China predicts a U.S. led global recession?
Voice of Helmutica
11 Oct 2005 at 11:32 AM
Here are some excerpts from a rather interesting commentary in China
Daily. It makes you wonder if it's the official government viewpoint,
or just one guy.
"I think it is time that we should take a serious look at the
possibility that the US is going to take us down towards a worldwide
recession in one or two year's time.
"It is well known that the US is the world's biggest economy, taking
up about 30 per cent of global GDP, but it is now also the world's
biggest debtor country. According to the most authoritative person on
this subject, the US Comptroller General David Walker, who audits the
federal government's books, the tab for the long-term promises the US
Government has made to creditors, retirees, veterans and the poor
amounts to US$43,000 billion, US$145,000 per US citizen, or US$350,000
for every full-time worker.
"The US Government indebtedness is financed this way: The US now runs
a trade deficit roughly 6.5 per cent of its GDP and the gap is widened
every day. Its citizens are spending ever more on foreign goods, and
with the US dollar as the international currency, the US Government
just prints money to finance the deficit. And with this money, central
banks in the surplus countries purchase most of the US Treasury bonds
as currency reserve.
"By now, Japan is the largest creditor of the US Government, and the
Chinese mainland has been a fervent buyer for the last few years. As
for Hong Kong, most if not all of our reserves are in US dollar
denominated assets. The US Government in turn uses this foreign
borrowed money to finance as much as 90 per cent of the federal deficit
which stood at US$412 billion last year. The federal deficit is
expected to be running at about US$2 billion a day at the moment.
"Put it simply, the Americans have been living way beyond their means
for much too long. On top of this, the Bush Administration is cutting
tax at least three times while fighting an expensive war in Iraq, which
has already cost the country US$700 billion, and currently progressing
at US$5.6 billion per month. Now the US economy is dependent on the
central banks of Japan, China and other nations to invest in US
Treasuries and keep American interest rates down. The low rates keep
American consumers snapping up imported goods.
"The US is now clearly in huge trouble, economically, socially,
politically, and internationally. The Bush Administration bungled big
in cyclone Katrina's aftermath in New Orleans, and then a minor rerun
from Rita in Houston, and this will trigger the general outburst of
people's dissatisfaction with the government, leading to great internal
turmoil lasting for many years. In all likelihood, long-term interest
rates are going to rise, and the greatest property bubble the world has
witnessed is going to burst in the next one to two years."
mordacp...@hotmail.com
Voice of Helmutica wrote:
> By Jon Nones
> 11 Oct 2005 at 11:32 AM
>
> Here are some excerpts from a rather interesting commentary in China
> Daily. It makes you wonder if it's the official government viewpoint,
> or just one guy.
They're not saying anything Greenspan and the Federal Reserve board
hasn't been saying for the last couple of years.
It's just that no one is listening.
Bob Eldred
"Voice of Helmutica" <presiden...@yahoo.fr> wrote in message
news:1129047145....@g14g2000cwa.googlegroups.com...
Recession may come but will most likely start when China, Japan and other
creditor nations stop supporting the borrowing by financing our debt. They
have a vested interest and support American debt, in effect, to help
continue America's purchasing of their goods. That's why they have put up
with it for as long as they have. In the end it will come crashing down but
lets hope that it is a soft landing.
Interestingly real-estate may be the most immune to a coming recession. One
of the reason for the recent real-estate run-up in values has been the
lackluster performance of the stock market and other investment tools. The
Dow at about 10,500 is the same place it was 5 years ago when Clinton left
office. Real-estate has been a good haven for money and growth in recent
years. A recession may actually enhance that as traditional investments and
stocks will certainly take a hit during a recession. Real-estate is one of
the tangible assets that people can actually hold so I would not look for
much of a bubble burst as many have been predicting. Furthermore, it is not
directly tied to manufacturing or business activity as other investments
are. It may see a slight down turn but a bubble burst, not likely.