Quote: DaButt @ September 26 2008, 4:19 AM BSTNow someone's going to do all the work for me!
That's the American way!
Sorry, sorry, I couldn't resist.
This whole recession thing... Page 5
The US economy is in serious danger. China and the Gulf states are in effect funding America's economic rescue mission. If they withdraw that funding, the US economy will crash and burn. The Gulf states won't let that happen for political reasons (they want US power to balance Iran), but China could withdraw its funding and really f**k America without damaging itself too much in the short term. Incidentally, Chinese money is now responsible for funding the US military. And they've got trillions of dollars of US currency bonds, meaning they could flood the market and hugely devalue the USD.
Basically, China has the world's biggest GDP in buying power terms (not real GDP). This will let it dominate markets even with a flunking US economy, particularly in its immediate region. America is relying on Chinese goodwill. The non-western great powers (China, India, Russia, Japan) are not suffering the ill-effects of this economic instability. Western hegemony is in a precarious state, both economically and politically.
Let's revert world markets back to the pound. Much easier.
Quote: Aaron @ September 26 2008, 10:36 AM BSTLet's revert world markets back to the pound. Much easier.
Yeah, or something stable and solid. Like:
Quote: Finck @ September 26 2008, 10:06 AM BSTBack to clams, feathers and pretty stones.
Quote: Finck @ September 26 2008, 10:06 AM BSTBack to clams, feathers and pretty stones.
Everything always comes back to your sex life, doesn't it, Finck? 
Quote: Finck @ September 26 2008, 10:42 AM BSTYeah, or something stable and solid. Like:
Yeah, it's your lot's fault that the Yanks now dominate and control anyway! *shakes fist*
We tried to stop them back in 1812 but they just rebuilt the White House. We got bored after that and decided to just go with the flow. If you can't beat'em, join'em!
Quote: Tommy Power @ September 26 2008, 10:28 AM BSTThe non-western great powers (China, India, Russia, Japan) are not suffering the ill-effects of this economic instability.
Not true.
The precedents for China aren’t encouraging. Many developing countries in Latin America and the Middle East stagnated after periods of rapid growth. Economists sometimes call this the “middle-income trap” because so many countries have failed to achieve the consistent growth that would deliver higher prosperity.
China is at the crucial boundary, no longer poor but still far from rich. It ranks 100th in the world in terms of income per person, edging out Namibia but lagging behind Colombia. President Hu Jintao frequently calls this a “crucial period” for overhauls.
In the next few years, China will cross the threshold to a majority-urban society. Since urban workers earn more than three times as much as rural ones, the annual migration of more than 10 million farmers into cities has steadily boosted the economy. But the urban-rural balance will eventually stabilize. Then people will have to find other ways to raise their incomes, such as learning new skills.
In addition, a smaller number of workers will have to support an increasing number of elderly. The United Nations projects that China’s working-age population will account for a decreasing share of the total after 2010, and will start shrinking in absolute terms after 2015 — the long-delayed effect of the strict family-planning policies that came in the 1970s. The “demographic dividend” from a young and growing work force may have been responsible for a quarter of China’s growth to date…
http://online.wsj.com/article/SB121958712606066933.html?mod=hps_us_whats_news
Beijing has wisely opened up its economy to Western investors to fund its military ambitions…But we still don’t know fact from fiction when we talk about China’s “miracle” economy.
“You can’t trust their GDP numbers. They’re at least 2% below what they advertise,” said Roger Robinson, former chairman of U.S.-China Economic and Security Review. “So when they say 9% growth, it’s really 7% or less.” Other estimates say growth is even lower — 6.2%, according to the University of Chicago, and 3%, according to the University of Pittsburgh. Robinson said that, without the cushion of foreign capital, China would implode even with 5% to 6% growth.
He noted that Beijing has artificially devalued its currency and continues to heavily subsidize its manufacturing sector. Bad debts have piled up, many of its state-run banks are insolvent, and now China’s rulers fear an inflation spike.
The whole system would collapse if we didn’t prop it up through massive flows of trade and investment. Yet Wall Street can’t get enough of Chinese IPOs — even debt-laden dogs like China Construction Bank, whose shares were snatched up last year in the world’s biggest offering…
As we saw from this week’s sell-off, all of America may be overinvested in a monumental fraud. We know Beijing’s defense numbers are bogus; the Pentagon has proved it. If the Chinese lowball those data to hide military outlays, how do we know they’re not inflating growth figures to attract more Western investment — the lifeblood of China’s economy? Both come from the same dubious source: the Chinese Communist Party.
http://www.dinocrat.com/archives/2007/03/03/ibds-alarm-bell-on-chinas-systemically-cooked-books/
I see what you're saying DaButt, but the key point is Beijing hasn't suffered the same sort of economic slide that the Western powers have. The Indian, and Russian have remained relatively undisturbed, and the relative resurgence of the Japanese economy has not been significantly slowed. Those quotes are basically the opinion and conjecture of certain commentators, but the hard facts do not support such conclusions at the present time. China continues to grow as the US faces economic downturn. Should Chinese investment be withdrawn, America is likely to enter the "stagflation" phase, i.e. stagnation and inflation. A pre-war depression would potentially follow.
The continued dynamism of the Asian economies means a collapse in the US will not necessarily mean a similar collapse in China and Japan. Economic aftershocks will hurt them, but the effect will be diminished by their regional interdependence. US investment is important in Chinese industry, but Japanese, Korean, Taiwanese, Malay, Thai, Singaporean and Indian investment also sustains a large portion of economic growth. Ironically, given the claims of free-market capitalism, the governmental control of industry is another advantage for the "tiger" economies.
The majority of US GDP comes from domestic economic dynamism, traditionally founded on industrial strength and relative prosperity. The credit crunch is the immediate problem, but long-term it will be the decline of American manufacturing that will pose a real threat for the domestic market. Given the level of US reliance on Chinese and Arab finance, the withdrawal of those investors will leave the US with a debt it cannot repay. The US will have lots of money, but its currency will be so devalued that it will have no real spending capacity relative to China. Once the Yuan is disengaged from the USD, China will be able to distance itself from the collapse and engage more lucrative markets. The US is in enormous debt to China etc., and the situation is just getting worse. Id est, its economic advantage may be slipping away.
Edit: I'm aware of the arguments raised in those articles. This stuff is part of my uni major. China has internal problems, sure, but those views are becoming a bit dated given the current crisis in the US etc. Even though its real GDP growth stats may be inflated, its purchasing power (despite being linked to a potentially undervalued currency) now outstrips that of the US.
Edit Edit: And regardless, those articles highlight America's problems. If China does collapse, the US is even more f**ked than it otherwise would be. Which supports my fundamental point: US may be more economically vulnerable now than at any other point in the last 100 years. 1929 included.
Quote: Tommy Power @ September 26 2008, 2:10 PM BSTI see what you're saying DaButt, but the key point is Beijing hasn't suffered the same sort of economic slide that the Western powers have. The Indian, and Russian have remained relatively undisturbed
Give it a few months.
Quote: Aaron @ September 26 2008, 2:13 PM BSTGive it a few months.
Yup, maybe. 
But the only great power currently declining is the US.
Quote: Tommy Power @ September 26 2008, 2:10 PM BSTI see what you're saying DaButt, but the key point is Beijing hasn't suffered the same sort of economic slide that the Western powers have.
The Shanghai Composite says differently:
Something like 70% of China's growth is based upon exports. If the U.S. and the West slow their purchases, China suffers as well.
I'm no expert in these areas, but isn't it the case that India, China Russia have oligarchs, peasants and few middle classes.
So the middle class property owners in the West will always feel the pinch first?
More or less, yes.
Quote: DaButt @ September 26 2008, 3:21 PM BSTThe Shanghai Composite says differently:
Something like 70% of China's growth is based upon exports. If the U.S. and the West slow their purchases, China suffers as well.
DaButt, look at the graphic at the bottom, which shows previous years. This graphic has been taken right out of context, and only looks severe because there was such a rise in '07, which dropped off slightly this year. Compare current levels to e.g. '05 and China is actually doing better at the moment. The evidence is in the graphic you've posted.
Compare growth in the US now to '05, and there is a big difference. That's the point.
The fact that China's GDP is dependent on overseas economies is a weakness, because it means global trends can affect China more strongly, but the fact that the US has most of its GDP coming from its domestic market is more serious because the domestic market is collapsing. As I said previously, this is the major reason why the US will be unable to repay its international debts to China and the Arab states.
Quote: sootyj @ September 26 2008, 3:27 PM BSTI'm no expert in these areas, but isn't it the case that India, China Russia have oligarchs, peasants and few middle classes.
So the middle class property owners in the West will always feel the pinch first?
As Aaron said, this is true. Lower middle-class feels the pinch - those who own property but are walking the fiscal tightrope.
Middle classes are growing very quickly in India and China, not sure about Russia (there is a top-end explosion there - lots of billionaires).