But the selective dumping of small tranches of bonds could focus the Yanqui mind.
You bet it would focus the Yankee mind, but probably not in a way beneficial to China.
Short term this might be a mercantile issue for the PRC, though it's been remarked here elsewhere on the thread that the PRC-EU trade relationship has grown to be much larger than the one between the PRC and the US, and the PRC's trade relationships with much of the rest of the world (Pacific Rim, Russia, Latin America and now Africa) are growing rapidly as well.
But I don't think the leaders in the PRC are as necessarily concerned about the short term impact of such a move as they might be the long term benefits of such a move.
When thinking of the value of reserves held, let's not forget the financial concept of sunk costs, I'm sure Beijing is not forgetting this. One seeks to avoid losses when the reserves one holds are devalued, but there is no reason to believe that Beijing hasn't already priced these losses into their expectations already and in any event they're necessarily adjusted their asset allocations, if purely as a function of their evolving trade relationships and a burgeoning trade surplus with the EU.
Provided that the potential economic shock that falling US demand for products made in the PRC can be managed, seen against a backdrop of increasingly diversified multilateral trading relationships (eg increasingly mitigating), I'm not so sure there's any other reason for the PRC to back down. And long term, a currency crash in the US benefits the PRC in more ways than one, for one thing, US hard power in the Pacific Rim will be strained due to financing needs; US access to energy resources China needs will be increasingly limited, and the social disruption in the US due to a massive dose of consumer inflation may further limit US' projection of hard power for some time to come, and the US Dollar's role as default reserve currency will end, all to the PRC's benefit.
For my money, it comes down to whether the Party's central committee thinks it can manage the possible social disruption a collapse in US demand for PRC products. The US position here is far weaker imho than one supposes, and the PRC's, increasingly stronger. Fai de bčn a Bertrand, te lou rendra en cagant
So this was the low fruit. But in the global market, not the only fruit.
I see this game going on a low-scale tit-for-tat basis until (like the typical heavy diplomatic exchanges with Russia ), the Eastern side will escalate and see what happens. They do, after all, have less divided popular sentiment at home to cope with.
My guess is that the macho reaction of the US to this escalation, unaccustomed to having its swagger called by a heavyweight, will precipitate some very nasty events that might touch us all.
There are two more things to factor in:firstly, the 2008 Olympics. This is the gigantic window that the Chinese have been waiting for. They are ready to disrupt large swathes of industrial infrastructure around Beijing for 3 months (!) and severely curtail the freedoms of the population for half that time. This will be the biggest and most expensive ad anyone ever placed.
Secondly, the US Presidential election 2008. It will surely be the most important in many decades. It may create tensions that the Chinese cannot understand, though they will understand their importance.
So there are good reasons that the escalation, if there is to be one, will come in late 2008 at the earliest. But since we are in an era of exponential rates of change, who knows how the world will look in 6 months? You can't be me, I'm taken
China is not in the position Japan has during the last trade conflict 15 years ago. Japan was both a very important strategic ally and a supplier of critical goods - semiconductors, industrial machinery. China not so. Made in China products are eminently replaceable - consumer goods, light industry - and manufacturing can be turned around very quickly. Countries like Malaysia, Indonesia or Vietnam would be very happy to pick up the slack (and are scared of China). Also, China is clearly perceived as a threat in the US that has to be "dealt with".
Add the political climate in the US, which is, I think, turning solidly populist and anti-trade. You should note that the pressure on China is not coming from the pro-"industry" Republicans but from the Democrats, which are the ascendant force. The US response to a "selective dumping" would be extremely brutal, probably a full blown embargo. I really think it would happen. US demand for products made in the PRC would not fall but stop dead. I don't think China would be able to weather the shock.
And don't forget that if China crashes the US dollar, they're also screwing every holder of USD denominated titles. Pretty much everybody. There would be a lot of people very pissed off with China. I'm sure everybody would love to see the USD taken down a peg or two but a currency crisis would not be taken lightly.
These are all excellent points. A quick look at 2006 Us imports from China shows that it's dominated by low tech items. Although (I find this highly disturbing given what we know about Chinese safety standards) almost a quarter of US imports from China come in the "NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS." Oh Jesus, that's just not a good thing.
I can't rember when the US import quotas on clothes ended, but I want to say it was last year. Reimposing those quotas could be a popular move, limiting Chinese imports, while at the same time shifting trade to other countries who could then be called upon to condemn China.
It's not straight dollar numbers, but Nationmaster has foreign reserves and gold for various countries.
Top 10 #1 China: $1,034,000,000,000.00 #2 Japan: $864,700,000,000.00 #3 Russia: $314,500,000,000.00 #4 Taiwan: $280,600,000,000.00 #5 Korea, South: $239,000,000,000.00 #6 India: $165,000,000,000.00 #7 Singapore: $134,600,000,000.00 #8 Hong Kong: $132,000,000,000.00 #9 France: $98,540,000,000.00 #10 Brazil: $87,270,000,000.00 This entry gives the dollar value for the stock of all financial assets that are available to the central monetary authority for use in meeting a country's balance of payments needs as of the end-date of the period specified. This category includes not only foreign currency and gold, but also a country's holdings of Special Drawing Rights in the International Monetary Fund, and its reserve position in the Fund.
#1 China: $1,034,000,000,000.00 #2 Japan: $864,700,000,000.00 #3 Russia: $314,500,000,000.00 #4 Taiwan: $280,600,000,000.00 #5 Korea, South: $239,000,000,000.00 #6 India: $165,000,000,000.00 #7 Singapore: $134,600,000,000.00 #8 Hong Kong: $132,000,000,000.00 #9 France: $98,540,000,000.00 #10 Brazil: $87,270,000,000.00
This entry gives the dollar value for the stock of all financial assets that are available to the central monetary authority for use in meeting a country's balance of payments needs as of the end-date of the period specified. This category includes not only foreign currency and gold, but also a country's holdings of Special Drawing Rights in the International Monetary Fund, and its reserve position in the Fund.
Japan, Taiwan, South Korea? All major trade partners with China. They all export the value added parts that are integrated into Chinese products. But a cheap watch? The leather band is Chinese, but the actual timepiece is Japanese. Pissing off these trading partners is probably a bad idea. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Although (I find this highly disturbing given what we know about Chinese safety standards) almost a quarter of US imports from China come in the "NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS." Oh Jesus, that's just not a good thing.
Narhhh,
That's a fluke. Chapter 84 (big pdf) is all non-electrical machinery, sprayer for horticulture, valves, washing machines, and whatnots. It just starts with "Nuclear ...".
I know all about SIC categories, but still they remain thoroughly opaque. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Germany. German gold reserves in September 2006 were at 3422,5 tons. In September 2006 that was worth EUR 52 billion (at EUR 475 per fine ounce). Today (August 8, 2007) a fine ounce was worth around EUR 490. That alone is more than the number mentioned by "Nationmaster". And it doesn´t even include foreign reserves / currencies held by the Bundesbank. It´s difficult to believe that they would be halved in less than two years.
"The Economist" reports that at the end of 2005, Germany had foreign reserves of around $ 101 billion (gold and foreign currencies).
For what it´s worth, here´s the IMF Data on International Reserves and Foreign Currency Liquidity Official Reserve Assets (pdf-file). It confirms most of the "Nationmaster" data and puts the "Eurozone" foreign reserves at around $ 440 billion.
I´m a bit astonished though by the US data. I seem to remember that the US gold reserves were almost triple the German ones? That would be $ 150 billion+ in gold alone?
Countries like Malaysia, Indonesia or Vietnam would be very happy to pick up the slack (and are scared of China).
But I'm not convinced they do it as quickly, or as cheaply. You'd have a significant gap in the mean time.
Is there anywhere in Indonesia that can produce an entire MacBook Pro, for example?
There would be a lot of people very pissed off with China.
Why would the Chinese care? There are a lot of people very pissed off with the US, but that's had a negligible effect on US policy.
Competing economies may not necessarily be able to afford sanctions, so the practical outcome of pissed-off-ness is likely to be a few shipping containers of not very much.
The point is really that this isn't just an economic issue. China and Russia - and to some extent also the EU - all have good political and military reasons for wanting to tame the US. Economic warfare is a much more efficient way to reach that outcome than military confrontation.
And China would care but China falls if it's not running.
Losing access to cheap shirts means that you have to find new cheap shirts at a slightly higher price.
Losing access to sewing machines, means that you have to pay people to sew by hand, or find a way to make sewing machines on your own.
The latter raises the price of shirts more so than the former. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
There's already a disconnect in terms of inflationary pressures felt by different socio-economic strata in the US and the data we hear bandied about (Core CPI). This will make it far worse. Keep in mind that it is precisely the constantly moderating influence of low-cost Chinese imports which has kept CPI in check over the past decade.
Suspect that if you're a family of 3 struggling on $24K/year, you'll be a bit less insouciant about the effects of such a currency devaluation than, say, the typical policy analyst.
Just a guess, of course, though knowing more than a few of the former, a more or less educated one. Fai de bčn a Bertrand, te lou rendra en cagant
Try buying anything not made in China in your typical supermarket or hypermarket. Not just cheap toys, but foodstuffs, clothing.
These are not simply consumer items or luxury goods, but a fundamental part of the basket of goods lower income tranches in the US in particular buy. Yank them off the shelves and CPI will go up quite quickly, and the working poor in particular will feel the effects immediately.
Keep in mind there is virtually no safety net in the US. So when you have to pay 30% more for baby clothing and, say, 10% more for foodstuffs and, this is money you don't have to pay for medical care for your children which, you might not be aware, is not automatically granted in the US. Fai de bčn a Bertrand, te lou rendra en cagant
And, having lived in the US the most of the past 10 years (and residing there as I type), I'm very aware of the health-care situation, thank you very much :)
Primary imports from China
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; PTS 64,905,504,814 22.6 % 84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS 62,266,097,460 21.6 % 95--TOYS, GAMES & SPORT EQUIPMENT; PARTS & ACCESSORIES 20,891,814,337 7.3 % 94--FURNITURE; BEDDING ETC; LAMPS NESOI ETC; PREFAB BD 19,358,484,067 6.7 % All Others 120,350,885,249 41.8 %
The biggest effect is that the price of electronics goes up. It's this, clothes, and footwear. All these are products that you can hold off buying for a few months, by which time American companies have pulled out of joint ventures, and have increased American imports from the Latin American countries that have no tariff agreements in exchange for using American fabric. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Surely you are aware of food scares seen in the US of late related to foodstuffs immported from China? Fai de bčn a Bertrand, te lou rendra en cagant
Chinese food and agricultural imports in the US amount to $4.2 billion (2006). That's peanut compared to the overall US market.
http://www.opencrs.com/document/RL34080
The revenue of Archer-Daniels-Midland alone was 41.35B last year.
It's not like the US or anyone for that matter is going to starve if China stop exporting. China is barely self-sufficient for food.
I know you probably wouldn't notice that you pay $10/month more for food because of a devaluation of the dollar, but there are others who are more than a bit less immune to this. Fai de bčn a Bertrand, te lou rendra en cagant
Are you aware of anyone in your own personal circle who must worry about such things? Fai de bčn a Bertrand, te lou rendra en cagant
What they do export are low value added electronic compenents that are not part of the follow up purchases.
Now I'd be very concerned if suddenly exports from Ireland, Switzerland, Germany, the UK, and France dissappeared. That would have a huge impact. But to be honest profit margins are so high in the US healthcare sector that they can swallow any increase currency changes bring. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
I'm saying that when inflation hits because of a USD devaluation, whether it be sudden or long and slow, it will hit the working poor first and foremost.
These are precisely the people who can least afford it, who by having to pay more for food and clothing will have even less to pay for medicine, doctor visits, much less proper health insurance which many do not have. I did not say that medicine came from China as you seem to suggest.
And yes, I do know people in such straits, my best friend for instance, so I tend to take a dim view of the economically-minded who wave their hands at such things as simple trifles which are of little consequence. Fai de bčn a Bertrand, te lou rendra en cagant
It's the "middle class" who live beyond their means, and either don't know how to save money, or feel it below them. Take for example, food choices. By going to Aldi's I can cut my food costs in half, but it's also known as the place the "poor people" go to shop.
Regardless, particularly in food, Mexico and Latin America is a far larger source than China, and Latin America has the excess capacity to start pumping out shirts and the like with American fabric in a short period. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
If anything, if the dollar tanks, it would probably help the working poor relatively to the rest of the population because it would make light industrial activity in the US more competitive, which where non-service low qualification jobs are. They would either suffer less or even benefit from the repatriation of those jobs in the US.
And that includes the petrol used to transport California produce to Chicago, St Louis and Minneapolis.
Again, I think the two of you are dead wrong about how this plays out.
As for the middle class in America, I could care less if they get taken down a peg or two, they've got it coming. Fai de bčn a Bertrand, te lou rendra en cagant
My original point is not that it would harmless for the US. The point is that it would hurt China a lot more, probably to the point of completely crashing its economy. And, IMHO, if China moved, the political situation in the US is such that it would snowball very quickly and the response would be extremely brutal.
Which is why those Chinese declarations are fairly spooky. Kabuki? Miscalculation? Weird in any case.
We just disagree on who. Fai de bčn a Bertrand, te lou rendra en cagant
In English, that's the IR speak for the difference between people who believe that the rules of things like the WTO are permanent in broad terms, versus realists who seem them as fundamentally variable institutions rather than something structural
Domestically, I think that the problem is that the proposition that markets exist in social contexts that generate social protection when economic activity tries to dismbed itself harming the human aspects of life is given terrible form. The rising cost of Chinese goods in American markets, leads to millions of urban workers being forced out. Unable to subsist off the land as before the great transformation, their efforts to restoret the human character of life take root in religous and cultural fundamentalism.
The Chinese Communist Party either channels this anger into the creation of a virulent nationalism, or falls to those who will. And the horrors of the 20th century live once more. Falun Gong, Christians, Homosexuals, and other groups are made scapegoats, are discriminated against, and then genocide.
It's a question of whether China merely implodes or takes East Asia with it.
Now the happy version of this supposes that enough social capital exists in the Chinese state unions and other elements of civil society to faciliate a social democratic response. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
you are the media you consume.
You also don't have the engineering skills base to do anything too impressive. China and India have engineers, Vietnam mostly doesn't.
Having said that I think it's more likely that China will push for a slow devaulation rather than an overnight sell-off while it develops some new markets.
A slow devaluation is going to be just as unhelpful to the US, but without the PR mushroom cloud.
The point I would simply make, and made above, is that all this talk about how the PRC will do itself in if it hastened a USD crisis is a bit overblown, and all this talk of how easily the US wriggles itself out of discomfiture in the event of a major financial crisis is a bit pollyannish for my tastes, for some of the reasons you are here enumerating.
The PRC is in a stronger position than we think, the US weaker, and the relative position of the former improves with each passing quarter. Fai de bčn a Bertrand, te lou rendra en cagant
Because so many of these Chinese firms are operating on paper thin margins, a 40% rise in cost to American customers could push them over the edge.
Consider that the series of quality issues that we've seen in the past year, may be indicative of an economy that's reached a point at which it can no longer bank on cheap labor, and being unable to increase productivity because that would require greater autonomy for workers they resort to debasing their products. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
You only have to look at Microsoft's Vista or some of the trash produced by the US car and food industries to see that you don't have to be Chinese to produce useless and dangerous rubbish.
The only difference between the Chinese and the US model is that in the US, systemic quality defects are hidden by marketing spin if they're non-fatal, and by lobbying if they're physically injurious. There's also a more direct risk of litigation.
But otherwise the common aim is to cut costs and maximise profits. If customers and workers are endangered at any point, that's only seen as a bad thing if it's discovered and made public and subsequently impacts the bottom line.
Quality systems and regulation are still quite strong in the United States. Particularly in the healthcare industry. While enforcement varies greatly, there are very strict rules about reporting in the healthcare sector. I know. That used to be my job.
If someone so much as got a paper cut from the packaging we had to file a report with regulatory agencies here in the US. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
in china you can get executed for sloppy discharge of responsibility..
their video games allow you to 'kill' corrupt officials, (and their bikini-clad mistresses).
just sayin'... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
The scenario we're hinting at here will cause not just the CNY to rise against USD, but all currencies of major trading partners with the PRC, of which the entire Pacific Rim, will more than likely rise against USD as well. It's hard, in fact, to imagine that JPY wouldn't as well given the increasingly tight trading relationship (as supplier) it has with the PRC and the fact that any PRC dumping of USD assets would more than likely provoke at least some asset-reallocation response on the part of Japanese USD asset holder.
If USD tanks, it more than likely will tank against most everyone, just as when the Argentine Austral tanked against USD it tanked against the Euro, the Yen and damn near everything else.
And if this is the case, inflation in the US will be a sight to behold, ST interest rates almost certainly pretty nasty and, like in Buenos Aires not too long ago, long middle-class lines at the soup kitchen.
I'm certainly not saying this is likely, but it is certainly not impossible, and the US margin of maneuver relative to the world economy would be, as was the case for Argentina, far more limited than one might expect. Raise tarrifs on something less and less people can afford anyway?
There is, of course, hard power. Fai de bčn a Bertrand, te lou rendra en cagant
If America goes down, you're all going straight to hell with us. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Let's face it, true the US is a far more important economy than the other Peronist regime in the hemisphere, but it ways increasingly less than it did. One big Argentina. If I were Canadian, I would fret, just as the Finns really took a hit when the old SU collapsed. As for the rest of the world? Probably recessionary pressure, but the real suffering will be done by working Americans. Fai de bčn a Bertrand, te lou rendra en cagant
If America goes down, you're all going straight to hell with us.
Not Europe.
Our trade and financial flows are each basically balanced. Openness to the outside is on the low side when you look at the real commercial EU-zone (EU+Russia+Africa+Middle East). Domestic demand will not be savaged by a US or Chinese downturn. Company profits and stock market prices might be, but hey, tough. The euro will stay strong and protect purchasing power. In the long run, we're all dead. John Maynard Keynes
Detailed American imports from the EU show that several fields are probably not going to be able to absorb a big price increase. Automoviles? Machined pieces?
And the EU exports $332.1 Billion annually to the US. Where do those exports go to if the US can't but them? And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
The truth of the matter is that this "crisis" needed to happen eventually. We've all seen it coming for a long time, and it's finally here. A weakened dollar is necessary, too.
Housing had to go down. (Asking $500k for a 1700 sq ft single-family home or townhome -- a house that would rent for about $2000, maybe even less -- is just nuts. Nothing in the fundamentals supported it, as most people here at EuroTrib have known for much longer than the press.) I think people have gone insane over it because of how "quickly" this hit. The market around my neighborhood -- just outside the Beltway -- is in an all-out collapse, unlike anything seen in decades, from what I'm told. (And this was supposed to be the one city immune to a collapse in the housing market, yet prices here are falling at rates double the national average.) You can drive down a typical street and see three, four, five, even six houses for sale, no doubt by desperate sellers who have yet to realize (or simply won't admit) that it's already too late.
On the whole, it's a good thing. Prices will decline. Consumers will continue to trim spending. Irresponsible companies -- the ones whose bigwigs are apparently on the phone to Cramer nightly -- will go bankrupt. Global imbalances will begin the long process of getting back to equilibrium. Thinking of the big picture, it's difficult to see this as anything but a necessary evil.
It's going to be a painful experience, but, even if it leads to recession (and I say this as someone who, as a low-level employee, could lose his job in such a scenario), it's not going to be the end of the world. And it should serve as a much-needed wake-up call to Americans: Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits. And incorporate asset inflation into the CPI. And set a CPI target. And balance the budget.
I'll say this, though: If I were in Britain or Australia right now, I'd be scared out of my mind. If this is how bad things will get in America, which suffered a much less severe bubble than our fellow Anglos, what's it going to look like when the shit finally hits the fan in those countries? Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
OTOH, it might be the first to suffer from the consequences of global climate change, wirh a continent that was never very hospitable to start with suddenly becoming even more hostile. In the long run, we're all dead. John Maynard Keynes
The immigration and strenght of the economy make any recession quite unlikely, especially if we talk about house prices, there is a affordability crisis and lack a supply.
my state, Queensland, runs at 5% of growth and 3% unemployment (and still dropping).
I think that the UK property market is protected by demand for rented property, due to the restricted supply of land/property in the UK. The US is totally different in terms of over-supply, I think.
While there is already some pain in the massively growing "buy to let" sector here, a distressed over-geared investor does not have to drop prices too far before another investor steps in who is happy with the rental yield achievable.
The problem we had in the 1990's bust was caused by a recession and the fact that people who had lost jobs could not afford more than a "social" rental, never mind a mortgage. So rental values were dropping alongside property prices and could not support them through invetsment by would be landlords..
That is not the problem now, so UK prices are not, IMHO, going to crash the way they are in the US.
Nor did we reach quite the same levels of craziness in the UK in terms of credit excesses, and risk aversion / prudence has now set in big time.. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
May I have a BLT instead, please? -----sapere aude
Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits.
Or take away the endless and frankly criminal financial farming schemes that leech wealth out of the pockets of people who work for a living into the overseas tax-free accounts of the hyper-rich.
There is more than enough wealth in the planetary economy to provide food, shelter, education and health care for every inhabitant.
If a tiny minority has to be deprived of pointless and excessive luxury to make that possible, that's not necessarily a bad thing.
As for the UK - unfortunately we simply don't have the housing stock in the UK to make a crash likely. Unless the economy tanks spectacularly - which is possible, but not likely given how closely we're tied to Europe - house prices will start to settle, but a headlong 50%+ nose-dive seems unlikely.
The difference is that Argentina was not a major export market for much of the rest of the world.
I'm amazed that people continue to ignore this elephant-sized fact. This country is going to suffer because of the credit and overconsumption binge, not because the economy produces nothing of value. Yet I continually see comments (not from redstar necessarily) that either implicitly or explicitly claim that the US "makes nothing."
The medium term is what makes or breaks the US. When our standard of living is reduced to that of Western Europe (or lower), are we still going to put half of our national treasure into the military? If so, we're doomed. If not, and that money goes into education and other social goods, our long term prospects look on par or better than Europe's due to our relative isolation from the coming volatility in Asia and better placement to exploit alternative energy.
Until that gets sorted out (nuke the planet, or roll back to regional military power), each forthcoming presidential election will be considered "the most important in history."
In any event, the Argentina crisis turned out relatively ok, and many previously shuttered manufacturers re-opened when the Austral dumped the USD peg and became competitive with Brazilian and Uruguayan suppliers. In some cases, the plants were taken over by workers, also a good thing.
For my part, the militarism will end up being the biggest problem, and given the upcoming correction, the likely source of future unrest. Fai de bčn a Bertrand, te lou rendra en cagant
the lower you are on the SES scale the more you're going to suffer
Yes, and while the European safety net really helps it won't ultimately stem the tide of the same trends. Your job skills are an increasing component of your future prospects with country of birth rapidly declining in importance. The middle class will continue to shrink as the number of people required to run the world economy declines. I don't know that dwindling energy supplies necessarily change that, either, I think the world economy will simply shrink. The difference for the poor will probably be having to work in the fields rather than going to the food bank. Those employed in manufacture will be able to scrape by on a bare urban lifestyle, while current tech/knowledge workers will occupy the middle class. Then the usual parasites on top. Essentially everyone moves down a half or full step on the ladder, with the poorest in the 3rd world disappearing. For my own prospects, I might have to be flexible enough to work in SE Asia for a while.
When our standard of living is reduced to that of Western Europe (or lower)
You're being sarcastic, right? Or are you talking GDP? -----sapere aude
We don't have a huge concentration of billionaires to skew the mean, but we do have - at least we used to have - a much less extreme income distribution curve.
(I was trying to avoid the "GDP"-"standard of living"-"measurements"-"perception"-"quality of life"-"damnyankee"-"oldeurope" discussion as well. No good can come of that. Sorry if I came across as snarky! :)) -----sapere aude
No there isn't. I'm not having a go at you over this, because it seems to me that your position is more realistic than some others. But the idea that the US can rely on 'hard power' is absurd. (Again, I do not attribute this idea to you.) The truth is that the US is, in military terms, very weak indeed. I'm sure that this statement will raise eyebrows amongst most of you, but as someone else once said, you have to take everything into consideration, not just amount of money spent and amount of stuff. If you have the world's largest military, which happens to be staffed and controlled by morons and is strategically and tactically idiotic (see, e.g. William Lind's comments), then you have no 'hard power' worth talking about. The truth is that the US has all the military competence of Fascist Italy. Yes, they can nuke the whole world, but otherwise they can't fight their way out of a paper bag. Even the British despise US soldiers for their jittery nerves and utter incompetence.
More generally, I'm surprised at the polarization and lack of subtlety this aspect of the debate here has engendered. Everyone seems to think it will be China dumps its holdings and the US rolls up its sleeves and gets ready to whup some ass (as if it can actually do so ... ) ... instead, it will be China pointing out the obvious, and then everybody else in a panicky market dumping their dollars before China does. And the US will have no recourse.
The truth is that the US is, in military terms, very weak indeed. I'm sure that this statement will raise eyebrows amongst most of you,
We've been making similar arguments here for a while now, so you may be overstating the likely surprise.
But the real problem faced by the US is that it's politically split down the middle. In a bizarre way the neocons are right - if they could have set up their ideal fascist super-state the US could have walked into Iraq and taken the oil without being seriously challenged.
But that would have meant a draft, and a suspension of the Constitution, and not even 9/11 could make that plausible, partly because of that pesky liberal tradition.
So - because the neocons prefer inertia to reality, and can't be accused of flexibility or long-term creative thinking - they carried on with the original plan, pretending to the themselves that they had the mandate they needed.
As a result the US military has been bled dry for no useful outcome of any sort - unless you count the profiteering - and the whole economy is looking very crash-prone.
Nothing short of an all-out invasion on American soil can turn the US back into a single unified state now. The splits between the hyper-rich conservative exploiters and everyone else run too deep.
If inflation explodes and a wave of bankruptcy creates a new Depression, I think there's a real danger of a much angrier response from the dispossessed middle classes than happened in the 30s. People who grew up in the 00s, 10s and 20s lacked the entitlement culture that's been a staple in the US since the 60s. Living standards are also higher, and people have been conditioned relentlessly by advertising to expect them as their due.
If that expectation is snatched away, they're not going to be happy.
And while that drama is playing itself out, the US is hardly going to be in a position play leader.
