Skip to comments.Markets Focus on Europe, but China May Be Bigger Worry (What happens if China's economy crashes?)
Posted on 12/02/2011 4:40:15 AM PST by SeekAndFind
China's move this week to keep its economy afloat isn't generating the big headlines that Europe's actions got, but is no less important in keeping the world's economic engine churning.
While coordinated action by the world's other central banks to enhance liquidity for Europe's banks stole the focus Wednesday, China's decision to cut reserve requirements for banks was even more important, some believe.
That's because the developed world has come to depend on China for a variety of reasons from buying up American debt to providing loans to growing businesses to keeping its mighty manufacturing base growing.
Easing the amount of money banks have to keep on hand, as the People's Bank of China did with a lowering of the rate by half a percentage point, helps accomplish those goals by keeping the lending spigots flowing.
"A change in the reserve requirement literally either frees up or delimits real lending by that nation's banks," hedge fund manager Dennis Gartman told subscribers to The Gartman Letter. "A lowering or raising of funding costs is a fly on the mule's skin, but a change in the reserve requirement is a board laid straight away to the mule's forehead."
Worries over China's economic growth have come as a surprise. Whereas the nation actually had been trying to slow down and control inflation that peaked above 6 percent over the summer, it now finds itself fighting to avoid a slowdown triggered by the European crisis.
Fresh data Thursday showed the Chinese factory sector contracting for the first time in three years, as a purchasing managers' index slipped to 49.0, the lowest since February 2009.
(Excerpt) Read more at cnbc.com ...
What happens? It crashes, hohum.
Be sure you give all your friends, collegues, selves, etc. that advocate for globalization a big fat “Thank You!” =.=
RE: What happens? It crashes, hohum.
You mean America’s economy will not be affected, and we can simply greet the event with a collective yawn?
I’m a big fan of John Maudlin. He thinks in terms of muddling through.
The events in Europe and in China are “muddling through”
The world is devaluing all currencies, devaluing debt and muddling through.
so what happens if this “devaluing” process results in major currencies being devalued to zero?
It’s not a matter of “if” but “when.”
For instance should a rape victim worry that the rapist has pneumonia?
The process will be incremental and drawn out. The goal is to make the inflation rate high enough to devalue the debt but low enough to be tolerated. It’s hard to predict numbers, but in say 10 years, the value of $1 will pay off $2 of today’s debt
The currency value should never get to zero, the price of land and gold and stocks and other hard assets will rise
I great it with both a yawn and nager because libtards, as with some conservatives, have long gone along with the globalization and interdependence BS to their own collective doom. Hence, why be worried or get exicted over something WE (most of the ‘free’ world) got our own selves into? Given your response, I’d wager you believe China is too big too fail and that we, through the IMF, should bail them the frak out too, huh? =.=
Say hello to Zimbabwe-ville for all of us. =.=
I would hope, that when you’re talking about the aftermath period - the recovery period - we would handle it better.
We might handle it better, but I doubt it given the current debt and spendung course/trajectory this country is on. Bernanke and his fellow idiot academic know-it alls are doing a absolute bang-up job in helping us “handle it better” and not heading us into Zimbabwe-ville. A few more QEs, whether openly or covertly, should ease all of our minds as to shoring up our currency, huh? /s =.=
Like I said in another post - I’m trying to wrap my puny brain around this whole business of credit default swaps.
While there is plenty of blame to assign to alot of places, it appears these “financial instruments” are the major source of trillions of dollars being gobbled up in an instant.
Is the Bernanke theory that you have to keep pumping money in - in order to counteract the dollars that get flushed down the CDS money-gobbling black hole?
“What happens if China’s economy crashes?”
Ummm, they unpeg the Yuan and become a consumer economy?
Ok, that was easy.
I would almost assert so.
Bernanke, as with those who think like him, believe (like the AnointedIdiot and most libtards) that if you through enough money at a problem or set of problems that eventually (God, Allah, or whomever willing) some sort of residue will stick, so to speak, and miraculously fix the problem/problems. It amounts to hogwash theoretical thinking which academic idiot know-it-alls like Bernanke have long taught: theory....no real world application or experience to back it. =.=
yes...once you leave the arena of dealing with “billions” and enter into coping with “trillions” -it seems it is all academic.
At some point the pyramid has to collapse. Better sooner than later.
I have long taught my students that the beauty of capitalism is that despite all the corruption, etc. that happens within it, it is a self-cleaning mechanism. In other words, the system will correct itself if given half a chance...for the betterment of all of us and the system of capitalism. These supreme idiots here and abroad are doing NOTHING but perpetually postponing the coming inevitable. Bet. And it’s going to hurt. But with any type pain, the pain will eventually go away.....indicating that things will get better through the healing process. =.=
Prices of goods in the US will go up slightly until we find another 3rd world country to supply us with cheap crap. The lumber, scrap metal, and waste paper industry will take a temporary hit on exports. The shipping industry will take a temporary hit.
RE: For instance should a rape victim worry that the rapist has pneumonia?
I’m not sure I get the analogy between trade and rape...
The big question is....once it happens, many will say this was all caused by capitalism.
They will keep trying to “fix” it with the very things that caused the collapse in the first place.