How long will China finance the US?
- Thread starter RedRalph
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GoodGame
Red, White, & Blue, baby!
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Amerika must pray that China's good fortune is only a bubble.
How long will China want to buy stuff from the US? The exchange rates will hold up as long as there's demand for American goods.
As far as I can see, there's not gonna be a reduction in demand for many US products for a long time... if the US has to finance its imports from China with farmers' produce and such, so be it. Potatoes and wheat for cars. Everybody benefits, that's how international trade works.
As far as I can see, there's not gonna be a reduction in demand for many US products for a long time... if the US has to finance its imports from China with farmers' produce and such, so be it. Potatoes and wheat for cars. Everybody benefits, that's how international trade works.
a_propagandist
The Light Brigadier
We Americans have to save more. Nose to the grindstone, cut off a lot of our purchases.
Archbob
Ancient CFC Guardian
Yeah, like thats gonna happen.
Mise
isle of lucy
These are the key facts:
Frankly, I'm fairly convinced that both China and America are waking up to the consequences of their economic models, and are attempting to redress the scarily imbalanced trade relationship between their two countries.
I am far more concerned that Germany does not even recognise that it cannot continue to be dependent on foreign markets such as the UK and the US for growth anymore, and that it must reduce its savings rate as the UK and US increase theirs. For me, as a European, that is far more worrying.
Frankly, I'm fairly convinced that both China and America are waking up to the consequences of their economic models, and are attempting to redress the scarily imbalanced trade relationship between their two countries.
I am far more concerned that Germany does not even recognise that it cannot continue to be dependent on foreign markets such as the UK and the US for growth anymore, and that it must reduce its savings rate as the UK and US increase theirs. For me, as a European, that is far more worrying.
CavLancer
This aint fertilizer
I say we sell Taiwan for 2 trillion and be done with it.
This reminds me of some companies selling off land on Mars...
plarq
Crazy forever
Taiwan is not worth that price.
You are right. The 8%...how many bubbles of the estate you know? I even can't afford a 60 square meter apartment.
Why? Their good fortune is our good fortune. The richer their middle class gets, the more stuff they buy from us.
Mowque
Hypermodernist
Not to mention that a richer China might help advert violence and political turmoil. ALSO, a richer China will be more open to environmental laws and human rights issues.
And if they did run into trouble they might dump treasuries, creating a fair amount of havoc
Actually, the savings rate of american families have gone up considerably since the begining of the crisis. It's the government which is running an expanding deficit.
Right! Savings rate is up to 6.9% from near 0 at the beginning of 2008.
And we've paid down personal debts substantially, such as credit card debt.
I think the U.S. consumer is doing exactly what Zhou Xiaochuan is suggesting.
Over the past year, household debt fell 0.6%. In the history of the Flow of Funds accounts, which dates back to 1952, household debt never fell over the course of a year. Indeed, even as consumers faced a sharp reduction in their net worth and reductions in their income, the household debt-to-income ratio continued to decline, falling to 131% in Q1 from 134% in Q4. It is now at its lowest level since 2006 and is the strongest sign that the explosion in household leverage has come to an end. I'd look for this to come in at 80% (historically average) before we see another consumer boom.
As far as saving go, in May not only is only $.08 of each stimulus dollar going into consumption U.S. households continued to stuff money into deposits rather than consumption. This is simply a repeat of the fiscal impact from the tax relief a year ago when the savings rate jumped from 0.2% in March 2008 to 4.8% in May 2008. Personal savings rate surged again to a new 16-year high of 6.9% from 5.6% in April and 4.3% in March. Until we get to more normal 8% savings rates will there be some consideration for spending.
Think the Chinese are the only ones buying treasuries?
If there was one asset class households preferred last quarter it was Treasuries. Household Treasury holdings increased $377 billion in the first quarter (up by a never-before-seen 175% against year-ago levels). Still, Treasury holdings only account for 1.6% of total household financial assets and, looking back at history (IE 4.5% of holdings in 1994-95) , there is clearly room for continued purchases of treasuries. So we have a new buyer coming into the market with their $7.5 trillion earning 0%. Not likely a lot of this is going back into equities.
Over the past year, household debt fell 0.6%. In the history of the Flow of Funds accounts, which dates back to 1952, household debt never fell over the course of a year. Indeed, even as consumers faced a sharp reduction in their net worth and reductions in their income, the household debt-to-income ratio continued to decline, falling to 131% in Q1 from 134% in Q4. It is now at its lowest level since 2006 and is the strongest sign that the explosion in household leverage has come to an end. I'd look for this to come in at 80% (historically average) before we see another consumer boom.
As far as saving go, in May not only is only $.08 of each stimulus dollar going into consumption U.S. households continued to stuff money into deposits rather than consumption. This is simply a repeat of the fiscal impact from the tax relief a year ago when the savings rate jumped from 0.2% in March 2008 to 4.8% in May 2008. Personal savings rate surged again to a new 16-year high of 6.9% from 5.6% in April and 4.3% in March. Until we get to more normal 8% savings rates will there be some consideration for spending.
Think the Chinese are the only ones buying treasuries?
If there was one asset class households preferred last quarter it was Treasuries. Household Treasury holdings increased $377 billion in the first quarter (up by a never-before-seen 175% against year-ago levels). Still, Treasury holdings only account for 1.6% of total household financial assets and, looking back at history (IE 4.5% of holdings in 1994-95) , there is clearly room for continued purchases of treasuries. So we have a new buyer coming into the market with their $7.5 trillion earning 0%. Not likely a lot of this is going back into equities.
vesley1987
Prince
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- 573
China has to buy more American debts, as long as its foreign exchange reserves are still increasing.
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