Quote:
Originally Posted by Broadsword2004
I think China is going to hit a wall at some point. All developing economies do. They are going to experience a crash at some point in the future, and people I think will see that their economy is not as "super" as many make it out to be (my belief anyway).
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Let's suppose that's true. What happens next?
China will have less money, lots of unemployed people, and an unhappy population that feels betrayed by their rulers. True?
So...China will cease to buy U.S. debt and may have to sell some of what it has. Which will tend to cause our interest rates to go up. That means our debt costs more to service. Which makes our annual deficit go up even more than it has.
China will want to get those unemployed people back to work. So...they ignore U.S. and world opinion and cut the value of the Yuan. Meaning that Chinese wages become really cheap. Which adds to the already existing deflationary pressures on U.S. wages.
It has been said of singularities (black holes) that once you pass the event horizon, all time lines lead through the singularity. I suspect we've passed the economic event horizon - and all paths will lead us through an economic crunch.
We owe some $14 trillion dollars. We can cut spending by about 40% or raise taxes by a similar amount, or some combination thereof. I can't see any of those as politically viable. We could default - again, not viable. Or we can inflate the debt away. That will destroy the savings of the middle class, the value of pension payments and social security, and the value of our foreign obligations. Those who are positioned advantageously will profit nicely.
Gee, I wonder which path is most likely?
The coming tsunami....I suspect the waves will be four hundred (400) feet high. It's going to hurt.