China - Debt Trap Diplomacy

#41
He seems to think this will be over by Christmas...
He seems to think everything everything will happen the moment he tweets something and signs something - and somehow a lot of things just get forgotten and he moves on the next. I don't know if he has dementia or ADHD.

And people below him who are actually running things just seem to ignore him. It's almost like dealing with a kid.
 
#42
He seems to think everything everything will happen the moment he tweets something and signs something - and somehow a lot of things just get forgotten and he moves on the next. I don't know if he has dementia or ADHD.

And people below him who are actually running things just seem to ignore him. It's almost like dealing with a kid.
I know exactly how the minions feel, I am one and my boss is the female version of Donald. But man when you get permission to run with things the interference is minimal...
 
#44
So you are a Ron Swanson type then? ;)
I am just a poorly paid Government Serpent...left alone to fight the battles that my boss does not want to deal with.

I am not allowed to have a movie prop version of Lucille..at my desk or any sort of trophy game mounts on display.. I tried and was shot down.

1560291958611.png
 
#45
At least until the US stops being, "hooked on easy money."

Or the far side of never, whichever is soonest.
The American trade deficit is a product of their chronic budget deficit. The former follows inexorably from the latter. It's simple economics, as can be seen here:
31.4 Fiscal Policy and the Trade Balance – Principles of Economics
A Reagan-era economic trend is making a worrisome comeback
Government budget balances can affect the trade balance. As The Keynesian Perspective chapter discusses, a net inflow of foreign financial investment always accompanies a trade deficit, while a net outflow of financial investment always accompanies a trade surplus. One way to understand the connection from budget deficits to trade deficits is that when government creates a budget deficit with some combination of tax cuts or spending increases, it will increase aggregate demand in the economy, and some of that increase in aggregate demand will result in a higher level of imports. A higher level of imports, with exports remaining fixed, will cause a larger trade deficit. That means foreigners’ holdings of dollars increase as Americans purchase more imported goods. Foreigners use those dollars to invest in the United States, which leads to an inflow of foreign investment. One possible source of funding our budget deficit is foreigners buying Treasury securities that are sold by the U.S. government. So a budget deficit is often accompanied by a trade deficit.
To put it simply, a budget deficit financed by external borrowing results in a net inflow of capital (that's what foreign borrowing is). That inflow of money will in turn produce an inflow of goods (that's how pixels on bond traders' screens connect to the real world). The above links explain it from multiple different angles, but this is pretty basic and well accepted economics and has been known about for years.

Or to put it in the most basic terms, China has no ability to do anything to reduce the American trade deficit, as they don't have control over what is driving it, which is the chronic US budget deficit.

A temporary budget deficit which is the result of a short term recession is not really a problem. A large and growing long term budget deficit which persists through both recession and strong growth however is another issue, particularly when it isn't being invested in productive assets. In the US the money borrowed from abroad has been "invested" in giving tax cuts to buy political support from people living in remote parts of the country who use it to buy pickup trucks and guns.

If you read the linked articles, you will see that the US is not a unique case. This has all been seen before, some examples being in Mexico in 1995, in Southeast Asia in 1997-1998, in Russia in 1998, and in Argentina and Turkey in 2002. Those are the dates of debt driven financial crises by the way, in case you didn't recognise them.

When the inflow of foreign capital is not invested in productive assets, but instead goes into short term government bonds, if the inflow reaches a high level then foreign investors will be on the alert for potential falls in exchange rates or the government not being able to repay debt on time. A bit of bad news can trigger an avalanche as investors bail out. If investors pull out rapidly, widespread bank failure and deep recession can follow. This is a well understood phenomenon and has all been seen before.
The risk of high inflation or a default on repaying international loans will worry international investors, since both factors imply that the rate of return on their investments in that country may end up lower than expected. If international investors start withdrawing the funds from a country rapidly, the scenario of less investment, a depreciated exchange rate, widespread bank failure, and deep recession can occur.
There is basically nothing that China can do about the US trade deficit. The control of that is entirely in the hands of the government of the US who consciously decide to run a long term chronic budget deficit which in turn produces a trade deficit through the operation of well understood laws of economics.

But no doubt there will be those who will cite "American exceptionalism" as justification for stating that the laws of economics don't apply to the US, only to lesser countries. And when the financial crisis happens and it all unravels, I'm sure that will be the "fault" of someone foreign as well as the hunt for the scapegoats begins.
 
#46
The American trade deficit is a product of their chronic budget deficit. The former follows inexorably from the latter. It's simple economics, as can be seen here:
31.4 Fiscal Policy and the Trade Balance – Principles of Economics
A Reagan-era economic trend is making a worrisome comeback


To put it simply, a budget deficit financed by external borrowing results in a net inflow of capital (that's what foreign borrowing is). That inflow of money will in turn produce an inflow of goods (that's how pixels on bond traders' screens connect to the real world). The above links explain it from multiple different angles, but this is pretty basic and well accepted economics and has been known about for years.

Or to put it in the most basic terms, China has no ability to do anything to reduce the American trade deficit, as they don't have control over what is driving it, which is the chronic US budget deficit.

A temporary budget deficit which is the result of a short term recession is not really a problem. A large and growing long term budget deficit which persists through both recession and strong growth however is another issue, particularly when it isn't being invested in productive assets. In the US the money borrowed from abroad has been "invested" in giving tax cuts to buy political support from people living in remote parts of the country who use it to buy pickup trucks and guns.

If you read the linked articles, you will see that the US is not a unique case. This has all been seen before, some examples being in Mexico in 1995, in Southeast Asia in 1997-1998, in Russia in 1998, and in Argentina and Turkey in 2002. Those are the dates of debt driven financial crises by the way, in case you didn't recognise them.

When the inflow of foreign capital is not invested in productive assets, but instead goes into short term government bonds, if the inflow reaches a high level then foreign investors will be on the alert for potential falls in exchange rates or the government not being able to repay debt on time. A bit of bad news can trigger an avalanche as investors bail out. If investors pull out rapidly, widespread bank failure and deep recession can follow. This is a well understood phenomenon and has all been seen before.


There is basically nothing that China can do about the US trade deficit. The control of that is entirely in the hands of the government of the US who consciously decide to run a long term chronic budget deficit which in turn produces a trade deficit through the operation of well understood laws of economics.

But no doubt there will be those who will cite "American exceptionalism" as justification for stating that the laws of economics don't apply to the US, only to lesser countries. And when the financial crisis happens and it all unravels, I'm sure that will be the "fault" of someone foreign as well as the hunt for the scapegoats begins.
Blame Canada!!
Btw would you like to float me a loan for a trip to the Cinema this weekend!!??
 
#47
I would just tell you brace for a long protracted struggle. It won't end quickly and that is the one biggest flaw with Trump that I do have. He seems to think this will be over by Christmas...
It must just inspire confidence that the bloke driving your nation's strategy doesn't understand how things work and doesn't seem to care.
 
#48
It must just inspire confidence that the bloke driving your nation's strategy doesn't understand how things work and doesn't seem to care.
Save up and pay off debt.
Use the good times to prepare for the rough ones. But hey I can’t complain. My grandmother grew up in the Great Depression, it is good to listen to her tales of growing up in that era.

But the Chinese are a clear national threat, it is time to treat them as such.
 

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