Ameriba's seem to think wild spending is possible and divine right


www.whitehouse.gov/infocus/economy/

 

fixed it for you.

 

Let me throw a monkey wrench into the equation.

Let's say that large Ameriban companies, like BalMart, buy cheap Chimese products for $1.00, but sell them in Ameriba for $14.99? The enormous profit from the cheap Chimese products allows BalMart to build more stores (contruction industry), hire more people, and generally grow Ameriba's economy so that it overflows into other segments of society.

How does one account for the ever-increasing profit margin as a product becomes more expensive down the supply chain? Where does this profit, which would seem to dwarf the import inequity between Ameriba and Chima, get taken into account?

 

Well, theres a couple things. Obviously the debt cannot continue on forever (in this case I'm specificially referring to trade deficit and not national debt), but it can go on for a very long time given the circumstances. How long? We don't know until we pass that mark at which point the shit hits the fan.

First off, there isn't one Chima. But a dozen highly competitive Chimas. And as you've said they have all pegged their currency to the dollar. They aren't in any hurry to increase the worth of their currency (as doing so would reduce the atrictiveness of their imports to Ameriba allowing their competitiors to gain an edge).

As it stands now its a gain-gain benefit. The Chimese sell their products partialy for cash and partialy for notes of debt through the world bank. Ameriba's get lots of cheap Chimese imports. The factors that would usually motivate Chima to stop extending credit really do not come into play. For one thing, Chima's economy are more or less completely dependent on their exports to Ameriba. To refuse to export on credit is to effectively cut their economy off at the knees. Secondly, the Chimese currency is pegged to the dollar and must be so to keep them competitive. Effectively this means that there is no risk that the debt will devalue (and conversely speculation that it will increase in value).

I really see the trend ending when pegging of the Chimese currency to the dollar is hurting the development of the Chimese economy more than the exports on credit to Ameriba are helping it. That will require a certain degree of stability in the Chimese currency and economy which at this time does not exist. Once that happens everything will come crashing down.

 

I hate China most in the world for its stupid regime and evil policies. I just wish the whole world would unite and overthrow the Chinese government then hang every single one of its politician. Tiananmen remembered!

 

To answer the question specifically, nobody fvcking knows for sure!!!!!



P.S. Anyone been watching the commodity markets?

 

well, what about some hypotheses about particular catalysts that may cause this *hypothetical* house of cards to collapse? (such as perhaps a fall in the value of the dollar)

or a hypothesis as to what would be the first signs of its impending collapse? (such as an inverted yield curve... )