Random Links XXXV
Fallows does make a good point re. ’90s SOE layoffs (tens of millions of job losses), and the late ’90s Asian Contagion (unemployment above 10%) as points of comparison for the current spate of Chinese unemployment. Of course neither of those ’90s episodes brought down the PRC. OTOH, I note that Fallows didn’t consider:
- How much of China’s stimulus lending ends up being junk loans due to rushed & insufficient credit evaluations?
- Possible credit crunch in China’s informal banking sector at least partly offsetting the credit extended by the formal sector as part of the stimulus.
- If Chinese exports are now falling solely due to decreased world demand, what happens if (when?) importers retaliate against PRC mercantilism (undervalued yuan, export subsidies, etc.) with import restrictions (e.g., tariffs). Given that a) import restrictions are stimulative for trade deficit countries; b) non-Chinese creditors – and perhaps even domestic US savings – may suffice to fund a somewhat more moderate deficit; and c) if the PRC responded to foreign import restrictions with a halting (or reversal) of dollar-denominated asset accumulation, this might (or might not) hurt the US, but it’d also hurt China (a depreciated dollar would basically equal a massive tariffs on Chinese exports to the US). Combine these three points, and it’s entirely plausible that US policymakers might conclude that the benefits of restricting US imports from China outweigh the costs. Which would make things interesting for China’s export-led economy….
WRT recent Chinese noises re. the security of their dollar-denominated holdings. So apparently, while China may indeed be concerned about US fiscal deficits, it may _also_ be concerned about US respect for implicit guarantees of other assets (e.g., Agencies, MMFs). What seems to have happened is that China tried to juice its portfolio yield by diversifying into such assets – and then it got burned when Frannie, Reserve Primary, & Lehman blew up, & US I-bank stocks & bonds collapsed. Now China wants assurances that such losses won’t occur in the future; and ’till then, it’s shifted its dollar purchases out of such assets & into Treasuries.
Mexican Civil War Armament:
Too Big to Fail:
Health Care Reform Costs: TANSTAAFL