The problem is that global capital is stuck.. US T-Bills, normally the safe have, are already far lower than the Fed Funds rate. So where will this capital flee to? The Euro? The Yen? Gold?
right now, it's looking like gold...
and i'm no 'gold bug'....in fact i despise the 'shiny relic' as an investment....but you have to go where the markets lead <ng>
as to the rest of your post...
i get the sense that we are going through a paradigm shift from west to *east* wrt economic growth....doesn't mean that the west is toast economically, but it does mean the east is where it's at wrt ongoing growth
that said, east economies recognize that the western economies are their primary market....they don't want to kill the goose that lays that <cough> golden egg
china has an inflation problem....and guess what? their inflation is being *exported*
remember the days when the conventional thinking was china was exporting *deflation*.....well yah, when it comes to tennis shoes, kid's toys, and electronics....but they are sucking up commodities BIG TIME which is leading to a global commodities boom....lot's of chinese $$$ chasing limited commodity goods
bottom line is discretionary spending is being destroyed by ever increasing costs of essentials like food and energy...yet americans continue to *spend* (albeit on credit)
and i disagree with your point about the yuan....
even IF it is revalued, the cost disparity is so HUGE that there is NO WAY manufacturing will suddenly be 'repatriated'...i just don't see that happening....all it means is that the price of chinese goods will go up from bargain basement prices to *somewhat* higher prices for *their* consumers....that doesn't mean that suddenly manufacturing in the west is somehow 'cheap'....it just means that chinese manufactured goods go somewhat higher, iow, even a recession here will not change the secular trend of manufacturing in the east (just imagine the type of protectionist tariff that would be needed to offset the economies of scale in china <shudder>)
yes indeed, we are wobbling, but it is in no one's interest for the west to sink into a financial morass and depression....that scenario hurts everyone....when we (meaning the global economy) gets to a semblance of 'parity' meaning not exclusively dependent on the western economies, then the historical imbalances will not be the critical determinant of which way the financial winds blow
we are not there yet, but i believe we are heading in that direction.... |
