Finnpundit On American-Chinese Economics

Posted on March 13, 2007
Filed Under America, China |

Finnpundit made a great replying comment on this post, that I think deserves to be given more attention. I found it very interesting and different in terms of the everyday perspective I’m exposed to. Here it is:

Regarding China and economy. It isn’t outsourcing that’s the risk, but rather Chinese toys. If the firm is Chinese, and the production is Chinese, then the money flows only one way. Into China.

Actually, you’re completely in error there. The Chinese get paid in dollars for their exports to the US. Where do these dollars go? Dollars are useless in China, so the money can only go abroad. Part of them get diverted to purchases of oil, which is traded in petrodollars, but that still leaves a huge chunk of change. That leftover cash has predominantly gone… back to America, to Chinese puchases of US Treasury notes.

How do you think America finances its budget deficits? The Chinese have had no choice but to do exactly that.

And if you think the Chinese are free to pull the cash out, think again. The collapse of the US financial system would mean the collapse of China. But even if that would happen, the US has the right to freeze foreign assets. (That, more than anything, is a guarantee that there will be peace between China and the US).

If you don’t think a freeze would never happen, think again. The US still holds, IIRC, some quarter of a trillion dollars in Iranian cash in its treasury, stemming from the days of the American embassy hostage crisis of 1978-80 (the US Treasury dutifully pays interest on the money, but refuses to let Iranians have it, until all the issues and claims from the embassy takeover are resolved. That’s not likely to happen, though there was some talk about it when Khatami was in power).

Information-based economy? Who needs it when they can undermine you with mass-produced, slave-labor made fluffy teddy bears?

A Finnish friend once described a recent purchase of some electronic gadget he needed at work, and marvelled at the power of globalization when this gadget came by the way of the Philippines. When I asked how did he find this gadget, he mentioned that it was through a website, which turned out to be maintained by Americans. When I asked how he paid for it, he mentioned it was paid through a credit card… maintained by American financial institutions.

So there you have it: Americans never even had to deal with the manufacturing, or the shipping of the product. The only thing they controlled was the marketing and financial information. That’s a pretty good chunk of change for merely providing information. (Keep in mind that financial services are part of the information industry).

How’s the trade difference between China and the US doing these days? Still horribly large?

Again, the US deficit in regards to trade in China is really an irrelevant factor if the Chinese have no choice but to invest the money back in the US. You should read up on the significance of globalized trade, before venturing statements on its feasibilty.

Okay dude, seriously what the hell are you reading?

Comments

3 Responses to “Finnpundit On American-Chinese Economics”

  1. Nobody on March 13th, 2007 6:43 pm

    in fact many in the US and outside are plainly preoccupied by their trade deficit and foreign debt … and the whole system looks increasingly shaky and prone to start unraveling with a minimal push in a wrong direction …the economist recently wrote that a slowdown of the US economy is urgently needed for at least preventing the situation from getting worse …

    the idea of the americans never even having to deal with manufacturing and the US economy based on marketing and financial services is an absolutely wild claim…

    PS

    i think that i read a few days ago about the bank of china planning to add more flexibility to the yuan regime to allow it to appreciate further against the dollar..

  2. Nobody on March 13th, 2007 6:45 pm

    the idea that the US does not mind its finacial and trade situation because its planning to freeze chinese assets if anything wrong happens is also a pretty wild idea , i would say

    :D

  3. Finnpundit on March 15th, 2007 2:53 am

    Drima: Okay dude, seriously what the hell are you reading?

    For a comment like this on globalized economics, I draw most information from The Wall Street Journal. That is the most important newspaper to read, if you really want to know how America is governed. Unfortunately, since it is an ultra-capitalist newspaper, you can only access most of it through paid subscription. But don’t underestimate its influence in America, as it really is read by everyone with power in America.

    The Wall Street Journal is the definitive publication for understanding how the world works. The Financial Times of London is a pathetic publication, by comparison, as it simply tries to match WSJ in profundity. The Economist is mainly for those with a 6th grade reading comprehension level, and should be avoided, as they are about as profound and insightful as Time Magazine, which is to say, not much.

    The following joke has made it through the internet in America in various formats, but there’s a lot of truth in it:

    1. The Wall Street Journal is read by the people who run the country.

    2. The Washington Post is read by people who think they run the country.

    3. The New York Times is read by people who think they should run the country.

    4. USA Today is read by people who think they ought to run the country but don’t really understand the Washington Post. They do, however, like their statistics shown in pie charts.

    5. The Los Angeles Times is read by people who wouldn’t mind running the country, if they could spare the time, and if they didn’t have to leave Southern California to do it.

    6. The Boston Globe is read by people whose parents used to run the country and they did a far superior job of it, thank you very much.

    7. The New York Daily News is read by people who aren’t too sure who’s running the country, and don’t really care as long as they can get a seat on the train.

    8. The New York Post is read by people who don’t care who’s running the country, as long as they do something really scandalous, preferably while intoxicated.

    9. The San Francisco Chronicle is read by people who aren’t sure there is a country or that anyone is running it; but whoever it is, they oppose all that they stand for. There are occasional exceptions if the leaders are handicapped minority feminist atheist dwarfs, who also happen to be illegal aliens from ANY country or galaxy as long as they are not Republicans.

    10. The Miami Herald is read by people who are running another country but need the baseball scores.

    11. The National Enquirer is read by people trapped in line at the grocery store.

    (Drima: P.S. I also draw a lot on French Marxist deconstruction theory that I studied as an undergraduate, especially when I see jihad as a form of entertainment for its proponents.)

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