American Recession, Chinese Depression? Parallels to 1929

Business Week ^ | Jan. 12, 2008 | Michael Mandel

[decimon]

Is China today like the U.S. in 1929?

This morning brings reports that U.S. imports plummeted in November.Since August non-petroleum imports, adjusted for inflation, are down 10% with no sign yet of a bottom.

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Where the Great Depression Hit the Hardest

Change in Real GDP, 1929-1933
United States -29%
Germany -10%
France -9%
Italy -3%
United Kingdom -2%
Japan 11%

Data: Angus Maddison

[Travis McGee]

The parallel is there, for sure.

[decimon]

The parallel is there, for sure.

I think the PRC is more dependent on exports than the US has ever been.

[PGR88]

And remember, the plan is that the Chinese are going to buy our new Trillion dollars of debt!

[decimon]

And remember, the plan is that the Chinese are going to buy our new Trillion dollars of debt!

Or sell us back the trillion they have at 10 cents on the dollar. It's the American way. ;-)

[wolfcreek]

“United Kingdom -2%”

Hmmm? Same reason, different century.

http://www.modernhistoryproject.org/mhp/ArticleDisplay.php?Article=FinalWarn02-4#Depression

[WilliamofCarmichael]

Policymakers, especially in the US and China, must ensure that ... adjustment [vis-a-vis China and our economic relations] takes place in the least disruptive way possible

Why?

This could be the opportunity to rid China of tyranny. In 1929 we'd already had hundreds of years of a social contract that believed strongly in unalienable rights -- not "human rights" -- unalienable rights. There's zero comparison of us at anytime in our history to China.

Their iron rice bowl gone and tens of millions unemployed with millions more about to lose jobs, a depression is probably the least of their worries.

Add in the outrage over corruption, deadly pollution, the influence of foreigners, and a host of other problems and a revolution like the one that overthrew the Nationalist Government is even more likely.

What's going to emerge? Some form of democracy or Maoism? A country that does it right; to wit, builds a domestic market first then turns to exporting. Doh!

Or will the promise of another iron rice bowl bring Mao back? Not everyone in China benefited from Deng's version of Lenin's New Economic Plan (NEP). The overwhelming majority of Chinese did not.

[henkster]

The Chinese hold lots of our debt, and it’s a key part of their economic plan. We do rely on them to finance us further. But both of us are held hostage to each other. If the Chinese don’t buy additional debt, all the debt they currently own may become worthless. They have the “in for a penny in for a pound vs. throwing good money after bad” dilemma.

[decimon]

Or will the promise of another iron rice bowl bring Mao back?

Maossolini.

[WilliamofCarmichael]

RE: Maossolini.

Good one!

Immediately that photo of Obama smirking in the manner of Mussolini came to mind -- maybe we'll be even closer to Red China than I feared. We got the Mussolini and they got the Mao.

[TigerLikesRooster]

Right. More unstable version of U.S. The same amount of shock would do more damage to China than it did to U.S.

We will be replaying major subplots of the Great Depression, but there will be significant variations as well. I mean, it would be just as tragic or more, but unfolding in somewhat different way, even though the Great Depression and the current crisis would share some key features.