Tuesday, October 15, 2013
China Begins to Worry About the U.S. Fiscal Crisis
This article is about how the U.S. government shutdown is affecting more countries than just ours. Since our government shutdown our economy has began to decline due to the halt of all government funded jobs. Our economic decline is affecting other countries by causing the value of the dollar to decrease. So for countries like China, who has invested much of their money in U.S. bonds, the pain is starting to set in as they watch their money lose value. Also their hands are tied because if they were to drop the debt that the U.S. owes them it would heavily impact their economy since 60% of their foreign reserves are "in dollar-denominated debt".
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While the phrase "a de-Americanized world" makes me inexplicably angry, I can understand China's view. The United States is really struggling to keep its act together and why should the world economy be dependent on us when we clearly have internal turmoil. However, as the author says, US bonds are still a safer investment then most of China's (and the world's) other investment choices. That being said, the idea of a "supersovereign currency” intrigues me. It seems like it could be an interesting venture. However I believe it would be nearly impossible for the currency to gain traction in international affairs. Finally, while a “supersovereign currency” sounds interesting, I don't think China's argument was very well thought out when it included accusations of the US having a moral high ground despite "torturing prisoners of war, slaying civilians in drone attacks and spying on world leaders.” It didn't seem very relevant to me.
ReplyDeleteI agree that the entire world is playing with fire as far as relying on one economy to support the global economy. This might sound strange, but it reminds me of the idea of biodiversity in environmental science. When an ecosystem has many different sources of food, rather than one or two main sources, the ecosystem is much more stable because if one food source is eliminated, it has more to fall back on. I think the same ideas apply to economics. If a country has many "sources of food", it's economy will be much more stable because it has many sources of revenue to rely on, rather than just one.
ReplyDeleteI do not know anybody who says that default would not be disastrous—Ted Cruz for example has said default on our foreign debts cannot happen. As I have said previously, we do not have to raise the debt ceiling to prevent this. I would also like to note, however, that China’s criticism of the dollar is not an objective one. It would be in China’s long-term interest for the dollar to lose its status as the reserve currency—it would allow them to work to establish their currency as the go-to one (the destruction of the dollar would also remove China’s greatest competitor aka the US). China’s call for a de-Americanized world is certainly a wake-up call for the politicians to get their act together and work to balance the budget. America’s debt (which is tied to the long term health of the economy) is the single greatest threat that America faces. In recent memory, the Soviet Union collapsed because of its poor economy (as opposed to a military threat). Think of what would happen to the world if the United States should collapse with only China (or Russia) to stand alone as the superpower of the world.
ReplyDeleteChina's call for a "de-Americanized" world is understandable - after all, who would want to watch their own economy suffer without the ability to do anything about it? Quite frankly, I agree with China. America can't have all economic power - as much as we would like it to be that way - because if we fail, everyone fails. I'm not saying that we need to eliminate ourselves as an economic superpower all together, but at least get a little less involved in countries that can clearly support themselves.
ReplyDeleteChina’s criticism has been made rightly so but the United States is not the only one at fault. Sure our economy and the threat of a default could have tremendous impacts on the global economy but what happened to not putting all your eggs in one basket? Also, the article writes that “China generates billions of dollars of excess cash that it needs to park somewhere.” China could use some of that excess cash on social services that benefit the citizens of China. Or even spending it towards environmental protection acts. A “supersovereign currency” is interesting but I think highly idealistic. It would be beneficial and I think would help stabilize the global economy by removing power from any one country, but too difficult to institute.
ReplyDeleteI think China, along the rest of the world, is rightfully annoyed with the United States. While our politicians bicker, the rest of the world is stuck anticipating a disastrous economic collapse. To me, China's "de-Americanized" world is just a way of making themselves look like a better alternative. Most countries are in some way involved with America's declining economy, and it has the potential to devastate their own. China has realized that if they want to make major gains in the global economic race, why not act on the widespread anger towards America and, basically, kick them while they're down. One can clearly see, however, how nervous China is because of their massive ties to American economy. Instead of focusing on their own problems, they are seeking to magnify America's.
ReplyDeleteI understand why China might be concerned about a downturn in America's economy, but I think they might be going a little far by suggesting a "de-Americanized world" considering that we're still more secure than most of the rest of the world. China's criticism seems an opportunistic attempt at improving its own reputation in comparison with the US; they're jumping to overstate the insecurity of our economy. Also, I agree with Olivia that they should spend some of their massive reserves on programs beneficial to their people instead of just letting them build up.
ReplyDeleteThe term "de-Americanized" sounds funny to me. I agree with Emily Evenden in that the world shouldn't be completely reliant on the United States. When you think about it, the other countries are just setting themselves up for failure. The US is not perfect, we make big mistakes sometimes, like the government shutdown right now, and of course that's going to impact the whole world since EVERYONE is relying in us. It seems obvious to me that all this pressure on the United States should be spread out among other countries, especially after such events. As Olivia said, I think it's interesting that China is just sitting around with a surplus of money when they could most definitely be benefitting their citizens.
ReplyDeleteI think this is China's way of letting off a little steam, considering the fact there's a possibility of the U.S. stiffing them for 1.3 trillion dollars. The world economy is mostly based around the U.S, and for good reason. We still as of right now are the most safe investment option for any other country. We are still the worlds strongest superpower even though sometimes we don't act it. As for China saying they want a "de-Americanized" world, that is them showing their annoyance with our politics when it interrupts their business.
ReplyDeleteChina can speak about the idea of a "de-Americanized world" as much as they please, but when push comes to shove they rely on us just as much, if not more, than we rely on them. Hopefully this was some sort of threat China made in hopes of scaring our government representatives into reaching some sort of compromise? If not, it makes China look downright silly. They need us and its apparent that the rest of the world does also. Things shouldn't be this way, and hopefully things will change as a result. This government shutdown is a wake up call, not only Americans, but the rest of the world also.
ReplyDeleteMaybe China's rhetoric will get the attention of the politicians in Washington. Though the default was avoided, the gridlock between the Democrats and Republicans remains, and it would not be shocking to see a similar situation in the future. America is a powerful nation, but pride comes before the fall. It would be wise to put our differences aside and make a plan that would stable not only the economy but also the government. China does have some dependence on the United States, but they are not totally dependent on our country. America owes lots of money to China, and it's time for those in Washington to step up and get the job done.
ReplyDeleteChina saying that the world should become de-Americanized is ridiculous, they rely on us for so much exporting on their part yearly they sell such large amounts to us that it just makes it easier for them to use the dollar as a global back-up. I acknowledge that we owe them huge amounts of cash, but challenging us by wanting to get rid of our global currency is not the way to get it done
ReplyDeleteAs stated in the article, China has has similar ideas before on how the United State deals with fiscal issues, so it is not very surprising that they have a strong opinion now. It could become a large issue of the world depends on the economy of one country, not just the US. China's has variously ideas on how to deal with this issue they see, either make a global currency, strengthen its own currency, or do nothing. Each one of these ideas will affect people worldwide. the question is what is China's goal in all this? They could use this to advance just their country, or they could help the worldwide community or go on as usual.
ReplyDeleteChina definitely is facing bad repercussions for something outside of their control. How are they supposed to keep the US government running? Everything China has valued in US dollars and all of the debt owed is now devalued.
ReplyDeleteThe reliance of the world on America is perversely large, but this is not only the world's fault. If the US didn't assume such a big role in the world and spread itself too thin to control their government running and their other problems, we wouldn't be so largely detrimental to the world economy.