mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
The Great Fall of China
S&P Cuts China’s Ratings Outlook
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  • Jim__L

    Are there any useful parallels to the Japanese experience a generation ago?

    • Jacksonian_Libertarian

      Yes, China has done the same thing as Japan did, it has used the purchase of US Treasuries to manipulate its currency and gain an unfair price advantage for its exporters. This has resulted in huge holdings of US Treasuries hanging over their markets threatening an instantaneous reversal of their currency manipulations of over 40 years duration. If the US were to payoff these countries (a press of the button with fiat currencies), their economies would instantly be flooded with over a Trillion Dollars (both have about $1.25 Trillion in US Treasuries), and the price advantage reversed in favor of the US for the first time in over 40 years. Japan’s exports would suffer steep declines as Japan has many quality name brands, but China’s exports would be destroyed as China hasn’t developed a single recognized name brand in the 40 years since the fall of the “Iron Curtain”. Both countries get a much larger share of their GDP from imports and exports than America, and are therefore far more vulnerable to changes in foreign trade. Japan has now been trapped in deflation for 27 years, and China is now heading into the same trap. The US has of course been trapped in “Great Depression 2.0” for 7 years.
      Japan also went through a foreign merger and acquisition mania in the late 80’s, just before they crashed into the wall in ’89’. We see the same behavior now from the Chinese, as their economy goes belly up. Also, credit agencies don’t drop credit ratings because of slower growth, they drop credit ratings because of shrinking income that threatens the servicing of existing debt.

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