After a decade of rock bottom rates, even few basis points will sound big
The cold war ended a while ago. Worrying about them today makes about as much sense as worrying about Autria in 1930 because Austrohungaria used to be a world power.
I don't think it was a sleight on Nigeria. Just a poetic way to emphasize the weakness of the Russian economy by highlighting the disparity between its population and its GDP. And while the population of Nigeria is is larger it's in the right ballpark for the argument being made. They could have said Pakistan, Bangladesh or Indonesia. Although I suspect those nations have even larger populations but not by an order of magnitude.
And yet, still the west endlessly obsesses about Russia, for some reason.
It’s foolish to discount them.
And nothing bad came out of Austria in the 1930s.
https://www.livescience.com/46292-hidden-ocean-locked-in-ear...
Why would anyone care what state heads say (this includes Trump and his comments about NK)? It means nothing and has no consequence...except maybe preventing fickle market fluctuation. You never hear "I hate this guy" because it's just pablum. Convince me otherwise.
I really don't understand why you would cite that as something meaningful.
Of course, Russia and China have attempted to unite vs. U.S. interests before, and it always turns out that they have more to disagree/argue about than they have to agree on. But it doesn't mean that it's not worth mentioning.
Before that happens, the capital exodus demanding to liquidate their Yuan for USD would have burned through the country's USD reserves and they would be insolvent. This is quite similar to what happened in South Korea in 1997 and it took IMF intervention to stabilize the country. The PBOC could limit how much a person can sell, but this would crash their currency (e.g. Venezuela) almost instantly.
As much as people want to hate on Trump and/or the US, China is in a weaker position here. Don't get me wrong, both countries suffer, but only one of them would see its financial system collapse.
Unless that is an absolute certainty then and this is a game of high stakes chicken, then I would say the USA has more to lose.
While China has certainly developed in the last couple decades they are still relatively used to living with less. On the other hand, Ameicans lose their minds when Facebook goes down for an hour.
That is, there would be bedlam in the USA. China much less so.
China has zombie enterprises, their financial statements are lies, and cities built by bureaucratic maneuvering over market need.
I will always bet on the American private sector over the government-run towers of lies.
American entrepreneurship doesn't mean all the manufacturing would take place in America. Entrepreneurial people are already moving to build more manufacturing in other countries where labor is less expensive and more plentiful than America. I don't think anyone was arguing that America would manufacture everything they currently import from China.
Can't those other countries start behaving like China? Sure, but doubtful it would go anywhere.
The cost to the USA would make the recent debt crisis look like a picnic.
If China decides it doesn't want to trade with the US, there are plenty of places that will.
And honestly, China had already reached the limit of an export-based economy. Growing your national economy on labor arbitrage only works up to a certain level of per capita wealth.
That's what's called entrepreneurship. People will get rich making these products that are in sudden demand.
These can and do change, with a single city council meeting. There's nothing impregnable about existing zoning. As usual, the dollar dictates the rules (having been party to 2! eminent domain proceedings in Southern California).
People really seem to believe this, but it always takes them to wrong conclusions here. For instance, everyone thinks California esp. SF is expensive because of "rich developers" but it's not. It's expensive because armies of retired people come to city council meetings and shut down any development because it'll hurt their 60s nostalgia.
Now, those people are acting to raise their own property values, but that's not why they're doing it. They genuinely just hate people taking their parking spots and think cell phone towers will give them cancer.
> It's expensive because armies of retired people come to city council meetings and shut down any development because it'll hurt their 60s nostalgia.
Maybe in some areas, but in Southern California this is fantasy.
(California) Brea's mall expansion forced eminent domain on founding neighborhoods for commercial development. That never came and was sold back to new developers for gentrification. I had a property that I was paid well for, but I did not want to sell. So I bought into Santa Ana.
In 2009 The Irvine Company put out magazine that detailed the commercial expansion to the adjacent 2525 N. Main Street and eventually the Park Santiago neighborhood. That has been in progress for 2 years, after the necessary city council members were termed out of course. The NIMBYs there are of the aforementioned demographic, alongside their descendants. It's as ineffective. I have pre-emptively sold, but you can still attend the futile meetings if you like (https://park-santiago.com/)
The US can always find other countries that manufacture things for cheap. China can't find other customers. The domestic demand isn't remotely high enough to propel their mercantilist economy, ironically due to the fact that the currency manipulation of the yuan has suppressed the wealth of Chinese citizens by devaluing their savings.
The idea that Americans are too weak and whiny to tolerate inconveniences can be refuted by every natural disaster here. People band together, and grin and bear it. Just like every other nation.
How a nation where most of the older generation have only 1 child to support them will fare with an economic crash is uncertain, because the one-child policy was an experiment that's never been attempted before. I think it certainly boosted wealth, but I suspect it created a society that is less resilient.
On the other hand, USA cannot import enough copper, aluminium and iron... (It's mined in China and Chinese controlled territories...) And create and staff factories out of thin air.
In iron: Australia, Brazil (half of former), China (similar to Brazil).
In aluminium: China, Russia (similar to China), Canada (tenth of former).
So except for aluminium, this would be very problematic but not insurmountable. I bet Russians won't sell their aluminium to US without many strings attached.
Iron is incredibly abundant in the USA, and regarding copper, see here:
https://www.usgs.gov/faqs/how-much-copper-has-been-found-wor...
"Of the identified copper that has yet to be taken out of the ground, about 65% is found in just five countries on Earth -- Chile, Australia, Peru, Mexico, and the United States. "
Sure, it would mean lost economical potential for China, but by no means would it leave China with no place to send its manufactured goods.
Nothing is ever certain and that's not how people make decisions. What are you waiting for Chinese to use manipulated currency to buy local factories all over the world? It's already nearly too late.
That's exactly my point. I was pointing out that unless the previous comment was absolutely true (i.e., China would be wrecked and the USA would not be) then even if both fare badly the USA would __relatively__ be hurt more.
China has enforced strict capital and currency controls over decades to protect its currency from external shocks like an attempted run on the yuan. There may be lots of vulnerabilities in the Chinese financial system, but currency is not one.
Look at the wealth inequality increase since 2008. It can mostly be attributed to federal reserve QE policy.
Buying treasuries = the Fed giving money to the US government
Quantitative easing = the Fed giving money to banks
In the case of the US, the entire game is also complicated by the fact that the US dollar has insinuated itself into the global economy. Most critically in oil markets.
Because of this, there are some things the Fed can do (mostly) without the consequences other countries would face.
If the fed buys every USD bond in existence ( aka monetize the debt ) - it would lead to a good amount of inflation.
Any of the three, it will go back to the market and result in inflation.
The inflation the OP was describing is the massive inflation caused by printing money.
The US bond is effectively an IOU representing US dollars the USA owes the bond holder.
For the USA to buy back those bonds they only have two choices:
1. Run an strong economy earning lots of US dollars (i.e. a trade surplus) and use that USD income to buy back those bonds.
2. Turn on the printing press and print lots of USD to buy back the bonds.
That later option would render the USD worthless and since most commodities are priced in USD that would also lead to hyper inflation.
3) sell more reserves (gold, currency)
4) bond swap with other countries
If the Fed theoretically bought all the bonds then it could obviously no longer increase the money supply by buying bonds, but we're a long way from that, and even then the Fed could still create new money and give it directly to the treasury to spend in lieu of collecting taxes. Or in the utopia where buying all outstanding government debt and funding the entire federal budget out of new money still hasn't caused the desired amount of inflation, to use to enact a negative income tax.
I don't think that would happen. They will just borrow ever more. Which if debt increases slowly enough, is sustainable but causes inflation.