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Global imbalances have grown further
TheUS think tank Economic Policy Institutehas calculated that 83% of US trade deficit (2009 year to date) is on the account of China.
This means that imbalances have further grown. In 2007, only half of the US deficit was related to China.
The necessary "global rebalancing" has not even begun. This is a prerequisite to prevent a new global crisis in the future.
The EPI concludes:
China could do much to reduce this imbalance by revaluing its highly undervalued currency, giving up energy subsidies for exports, and forgoing the dumping of exports in the U.S. markets. China’s huge stimulus program has kept its economy growing at an 8% rate this year, and is able to consume many more U.S. exports
Of course, the US could do more to decrease the trade deficit, by applying a sounder economic policy based on investments and exports, instead of government spending and refuelling consumer credit.
11 Comments
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ivan
On 6 Aug, 2009
This is not good news. Global rebalancing not only will prevent a new crisis, it's also possible to solve our current woes with it. China should become a market for our goods, so that we can export ourselves out of our economic problems. This also means of course that Europe should do something about it's (relative) lack of competitiveness. In fact it's all quite simple: more consumption in China, more savings in the U.S., and more cost cutting (or cutting business taxes and red tape) in Europe. As far as I can tell, China is doing its best (but its still keeping its currency undervalued), the U.S. is doing the opposite what it is supposed to be doing, and Europe....
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sebastian
On 6 Aug, 2009
Maybe a bit simplistic :
Europe cannot lower it's taxed due to the enormous red tape AND the financially unexecutable scheme for the elderly. 'Healthcare will kill us' seems a bit sarcastic but that's reality that clearly no-one is willing to cry out loudly in this country.
on the other hand : china will also have to adapt (and therefore close part of the competitive advantage) since they will also have to adapt some kind of healthcare due to the age pyramid (let's not forget : one kid policy is an enormous impact on the age pyramid) -
Geert
On 6 Aug, 2009
The issue is clear: what will be a long term balance model for the world economy.
This is "Globalisation 2.0" that I tackled in the book Econoshock.
Part of the financial problems that we are facing today are ue to the Chinese/US imbalances. If they are not solved, any improvement is doomed to be temporary. -
frederic
On 6 Aug, 2009
in a certain and sick way we are starting to rebalance by devaluating our currency's and getting less buying power (slowly but steady).
As I have stated many times before, some day in the future, China is going to get some bills from the past (read now is de past of china's future) . Wich will be the healthcare bill, enviroment bill (wich will be the biggest one) and the aging of there population . I do believe it this will cause serieus problems in de future (15-20 years ?) .
At this point, I am surprised about the rise in the trade defecit, but I think we can't interpret those figurs like last year because 1, the US trade defecit was in the last months the lowest in years (apparantly with a larger percentage to china), 2 in the US people are saving again, 3 even due to credit pushing there is less credit finding it's way to the market.
So, in some way it seems to be a problem, in an other way, it seems like alway "with statistics you can pull anything"
at last, in economics, there are some things you must try to avoid, one of them is sudden turn overs. We can't expect fom the US to stop buying Chineese "crap" from one day to another and please, please let's hope they don't because Europes main export region is China !!!!! -
Eric Smekens
On 7 Aug, 2009
Much more than statistics !.
US is just playing with Russian roulette:
http://www.youtube.com/watch?v=WA9Rm77rq-4&feature=channel_page
Where will this end ?.
Any comments are welcome. -
frederic
On 7 Aug, 2009
@Eric,
Men is wanhopig in de US op zoek naar devaluatie van hun munt, immers men hoorde de vraag "wat zal het zijn, inflatie creeren, eigen schuld opkopen, belastingen verhogen" .
Hun primaire doel is inflatie creeren, zonder twijfel.
Echter het geld dat ter beschikking komt, raakt moeilijk op de markt (weinigmensen nemen krediet op) , en het geld dat dan uiteindleijk op de markt komt dat wordt gebruikt om schulden mee af te betalen, men brengt het dus terug vanwaar het komt zodoende dat de liquiditeit niet verhoogt.
Gevolg, men neemt onconventionele maatregelen welke als gevolg zullen hebben dat het vertrouwen in de $ inderdaad zal zakken.
Ik zeg het al van in het begin van deze Blog, men moet een meer internationale muntstandaard aannemen om hier uit te raken, naties die op eigen houtje hun munt manipuleren dat komt neit goed, men moet het internationaal beheren en zo de balangen uitmiddelen en dus ook de onbalancen. Geen goudstandaard (die is ridicuul) maar een internationaal gecontroleerde muntstandaard vanuit het IMF. -
Theo
On 7 Aug, 2009
Yep, exactly the solution China put forward with a well documented and founded argument.
The US meanwhile is too busy not looking for solutions to the problems it has inflicted on the system, rather on avoiding the full responsibility in honoring the debts it has incurred!
In the old days, trade conflicts were solved by sending the Navy. Today you just use the financial and monetary system to dilute the debt and block the debt holder from acquiring your assets and colling in the "collateral".
There was an interesting article in the FT this week, on how quickly Insolvency Laws were changed across the world even before the G20 had the time to organise their big meeting in London. -
frederic
On 12 Aug, 2009
Zoals ik al zei
http://www.tijd.be/nieuws/economie-financien/VS-handelstekort_ex_olie_kleinste_in_10_jaar.8219125-600.art -
Mathew
On 27 Dec, 2009
As I read today in 'Tijd', the Chinese aren't eager to depreciate the yuan and they are tackling their competitive disadvantage, namely their problem of pollution and their permanent energy need, by forcing their distibution companies to get their electricity from using solar energy as from april 2010.
Their demographic problem remains but for such a gigantic country their decision making process is quite short. They are converting their competitive disadvantage into an advantage.
I don't quite understand why the US wants a depreciation of the currency of their number one creditor. This makes their debts more expensive?
