The best way for China to stimulate its own economy is by buying US Treasuries

Kurt_and_Hunter

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Wed Mar-11-09 12:54 PM
Original message

The best way for China to stimulate its own economy is by buying US Treasuries

Edited on Wed Mar-11-09 12:59 PM by Kurt_and_Hunter

China is only as strong as the American consumer's ability to buy Chinese goods. So the best thing for China is probably to continue to finance OUR self-stimulus.

Note that Chinese exports/imports are almost indistinguishable from a chart of US housing prices.

The assumption that China will stop buying our bonds is up there with the assumption that Iran would launch their first working nuke at Israel. Why? Sure, it could happen but would be so dramatically against national self-interest that's it's certainly not obvious.

(China and Iran are both old cultures and presumably didn't get that way by committing suicide every time the opportunity arose.)

"After soaring for most of this decade � the pace of China�s export growth clearly turned up in 2002 or 2003 and then stayed at a very high pace � China�s exports are falling back to earth. The surge in China�s exports could prove to be as unsustainable as the rise in US (and some European) home prices. They might end up being mirror images � as Americans and Europeans could only import so much from China so long as they could borrow against rising home prices."

http://www.calculatedriskblog.com/2009/03/setser-on-decline-in-chinas-exports.html

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Jamastiene

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Wed Mar-11-09 12:57 PM
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1. ...and THIS is how China will take over America without firing a single shot.

They said they would do it, and they will...eventually.

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HiFructosePronSyrup

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Wed Mar-11-09 01:01 PM
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2. China's stimulating their economy with old fashioned stimulus.

Their spending billions on infrastructure and putting people to work.

I little ironic that China has a better grasp of Keynesian economics. They didn't dither around like Congress did.

And that's why they'll recover before the U.S. does.

Well, that and their banks didn't collapse.

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rufus dog

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Wed Mar-11-09 01:03 PM
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3. Thanks K&H, your daily econ postings are stellar.

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