China surpasses America as the number one economy.

[compuwiz1]

But they won't, because it's virtually a mexican standoff. If either side tries to screw the other they can't avoid screwing themselves.

Good point. I guess there is the answer to my question as to how this whole thing benefits us.

 

[fskimospy]

Good point. I guess there is the answer to my question as to how this whole thing benefits us.

It's not a Mexican standoff at all. We have China by the balls. They could never buy another treasury again and we would be fine. They would be in deep shit though if they stopped buying assets of some sort here to suppress their currency.

 

[Svnla]

I would rather bet on the US because even with all of our flaws and screw ups, we do not have these problems as china:


1. Extreme pollution in water, air, and land.
2. Running out of water in Northern part of china (on top of #1).
3. More chinese are living longer and only 1 child per family ==> less working people to suppor more elders.
4. Desertication in the North.
5. More males than females (as in million and million).
6. Uprisings and unrest in Xinjiang, Tibet, and other areas.
7. Real estate bubble (massive ghost cities with almost no one live in).

and so on.

That's why stinking rich chinese are moving their kids and family members to US/Canada/UK/EU/Australia/and other countries.

 

[UncleWai]

Don't over analyze, China is light years behind the US and other western countries.
China's growth is built on complete lack of moral values and the complete disregard of property rights. Fake eggs, fake soy sauce, fake infant formula that cause babies head to grow the size of basketball. The country makes no attempt to correct its flaws. It will crash and burn when the credit bubble bursts. The people in China no longer manufactures, now they are all property managers trying to flip homes for profits.

 

[werepossum]

PPP is all that really matters if you have domestic production. If you are Russia and you export commodities and import everything else, then yes, raw dollar value matters. If you are China, you can produce everything at home. If US builds an F22 jet for $300M, and China builds its equivalent for $30M, US is not 10x better economically than China. They both created comparable economic value in real terms.
Even if you account for cost of car and gasoline, you can take a cab in China for 50 cents per mile and it's $5 per mile in the US, a Chinese cabbie is not producing 10x less value than an American cabbie in real terms.

I largely agree as China is by far a net exporter, but Eskimospy has a point about oil.

eskimospy is correct that it doesn't matter in the near future due to oil being denominated in dollars and with over 90% of industrial production tied to oil. As long as OPEC continue to honor the 1973 Aramco deal and back the US dollar in exchange for military protection. I guess the question is how effective will Russia's flailing be around the world trying to establish a BRICs energy alliance that can significantly surpass OPEC.

Currently China will be behind the US for the forseeable future in absolute terms as world economic activity relies on oil, which must be purchased with Fed paper. The dollar is the lynchpin.

Um, no, for two reasons. First, China has shittons of dollars to buy oil. And second, oil doesn't have to be purchased with dollars, it's priced in dollars. Huge difference.

It's not a Mexican standoff at all. We have China by the balls. They could never buy another treasury again and we would be fine. They would be in deep shit though if they stopped buying assets of some sort here to suppress their currency.

Maybe it's my lack of experience here but it seems to me that if someone's balls are in one's mouth, then one does not have that person "by the balls". In fact, just the opposite.

 

[fskimospy]

Maybe it's my lack of experience here but it seems to me that if someone's balls are in one's mouth, then one does not have that person "by the balls". In fact, just the opposite.

China needs to buy US treasuries assets far more than the US needs China to buy US treasuries/assets.

They could stop buying them tomorrow and we would be fine. They would be very not fine though.

 

[finglobes]

Chinese economy IS the US economy. US foolishly drives its jobs to China, who then rises up like a great parasite, vampire economy. Every see all those ghost cities built in China to inflate it GDP numbers? Its bizarre. I know people who leave US to teach in China and they have to bring toiletries with them because they cant be bought in China. If the US woke up and stopped driving its own jobs to China the rug would get pulled out from that house of cards. The US is insane. As historian Will Durant said "Great civilizations don't die - the commit suicide". That's the West - and China is living off the miasma of their decay



"Video Of China's Ghost Cities Is More Surreal Than Anything We've Ever Seen"

http://www.businessinsider.com/60-minutes-chinas-ghost-cities-2013-3

 

[Newell Steamer]

Well, America's wealthy got what they wanted:
1) more money by sending manufacturing jobs to China (more profits)
2) more money by investing in China's phantom GDP growth (a guaranteed return)

However, they are feeding a beast that doesn't really look out for the wealthy; http://www.businessweek.com/articles/2014-09-15/almost-half-of-chinas-rich-want-to-emigrate

So, what will they do? Go back to the very government that they abused and used? Well, the US is much weaker, thanks to the money/work you decided to funnel and dump into a dead end (aside of course from the money). They've painted themselves into a corner, but, they have their sacks of money.

 

[alcoholbob]

Don't over analyze, China is light years behind the US and other western countries.
China's growth is built on complete lack of moral values and the complete disregard of property rights. Fake eggs, fake soy sauce, fake infant formula that cause babies head to grow the size of basketball. The country makes no attempt to correct its flaws. It will crash and burn when the credit bubble bursts. The people in China no longer manufactures, now they are all property managers trying to flip homes for profits.

Interesting chinese are saying the same about US meat exports lol.

 

[ElFenix]

PPP is all that really matters if you have domestic production. If you are Russia and you export commodities and import everything else, then yes, raw dollar value matters. If you are China, you can produce everything at home. If US builds an F22 jet for $300M, and China builds its equivalent for $30M, US is not 10x better economically than China. They both created comparable economic value in real terms.
Even if you account for cost of car and gasoline, you can take a cab in China for 50 cents per mile and it's $5 per mile in the US, a Chinese cabbie is not producing 10x less value than an American cabbie in real terms.

china can't even build shitty 1960s jet engines.

 

[First]

Yeah, that article truly is horrid click bait. The US is so vastly larger economically than China it's not even debatable. PPP is widely ridiculed for these sorts of comparisons, it's never really been taken all that seriously for all the reasons previously discussed.

Additionally and most importantly, the U.S.' economic reach and power goes far beyond our shores with multi-nationals that own assets around the globe. Read this article for a reality check, quoted below:

In the age of globalization, then, the rise of Chinese national accounts could actually reflect the power of foreign transnational corporations, and we cannot know simply by looking at national accounts. Another example is the Chinese auto market, which has exploded to become the largest national auto market in the world since 2009. But again, in the age of globalization, this does not at all mean that Chinese firms are world leaders in automobiles. In fact, Chinese firms can’t even compete within China, let alone abroad. There are more than 100 Chinese auto firms, and despite decades of state subsidies and protection, their combined market share in China is less than 30 percent. Foreign firms, dominated by General Motors and Volkswagen, make up the rest. This is totally different from the days when the Japanese and South Korean auto markets emerged, as the rise of their national markets reflected the rise of their national auto firms (Toyota, Honda, Hyundai, etc.), establishing a strong base from which to compete abroad.

So we can no longer rely on national accounts to determine national power. Rather, we have to investigate these corporations themselves to encompass their transnational operations — for which national accounts (conceived in the 1920s) are wholly inadequate. Once we analyze the world’s top transnationals, a startling picture of economic power emerges. For one thing, national accounts seriously underestimate American power, and seriously overestimate Chinese power.

So this is what I do in my research, some of which is published in International Studies Quarterly. I analyze the world’s top 2,000 corporations as ranked by the Forbes Global 2000, organize them into 25 broad sectors and then calculate the combined profit shares of each nationality represented. The extent of American dominance is stunning. Of the 25 sectors, American firms have the leading profit share in 18, and dominate (with a profit share of 38 percent or more) in an astounding 13 of these sectors — more than half. No other country even begins to approach this American dominance across such a vast swath of global capitalism. Only one other country, Japan, dominates a single other sector (trading companies), which happens to be one of the smallest of the 25. By contrast, American firms particularly dominate the technological frontier, including a whopping 84 percent of the profit share in computer hardware and software (despite China becoming the largest PC market in the world in 2011), 89 percent of the health care equipment and services sector and 53 percent of pharmaceuticals and biotechnology. Perhaps most surprisingly, American dominance of financial services has actually increased since the 2008 Wall Street crash, from 47 percent in 2007 to an incredible 66 percent profit share in 2013. In short, despite almost seven decades of increasing global competition and the rise of vast regions of the world (most of all East Asia), American transnational corporations continue to dominate the pinnacle of global capitalism, a phenomenon that national accounts miss.

This is not to deny that China’s rise has been extraordinary, but we have to go beyond national accounts to understand what’s going on. Basically, China’s economy has a two-tier structure: One tier is state-dominated and closed to foreign (or even private Chinese) competition, and the other is more or less open. In many of the latter sectors, American firms already dominate, so in this sense the rise of China actually increases American power and influence as these companies become increasingly embedded in Chinese society. As for the nationally protected sectors, China has risen rapidly mainly in those sectors that are state-dominated (banking; construction; forestry, metals and mining; oil and gas; telecommunications), but these sectors are largely contained within Chinese borders, and their Chinese state-owned enterprises don’t compete with American transnational firms abroad (oil and gas being a notable exception).

But if we now live in the age of globalization and these companies operate all over, then can we really count them as American power? Yes, because they are still ultimately owned by American citizens — of the top 100 U.S. transnational companies, on average more than 85 percent of their shares are owned by Americans. Thus, an incredible 42 percent of the world’s millionaires are American (as opposed to 4 percent Chinese), and more than 40 percent of the world’s household net worth is based in America. That the global share of U.S. GDP has declined to less than a quarter since the 2008 crash simply reveals how global American corporate power has become.

 

[First]

China should be borrowing money from us, not the other way around. China should be buying products from us, not the other way around. We, via, our politicians have given it all away. Everyone knows that most of the crap you buy at Wal*mart is made in China. Some once grand American made products now say made in china on the box. How does this somehow help us, as some will argue?

China could sink this country at will, just by pulling the plug on our credit.

No. Just, no.

 

[Atreus21]

It's not a Mexican standoff at all. We have China by the balls. They could never buy another treasury again and we would be fine. They would be in deep shit though if they stopped buying assets of some sort here to suppress their currency.

Is this some strategy to force them to decouple their pegged currency? LegendKiller explained this awhile back and it made sense, but I forgot it.

Any news about China being screwed long term falls on my eager ears. So far all I have is their demographic crisis.

 

[fskimospy]

Is this some strategy to force them to decouple their pegged currency? LegendKiller explained this awhile back and it made sense, but I forgot it.

Any news about China being screwed long term falls on my eager ears. So far all I have is their demographic crisis.

Long story short, trade imbalances make it so there is an increasing demand for the nation with the trade surplus's currency relative to the debtor nation. More demand for a currency means a greater price for it relative to the debtor currency. A pricier currency makes a country's goods less competitive, because they cost more in the places they want to export to.

One way around this is to purchase a lot of assets and other stuff (treasuries) in the debtor country to reverse this effect. That's what China is doing. If they stop, their currency will continue to appreciate, and for an export driven economy that's really bad news. They are trying to shift towards a domestic consumption based economy in part because of this vulnerability.

China seems to have a number of pretty serious internal problems. History tells us that they will not be able to keep up their pace of growth and already cracks seem to be showing. I guess time will tell though?

 

[Moonbeam]

I drank the water in Thailand. Nearly died.

I drank the water in New Jersey...



You know what, nevermind.

You got fat?