11/28/2009 11:42:13 AM EST

Will china surpass the U.S.?

posted by sesshoumaru2st

Will china overtake the U.S. because it is consuming so much of the U.S debt? i have heard many people say that it is a disaster if china have all the debt that THE U.S FEDERAL RESERVE can't pay for.

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Now these are my questions:How can china over power U.S higher dollar if it keeps on printing it's currency the way it does? If it keeps on printing it's currency it will further lower it's dollar price making it's business an easy "buy out" target for competing countries with higher dollar value;like the UNITED STATES.Yes,the argument can be made that their exports will be cheaper therefore getting more money due to increase sales,but how much will their profit margin be to gain money from those sales? Because of the excessive printing of their currency,it will be hard for them to buy imports and payoff expenses.Because,if the oil need to run china's power plants are for 50dollars a barrel and their currency are so low that they need 50k to pay for that in their currency,there profit margins cannot be enough if they sell a tv for 2 U.S dollars and receives profit margin for  3 cents -_-.(now remember we are talking if their currency is much lower due to excessive printing of their currency).

Secondly,i heard these same people who said china will take over--saying that the US dollar is worth nothing due to the removal of the gold standard as an underlining security(like futures contract,which you can pledge a commodity as a underlining security).But if the U.S dollar is worth nothing,why do we need to worry about the debt china is buying THAT IS WORTH NOTHING ? 

 

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Poll

WHICH will take over in the future?
AMERICA 16%
CHINA 83%

Votes: 6
Results | Other Polls
 Display:
Will china surpass the U.S.? | 15 comments (15 topical, 0 hidden)
Complicated question (none / 0)
China is currently artificially downvalueing it's currency to a certain exchange level with the $. This means China guarantees about 7 Yuan for one $. Thereby China is using the $ as it's "Gold Standart".
On the one hand China could destroy the value of the $ with the blink of an eye. They would just have to switch from $ to € as their standart. China would lose some money on that, the € would become more expensive and the $ would lose worth.
Because of the power switch between $ and € the OPEC would probably switch to €, too.
That would again mean that the $ would lose value.
All that would of course make American products more competetive in international trade, but America is not exporting enough to capitalize on that enough to make up for the rising costs of things they have to import.
In this scenario the price of oil to name one example would raise to ten times what Americans currently have to pay for it within weeks.
You can imagine the consequences of that.
America would become a Third World Country within months.
Of course that would put an enormous strain on the global economy, but America would probably suffer much more than China.
It is basicly like an economical nuclear bomb that China can drop, but America can't.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/28/2009 12:15:49 PM EST

How can there be any doubt? (none / 0)
China has a much bigger population.  They can out-consume us, out-produce us, out-invest us, out-everything us, and we're making sure they can overtake us as quickly as possible.

We are disinvesting in education and creating curricula that are certain to dumb-down our children.  We are disinvesting in manufacturing in favor of parasitic "industries" such as insurance and high-interest credit lending.  We spend our money on wasteful, unwinnable wars rather than invest it in, for instance, green technologies, in which other countries are establishing leads.

The corporatists don't care about The United States.  They care only about making money.  If they have to sacrifice their neighbors to do it, then that's just too bad.

by EveningStarNM on 11/28/2009 02:58:46 PM EST

Zhuanzhe (none / 0)
China is also brilliant at using the crisis to its advantage.

They invested more money than every other country to fight the crisis (by a long run) and they invested the second biggest percentage of that in green industries (South-Korea beat them in that).

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/28/2009 03:08:36 PM EST

[ Parent ]
couldnt agree more Evening (none / 0)
When I was watching the spectacular Olympic opening ceremonies that China put on I was thinking right then that it was kinda a sign the U.S century had come to a close.

A conservative believes nothing should be done for the first time

by C D on 11/28/2009 04:06:39 PM EST

[ Parent ]
I thought so, too. (none / 0)
The Olympics opening ceremony was an announcement of their coming supremacy in world affairs.  What's more, the Chinese people are proud of their country.  They see their opportunity, and they're not stupid: they're going to take it.

By the way, the Chinese about to send their second mission to the Moon.  I may start giving odds that they'll beat us there simply as a matter of their national pride.  Personally, I don't care who does it, just so someone does.  If the United States doesn't want to be the leader, then the Chinese may as well do it.

by EveningStarNM on 11/28/2009 04:37:23 PM EST

[ Parent ]
Zhuanzhe II (none / 0)
The problem still remains that the Yuan is bound to the $. Admittedly at the moment enormous amounts of $ are printed and that is why the Yuan is losing worth, but that is in China's interest.
If they would stop coupling their currency to the $ the Yuan would be worth much more. This means if they would stop this policy they could print twice as much money without the Yuan losing any worth.
I know this might sound crazy, but when you think about it, it is quite logical. As long as the Yuan is undervalued they can sell more products and thereby enhance their position in the long term view.
Maybe it's a difference of mentality, maybe a by-product of modern economy. While Americans want to have short term profits and wants to show of, China thinks on a long term basis and likes to be misunderestimated. The Chinese GDP is growing at about 8% per year. The incredible thing is not how big this number is compared with western economies, but that it could be bigger. China currently limits its growth to this number because it is considered a lucky number and they think if it would grow any faster the economy could "overheat".
China also chooses in what industries they are going to be dominant. Example green energy has been subsidized in Germany for quite a while and therefore Germany was leading in that area. Until the economic crisis came and China used this situation to reposition itself. Now the German companies have a really hard time to compete with Chinese ones, because China had a bigger stimulus package than every other country and of that money they have invested really big percentage in green industries (second only to South-Korea).
At the moment China is just satisfied with growing as much as they want and having their currency underestimated. The longer they can keep that going the bigger will their power advantage be when it comes to an economic war. In the long term it will be good for China to concentrate on the long term planning. It will be of no consequence for America's financial elite, because they will just become China's financial elite as soon as China is going to win the economic war. An honest capitalist doesn't care if he leaves chaos and suffering as long as they have maximised their profit. That's why they play along with the fictional American economy. They treat the whole stock market as a big Ponzy-Scheme. They try their best to motivate the middle class to invest and thereby add money to the "Casino-Economy" that is called Wall-Street. At certain intervals they secure their wins and let a part of that economy collapse.
Internet-Bubble, Housing-Bubble etc... The elite saw it coming when sub-prime lending led to a situation where a bank had to be temporarily nationalized to save the economy from bigger problems.
BTW I'm not referring to the situation in America, but to the failing of Northern Rock in the UK. To the financial elite, that was the sign to secure their winnings and get out of it for a while, because the bubble will burst.
The ones who are going to suffer are the American middle and lower class.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/28/2009 04:51:10 PM EST

Is there any occasion.... (none / 0)
...or development or political activity, nationally or globally-as-related-to-Amer ican-interests, by which the ones who suffer are _not_ the American middle and lower class?

by Milltycoon on 11/28/2009 07:03:17 PM EST

[ Parent ]
Hehehe! I didn't know you were such a comedian! (none / 0)
Hohoheeheehahaha!  Stop!  Please! Hohahaheehee!  Yer killin' me!

Haha! Heh.  Hu... er...

Hmmm.

Hey!  I'm "middle class"!  That's not very funny!

by EveningStarNM on 11/28/2009 07:42:00 PM EST

[ Parent ]
THE BLINDNESS (none / 0)
LOL just like how the U.S dollar was high and interest rate were high like currently Canada, Europe,and China,they must come down again. China's GDP is at 8%,when that inflation is at it's highest it will come down making china's economy look like trash compare to the U.S. economy,which will be booming. See,it's a cycle, when U.S economy is bad (the dollars is low,money is loose to stop deflation,unemployment..ect ) the Chinese,Europeans,and the Canadians economy will be in a much better position and compared to the US economy,it will indeed look better.In contras, when the U.S economy is doing well China's,Europe's and Canada's economy will look bad compared to ours.Listen,every one of these country follow the central banking system layout *BUY CHEAP-SELL HIGH*all of them are in the same risk as the United states,which is INFLATION and deep recessions.And for further information there is a natural energy working site located in Philadelphia which can power the whole U.S without coal for 20 years.Now that's only 1 site keep that in mind.We have the mind and the skills to overcome,don't get caught up about worrying about the dollars and that china is going to beat the U.S,that's nonsense.In fact,the federal reserve is not worried about china.Bottom line is this,when one country's economy is down the other is up and vice-versa.

by sesshoumaru2st on 11/29/2009 12:16:19 AM EST

Little misunderstanding (none / 0)
China's GDB is not rising because of inflation, it's real economic growth. They are producing more, they are employing more people and they make more money. This means that the Chinese position is becoming better and better there is no reason, why it should come down.
China is currently facing it's biggest crisis for decades. What is the consequence? 8% growth. Just like in the Year before.
The Chinese economy is mainly state managed ("communistic") that's why you have to treat China as the biggest company in the world when you look at it's economy.
Compare it with Microsoft. Do you think that in a few years Microsoft "must come down" and then all the competition will look good and Microsoft bad? Keep in mind that China's position is much better than Microsoft, because their much more diversified and have more political power.
Did the circle you were talking about work out well for American car manufacturers (now partially owned by China)?
Worldwide economy used to work in the circles you discribed. That was the reason for Keynesian politics.
The basis for that was a relatively "free" market". Now China controlls bigger and bigger parts of the worldwide economy. The more they control, the less free the worldwide economy is going to be.

Face it people it is time to learn Mandarin.
Lesson 1:
 Zhuanzhe=Crisis/Chanc e
A word used to describe a major change in a situation without valueing it. The thought behind it is that if things change you have to deal with it and not muse too much whether it is good or bad. The current crisis shows in reality what that theoretical concept means.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/29/2009 02:59:38 AM EST

[ Parent ]
That was pure nonsense (none / 0)

OK you said that china's economy is not due to inflation,i'm telling you the growth china is having now is a lower form of inflation.Look at the fundamentals,when Empolyment is rising ,when dollar price is HIGH,which is caused by the lowering of interest rates-and interest rate is use to set a floor on the deflation spiral(but will soon be raise by the central bank to set a roof on inflation),production is up these are all forms of a growing economy and Just like the U.S. it will reach the point of inflation it always does.The thing is,you have to understand the cycle;all countries face this at some point and america and the world has been in recession and bubbles time and time again.Understand that this what the central banking system cause and wants to happen.This(federal reserve/central bank) create competition,controls money flow,and controls the dollar price,and the economy.Just like i anticipated due to china's new growth while the U.S. dollar is low,production is low,unemployment is high,and interest rate is low(which by the fundamentals are signs of just coming from an inflationary period)you favor china's economy more than the U.S because it is growing faster now,BUT when U.S starts to grow what will china look like?It will be in a deflation.This is the bottom line,2009 company earning reports have shown stabilization in the market,which Ben Bernanke stated will happen way back in 08,and that  we will see a little recovery in 2010,which can be seen if you watch the movement of the stock market that has always been a tracker of the economy's growth.And by the way,china doesn't have most of the world U.S does, the plan of the central banks of U.S. and England is to issue reserves between themselves,in turn the England's central bank will loan U.S. dollars  to other banks all over the world.What this mean is the federal reserve is trying to supply the demand for the dollar which will lower interest rate in the whole global market of exchange.With that said,Ben Bernanke stated that the demand for the dollar is still high,so they have to supply it with good conservation and strategy.The U.S has HYPER inflation in check,because it creates RESERVES not more money in the market.Ben Bernanke said issuing more money  is for stabilizing the market in U.S. and world(i just mentioned the process ,where the fed shares reserves with England).This is done through some good fundamentally good practices like creating reserves which stays INSIDE the banks,these are not loan out so that the money supply will increase.Instead they are given back to the fed and this is ONE of the processes which the fed can tighten rates and the money supply putting a roof on inflation.3% of the money supply is real money and 97% is in the computers.when the fed rise the fed fund rates, this is attractive to the banks and in turn,as we have seen for many years,the banks  BUY U.S securities.The previous process in turn will tighten money supply and help put a roof on inflation,and this happens when the dollar is high,and interest rates are high,and employment is high,and production is at it's highest(just like what CHINA is benefiting from now,think about that).THE fed can also produce bonds attractive enough to draw back the 97%,and they have other measures assured by the FED's chairmen.NOW if that 97% is return what will happen to the dollar?just guess man just guess.But if he lets that happen the country will be in ETERNAL DEFLATION,in fact a recession,so fed cuts rates and rise them at the right time not to cause deep deflation and HYPER inflation.This is what ENGLAND does CHINA does and the world does.Keep in mind that the fed said the 3% is not growing rapidly it's the RESERVES which can be easily drawn back through strategic measures,and issue to other central bank in other countries.

lesson learned watch,listen and interpret meetings hold by the fed,politicians, and conference calls from the companies of America to hear how things are going.

by sesshoumaru2st on 11/29/2009 09:22:35 AM EST

[ Parent ]
sorry for the errors (none / 0)
I made many grammatical errors,which i will decrease in future replies.

by sesshoumaru2st on 11/29/2009 09:32:45 AM EST

[ Parent ]
The cycle is broken (none / 0)
"U.S starts to grow what will china look like?"

China will grow, because the Chinese economy is mainly based on exports. When America can consume more China can export more, therefore grow.
Has America been in deflation for the last three decades? Because in this time Chona had an average annual growth of 10%. When was the last time America had that?
To China 8% growth is the minimum because they want to become stronger compared with their competition and they want to limit it below 12% because they are afraid that the economy will overheat.
For a foreigner you have very well adapted to the American "us-against-them-mentality" . China doesn't want to beat America, they want to exploit it. Big difference.

"china doesn't have most of the world U.S does"

None of them has most of the world, but admittedly America has currently a bigger part. What I'm trying to explain is that it won't stay that way.

After that you seem to talk about the benefits of having reserves. I could not have made a better point. Currently China's foreign currency reserves have reached a value of more than 1Trillion $. They could raise their own reserves with the blink of an eye, because they control the value of their own currency. That's the advantage of having an underrated currency. They can down or uprate it as they want. And they raised the value of their currency to fight inflation in the past.

"3% of the money supply is real money and 97% is in the computers"

Money in the computers is as real as printed money. There is no difference except that it is easier and faster to transport.

I have to say that it was really hard to read your post, because it was not always clear what you were speaking of and what your thought process was. Otherwise I could have explained things more accurately.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/29/2009 11:48:18 AM EST

[ Parent ]
You don't get it (none / 0)

The fact that you have stated that AMERICA had no growth is showing the lacking of understanding you have.To simply put, america is in a deflation now due to INFLATION.What this means is they where at their highest in growth,then they began to fall now.Therefore, your logic is incorrect and you need to look at that.The other is 97% of money in computers is NOT REAL PAPER money,and the fact that it is easier to transport means the fed can easily move it out of the monetary circulation,which in turn raises the dollar;this is also what the fed approves-- HIGHER DOLLAR.

You state that china can double their reserves,how will they double it if there is no demand for their currency?United states currency is the highest demanded,and as i have stated that this is why the fed is issuing money to England,which deliver the U.S reserves it's banks and the banks of the world.This is due to england being the underwriter and the dollar is in demand.

This is it,china economy as crashed before and time again JUST like the U.S..It is just recently they have return to growth,and in those time U.S. was in the bubble housing market and it's stock market was booming;which is the opposite of what was occurring in china.Lesson"THE CYCLE" you need to get that, and also get that china's growth will not last just like all the countries who faced recessions.That includes china they face it before and will again.

by sesshoumaru2st on 11/29/2009 02:07:00 PM EST

[ Parent ]
Just recently for 30 years (none / 0)
"The fact that you have stated that AMERICA had no growth is showing the lacking of understanding you have."

I didn't state that, I asked a rethorical question (more on that later). Of course America had growth, but so had China. There is no correlation that the Chinese economy is growing when the American one is getting smaller. As I explained it is even easier for the Chinese economy to grow when demand is high in America.

"You state that china can double their reserves,how will they double it if there is no demand for their currency?"

It's not as easy as that. It is a fact that China is keeping the value of their currency artificially low, so they are able to export more. If they would stop doing that the Yuan would become more valuable. It is not the case that people somewhere say: Oh, $$ are great, they are nice and green and American, I want to have many of them.

How much a currency is worth is determined by much more complicated things and reflects the economic power of the country that currency is mainly used in compared to other countries. That is the reason why the $ has lost half its value compared to the € in the last 5 years.

If you have enough reserves it is quite easy to keep your currency artificially low. Keeping it high is much more difficult and hardly to achieve artificially.

"It is just recently they have return to growth,and in those time U.S. was in the bubble housing market and it's stock market was booming;which is the opposite of what was occurring in china."

Another example of your language making you hard to understand.
I have no idea what you are trying to say here.
In the last 30 years America had phases of bigger (about 4%) and smaller growth (about 1%). Some industries have struggled in those times (e.g. internet bubble), but most of the time there was a small growth. Then one year ago the housing market bubble burst, the stock market was influenced by that, but the stock market is recently growing again.

Now we can compare that to China. Indeed China had a growth of 8-9% in the last year. This is not really high, because America's economy has tanked.
It is not us against them. It is a low number, because China could export less, because of the declining demand in Europe and America. That was the worst that could have happened to the Chinese industry.
That's why their numbers are so bad.
Usually China's GDP grows at about 10%. That was the average during the last 30 years. In this time the growth was always between 8 and 14%. There was no "cycle". If 30 years to you are just a recent trend, than please explain to me what could be a substantial, long term trend.
And while America had to get bigger debt (which decreases the value of the currency) China increased their reserves.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/29/2009 03:03:36 PM EST

[ Parent ]
Will china surpass the U.S.? | 15 comments (15 topical, 0 hidden)
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