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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: orkrious who wrote (22888)12/5/2004 9:38:01 PM
From: Wyätt Gwyön  Read Replies (1) of 110194
 
stop buying our worthless pieces of paper?

Japan has been at it for 40 years, and has built up the largest net international investment position in the world as a result. they have no choice under their mercantilist policies, which require them to have a structural C/A surplus.

since the rest of Asia copies Japan, they also try to be mercantilists with structural C/A surpluses. so they must also recycle their C/A surpluses into our confetti. but as i said many times, Japan can better afford this than the developing Asian countries due to Japan's low capital requirements (because Japan is already overdeveloped). China, with high capital formation requirements, continues to run a mild C/A deficit despite the big surplus with us.

if China were smaller (like Korea), then perhaps they could be another Japanese mini-Me like Korea. but the large size of China means the capital requirements are literally earth-moving, and upset the entire balance. China can never become another Korea (which is trying to become another Japan).

so, it seems to me the question is, what will China do when it discovers that the policies that worked for Korea and Japan will not work for it, and how does this affect all the other players?
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