We’ll never know because China would not destroy its greatest market.
China has enabled the United States to increase it’s high amount of consumption without expanding it’s production base. By doing that it has provided the heroin to the addict with more and more heroin. While yes it is the United State’s fault, it wasn’t exactly out of the hands of China. They could have cut us off, and sent out a signal to the rest of the world of the instability of the U.S. debt system. But by allowing us to continue to consume and give the politicians an easy yet unsustainable way to please their constituents for a time, they have allowed our system to devolve into the service economy that it is now. Is it impossible for the Chinese to have predicted this, when an Austrian, e.g. Murray Rothbard, could and pretty much did foreseen this state of affairs?
Why on earth would they have cut the US off thus hurting their own market? China has erred (form its own point of view) when insisting on a pegged currency and, by default, on ridiculous dollar reserves. It has thus allowed the US to buy Chinese goods without paying anything but pieces of paper (actually, it used tax money to repay the Chinese for their own exported goods!).
So I’m with you that China should have cut the peg and left the yuan to float. It could have also started to unload its reserves and the US trade deficit would have crumbled.
Yet, that would have forced the US to sell off productive assets in order to finance its deific, which shall exist as long as US time preferences are higher that those in China. So, I’m not so sure that what we know to be a good measure (floating the yuan) would have been appreciated by the US. It could easily have been seen as a measure of ‘economic warfare’.
So, China has the choice of wither subsidizing US consumption by keeping its pegged currency or to effectively destroy the us capital stock by trading on equal terms. So China is artificially preserving the US stock of capital, not at all destroying it. If the yuan would have been floated in the late ‘80s, and Japan would have undertaken decent Austrian measures to fight its ‘90s depression, the US capital stock would have been effectively zeroed 15 years ago.
Well perhaps they only understand economic assassination and not necessarily the prosperity part of the theory? Borrowing to increase the appearance of wealth isn’t exactly the main part of Austrian economics.
China has enabled the United States to increase it’s high amount of consumption without expanding it’s production base
So you are complaining about someone giving us free stuff?
they have allowed our system to devolve into the service economy
Devolve?? Manufacturing is not objectively better or worse than service industries.
Is it impossible for the Chinese to have predicted this, when an Austrian, e.g. Murray Rothbard, could and pretty much did foreseen this state of affairs?
AFAIK the mercantilist Chinese are about as clueless as the USA. Consider their currency peg. Make no mistake, they too will face dire economic consequences for their foolish policies.
Well perhaps they only understand economic assassination
You mean like if USA no longer honours bonds held by foreigners? I would not be opposed to such a default. People who buy bonds are investing in a chance to collect revenue taken from future generations through taxation. They are investing in involuntary slavery. It is not a valid contract, but rather evidence of a crime.
You’re missing the point. Instead of paying for a war with the United States with their products, they are paying for an undermining of the united states economic system with their products. Both would hurt China, but that has never stopped an aggressive country before.
By allowing the U.S. to stay on their tit for so long, they’ve allowed us to grow stagnant, and to have our production base crumble, and to make it way more likely that our country will get out of this mess by inflating, thus killing the dollar as the world’s reserve currency, and probably replacing it with their own. China has already experienced all of the hurt with their relationship with the U.S. By cutting us off, and demanding payment, they’ve helped create a situation where the U.S. will receive all of that hurt at once, and destroying the economy and currency.
They will never get back the consumption they lent to us, but, the U.S. is now in a political climate where we have to inflate to get out of this (It’s not that we can’t default, it’s just that we won’t do it). That IS what the politicians will do and are doing. They’ve succeeded in destroying the U.S. economy with the help of our own (perhaps unwitting) politicians. By subsidizing the US consumption even further, they’ve made the fall that much worse. We will inflate that much more and cause even more damage than before.
Instead of paying for a war with the United States with their products, they are paying for an undermining of the united states economic system
I suppose that could be their goal. I guess I don’t see the point of a war, economic or otherwise. I think they’re on the verge of collapse themselves.
make it way more likely that our country will get out of this mess by inflating
Well, we’ve already destroyed 98% of the value of the dollar in the last 97 years. TMS keeps growing http://mises.org/content/nofed/chart.aspx. So yeah, we will keep inflating.
“By cutting us off, and demanding payment, they’ve helped create a situation where the U.S. will receive all of that hurt at once”
Nah. China can’t redeem all its bonds at once. And it can’t sell them all at once, unless it wants a huge haircut. I don’t think a head-on fight with USA is prudent anyway, since there is a risk of USA defaulting. Basically, I think what we have is a bunch of clueless mercantilists and statists, not some clever insidious plot.
They obviously dont know any Austrian economics when they build huge ghost cities. They have central planning .They are just as clueless as everybody else.
So whatever they are doing, good or bad, is blind groping in the dark.
One thing they got right, probably by accident, they understand the importance of gold.
I was thinking less inflation and more hyper inflation. While inflation over a long time won’t convince people to get off the reserve currency, hyper inflation would.
China has most of it’s debt in 6 month bonds. All they have to do is not re-buy bonds when those 6 months are up, and it’s all over within 6 months.
But yeah, I can accept that they are clueless, I just wanted to discuss the possibility that they aren’t completely clueless and are in it for power and know how to go about attaining it. It’s something to think about.
China is in a huge economic bubble rigth now , they are gonna get hit very hard in the next few years. I dont see how that equates to winning. Neither does getting paid crap for your labour(due yan devaluation) for the workers, at least. Life for the US worker continues to be much easier and the rest of the world gets cheap chinese goods as a bonus. chinese govt are the suckers just as much as any other place.