the standard has published an amusing analysis of the united states’ “empire of debt”. it is packed with hilarious phrases and would be a real knee-slapper of a piece were it not for the fact that it addresses very real and very difficult problems with the US economy. (i have heard through the IM grapevine that some institutional traders are being questioned by management about their exposure to chinese markets.)
Entirely predictably, the deficit with China
has led to calls from Washington for Beijing to be forced to revalue
the yuan, and if it does not, then the United States should impose a
tax of up to 25 percent on Chinese goods. US congressmen are blaming
everyone except the real culprit – Americans themselves.
A yuan revaluation, or a tax, would have to be massive to make much dent in China’s exporting ability, and it would not solve the root cause of
America’s woes – its spendthrift ways and its inability to produce the
kind of goods the world wants at an affordable price. China can make
cars faster and cheaper and India can write their programs cheaper and
Of course, global accounts must balance and,
perversely, some economists claimed that the 2005 figures showed a
booming – and not a bust – US economy. Paul Blustein in The Washington Post noted that “the trade gap reflects the strength of the US economy, at least relative to other major trading partners.”
The logic of this is that the United States is booming and, therefore, sucks in imports faster than other sluggish economies like Europe, and Japan can afford American goods.
What a turkey of an argument. Perhaps Americans will appreciate the reference to the turkey – because just like a turkey before Thanksgiving, they are strutting around feeling in charge of the barnyard because people are feeding them the best corn.