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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (54992)	3/1/2006 7:33:48 PM
From: KyrosL	Read Replies (4) \| Respond to of 110194

Hi GST. You have a very rosy view of China and a very gloomy view of the US. While I agree with you that the US is due for a severe recession in the not too distant future to correct its huge imbalances, I think future prospects for the US are fairly bright, compared to those of China, because I believe that US politicians will acquire a bit more spine relatively soon. The US simply needs to adopt policies that strongly encourage savings and discourage excessive consumption, particularly energy consumption. Say, a VAT and a hefty gasoline tax, like in the EU, accompanied by corresponding tax reductions elsewhere, unlike the EU. Hopefully, the coming recession will wake up the politicians so they take such action. As for China's productivity, China's present GDP per capita on a purchasing power parity basis is one seventh that of the US. It will take more than thirty years at current differential growth rates for China workers to become as productive as US workers. I very much doubt that China can sustain its current growth rate relative to the US for more than a decade or so. China's huge savings are mostly generated by a relatively small elite at the top, which enjoys a huge income inequality compared to the masses at the bottom. Most of Chinese savings are the savings of this small percentage of the population at the top of the pyramid. Of course, this state of affairs does not provide long term political and economic stability. The CCP will have to start distributing the fruits of growth much more widely soon, and that will decrease Chinese savings. Finally, one of the reasons of our huge trade deficit with China is rampant Chinese stealing of key potential exports of the US: software, movies, music, and other intellectual property. Hopefully, as China adopts civilized behavior, such stealing will diminish, and with it our trade deficit.

To: GST who wrote (54992)	3/2/2006 1:13:51 AM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

"And as our deficits swell in a recession we will certainly need their savings. On this score we will suffer badly as their savings pool will shrink exactly at the moment when our need for their funds grows more dire." That is huge. We are joined at the hip like never before. Would a more pessimistic view on the Chinese economy leading to a financial event (from misallocation of capital with massive overbuilding in plants,equipment and real estate) be even more negative for US interest rates going forward?