Thursday 23 September 2010
China-US trade war finally hoves into view
They also created the huge Real Estate and Asset bubble that wasted the economies in 2008 - perhaps irretrievably, we won't know for a decade or so.
Despite this obvious narrative, nothing was done following the crisis to remedy the key issue, the huge trade imbalance between East and West. In the East, they are keen to keep their artificially low currency rates to help spur growth and hollow out Western economies - it is pure mercantilism.
So this news today that the US is finally going to do something about this is welcome. Yes, it is gonna hurt. you can see from the Chinese reaction that they are not just going to go along with this challenge to their strategy. yet it has to happen, or else the West will be denuded of jobs and in turn the East will overheat and suffer a collapse that will take the West even further down. if China think they can win they should remember the US has the World's reserve currency and can print its way out of Chinese deflation.
What is worrying in the world today is that the international economy is so developed and yet the international institutions, indeed international feeling for the common man, is very underdeveloped. Solving these macro issues is both crucial and a Sisyphean task.