Blogs > Cliopatria > AMERICA ONLY TALKS, SO CHINESE NEED NOT LISTEN

Nov 18, 2009 11:44 pm


AMERICA ONLY TALKS, SO CHINESE NEED NOT LISTEN



Robert Reich gets half of it right in China and the American Job Market when he points out that Geitner and Obama's talk of rebalancing the world economy is wishful thinking.

Why? Because the Chinese refuse to cooperate doing instead what is best for the Chinese regime if not the people.

But in fact China is heading in the opposite direction of"rebalancing." Its productive capacity keeps soaring, but Chinese consumers are taking home a shrinking proportion of the total economy. Last year, personal consumption in China amounted to only 35% of the Chinese economy; 10 years ago consumption was almost 50%. Capital investment, by contrast, rose to 44% from 35% over the decade.

China's capital spending is on the way to exceeding that of the U.S., but its consumer spending is barely a sixth as large. Chinese companies are plowing their rising profits back into more productive capacity—additional factories, more equipment, new technologies. China's massive $600 billion stimulus package has been directed at further enlarging China's productive capacity rather than consumption. So where will this productive capacity go if not to Chinese consumers? Net exports to other nations, especially the U.S. and Europe.

What Robert Reich fails to mention that the Obama regime makes it easier for them to continue to beggar America as they increase (not decrease) the global imbalance.

How? By encouraging American consumption with home buyers incentives, cash for clunkers and other such schemes. At the same time, the low interest rates discourage savings and grand schemes create an atmosphere of uncertainty discouraging investment.

The result? The American job machine is sputtering while the Chinese job machine is growing by leaps and bounds.

As Reich acknowledges, most of the Chinese people remain poor while the Americans are getting poorer. This is what Socialist Obama has been striving for all along because it is fairer. Of course, he has not become does not share his wealth with his Kenyan brother but that's another matter.


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