Zakaria says America’s only hope is to kowtow to the Chinese. As usual, I disagree. Also as usual, the most interesting words are not his own:
“People often say that China and America are equally dependent on each other,” says Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics. “But that’s no longer true. China has two ways to keep its economy growing. One way is to finance the American consumer. But another way is to finance its own citizens, who are increasingly able to consume in large enough quantities to stimulate economic growth in China. They have options, we don’t. There isn’t really any other country that could finance the American deficit.”
The Chinese are in this position because their labor is far cheaper than ours, and as such they can sell a lot of it. My response to this is essentially this. You won’t see any return to sensible trade and fiscal policy in our country until the Chinese can (or will) no longer purchase our bonds in such large quantities. I’m not saying I don’t want to see foreign investment, I’m just saying I want to see the kind of policies, like balanced budgets, that in a reasonable world would invite foreign investment. Zakaria and the NY Times, and apparently everyone in the media, is saying we desperately need to deleverage….later.
I guess I’d rather a sharp steep recession than an endless one. But no, it’s all spend, spend, spend, more easy money, bail out rotten banks, and go Christmas shopping, for the sake of the economy.