Yea, it makes a lot sense
Of what? Sneakers? Its GDP is smaller than America's (though maybe not with PPP corrections).
a culture of saving a lot of money by it's citizens
Too bad the savings go to malinvestments. Good luck securing ROI from ghost cities: https://www.wired.com/2016/02/kai-caemmerer-unborn-cities/
And Sri Lankan airports: https://www.forbes.com/sites/wadeshepard/2016/07/31/china-to...
American in debt with no savings got AAA rating
The Federal Government has tremendous assets: http://business.time.com/2013/02/05/the-federal-governments-...
We could pay off the debt with a land and spectrum auction tomorrow and people would clamor for more.
I'd rather hold dollars than yuan and that's not just because I speak English.
If trade with China stopped today, how quickly can the United States re-tool up to supply the enormous demand for PCBs, basic electronic components like SMD resistors and capacitors, microcontrollers, transformers, chokes, cables, wifi chips, antennas, power transistors, PLAs, LCD displays, OLED displays, solar modules, and the myriad other goods on which our modern society increasingly relies?
"Sneakers" is a cute little jab, but A GDP predicated on the consumption of televised football and mocha lattes is qualitatively different from one predicated on the production of goods upon which reliance the profligate NFL viewers are blissfully unaware.
At some point, even if that point is measured in centuries, the producers and savers eventually win over the gluttonous consumers. China is playing a long game with a long-term vision, securing rights over natural resources around the world, acquiring critical control over global supply chains, and artificially pegging the Yuan down to fool us into thinking that the value of passively watching Netflix is (as measured by GDP) greater than that of the construction of ever-faster pick-and-place machines.
Meanwhile, we look only to the next quarter and goose our EPS with low-interest stock buybacks, and realistically believe that mindless consumption of pixels is a more solid foundation for an economy than producing the "picks and shovels" used to deliver those pixels.
the majority of people in the west, the US especially, thinks all china does is make cheap walmart crap. it's perfectly fine to say horrible, racist things about the chinese. nobody seems to care.
what's really happening is the chinese government runs the show and facilitates the dumping of cheap stuff into the west to manage expectations/anxiety about their rise, and to fund the real manufacturing and mineral extraction empire. if your competition doesn't take you seriously, that's a net asset, not a liability.
"All warfare is based on deception."
No it's not. The common criticisms have absolutely nothing to do with race.
if nothing else it's a great little vehicle for racists to hop onto guilt-free.
Overall, US manufactures more stuff today than at any point in it's history. Clothing, Cars, CPU's, Candy, Cosmetics, Cameras, etc.
The DoD has done a great job of having US suppliers for every good it needs which demonstrates the US can still manufacture all critical goods independently. Even if it would have to ramp up production of various things.
As mind-blowing as it might seem the US has minimal dependence on China. In part because it exports several times more $ worth of goods ~1.3 trillion to the world than it imports from China ~0.46 Trillion.
Components may be sourced from China, but you can just as easily source most things from somewhere else.
Scaling up capacity for almost anything you mentioned would be a bit expensive, but ultimately not crippling.
“FROM today, China has the world’s fastest bullet trains.” 21st Sept 2017 “China on Thursday officially began the world's fastest commercial train service with a top speed of 350 kilometers per hour between Beijing and Shanghai.” Intend to export technology. Numerous articles. http://www.globaltimes.cn/content/1067646.shtml
> Good luck securing ROI from ghost cities
One year later, same author. “China's Most Infamous 'Ghost City' Is Rising From The Desert” https://www.forbes.com/sites/wadeshepard/2017/06/30/ordos-ch...
> And Sri Lankan airports – you mean A Sri Lankan airport
So what? Some infrastructure initiatives don't pan, but many do. http://www.atimes.com/article/western-contempt-china-turns-p...
Sure, some ghost cities might pan out but I wouldn't hold my breath. If this were 2006, my position would be "it doesn't make sense that fat women with crappy entertainment jobs can afford luxury houses" and you'd retort "but the houses appreciated, even if she can't afford it, it's more valuable now than it was so the bank wont take a loss on it".
We'll see if the fat lady sings.
“Chinese companies’ share of global electronics production, meanwhile, rose from 30% in 2012 to nearly 60% in 2016, and this share will rise to 87% by the end of the present year.”
That's interesting, because if the crap hits the rotating blades and if the US has to sell even 10% of those assets the effects on the global economy are anything but obvious
Who can pay 10trillion dollars? What's the economical effect of such a big transaction? What if there's not enough liquidity in dollars for the purchaser? Would the US accept GBP/CNY/EUR?
2. The economical effect: A bunch of companies get what they pay for. This may create economic growth.
3. Not enough liquidity in dollars: We could always print more dollars
4. Would the US accept other currencies? : Who knows but most likely American Companies would buy American Assets.
US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable.
No, the US government cannot just auction it's assets to the public to pay off debt. If it is that easy, the Federal Reserves can just print 20 trillions and pay it off
Debatable. GDP probably measured production better in 1920s America than 2017 America.
and should not use as a measuring stick of how productive a country is.
If you have to compare the relative size of two economies on a single dimension, GDP is probably your best KPI.
US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable.
But most of that money isn't ultimately spent by the government. The money goes to Boeing, hospitals, the elderly, etc. A lot of our GDP is ultimately spent by consumers.
I have serious concerns about America spending too much on its military and healthcare but I'd think we spend our money better than China.
No, the US government cannot just auction it's assets to the public to pay off debt.
Why not? It holds the assets, it can write titles to the assets, it can conduct auctions.
If it is that easy, the Federal Reserves can just print 20 trillions and pay it off
If you don't see the difference between printing 20 trillion dollars and exchanging valuable things for mutually agreeable prices, then I'm sure you're set in your way of defending the wise policy decisions of the Chinese Communist Party.
As a thought experiment, we could lower taxes, and have the services provided by government instead paid for through private transactions. Why is this more sustainable?
Correction needed there. The value of those asset classes will fly to the bottom even if 1% of asset stockpile is sold.
The last spectrum auction ended with a winning bid of 19.6 billion. The initial subscription was 86.4 billion. You're telling me that 84 mhz of spectrum represents 85% of the entire world's willingness to pay for American spectrum? http://www.reuters.com/article/us-usa-wireless-auction/fcc-s...
Get real. It's worth its weight in gold.
https://en.wikipedia.org/wiki/United_States_federal_governme...
While we're being snarky, let's not forget that China also regularly steals, copies, hacks, and sources much of their "production" innovation from the USA while simultaneously impeding the United States' ability to enter Chinese markets in just about every category of good or service. So we'll just call this one even and leave it at that.
In fact it does make sense. China has undergone the greatest debt binge in world history in the last 10 years. In fact, there has never been a debt accumulation even remotely close to what they've done.
Tens of trillions in publicly known and shadow debt has been taken on by the Chinese economy. Compare their GDP to debt growth:
https://i.imgur.com/J2u9qFz.jpg
It's obvious what's coming, sooner rather than later.
To make matters worse, Chinese consumers are now aggressively loading up on debt:
https://www.bloomberg.com/view/articles/2017-07-21/china-s-o...
https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-em...
Rating of debt is largely a question of future ability to repay. The concerns of the rating agency, I imagine, is that much of the debt in China is being created for non-economic investment, that ultimately won't be able to pay for itself. And someone will have to foot the bill, whether it's the lender (via a write-down or write-off of nonperforming loans) or someone else (the central government, by assuming the loans directly or some other mechanism).
Yes, the Chinese central government has a lot of capital to play with, due to a very high household savings rate and positive trade imbalance. But the magnitude of the internal debt, and the degree to which it's likely misallocated and ultimately nonperforming, should concern anyone who's paying attention.
http://tsi-blog.com/wp-content/uploads/2015/08/chinadebt_gdp...
And these are also proportional, so China's debt to GDP is higher than the US's debt to GDP regardless of the $ (or yuan) amount involved