Blogs > HNN > ASIAN ABILITY TO PRODUCE OUTSTRIPS WESTERN ABILITY TO CONSUME

Mar 30, 2009 1:57 pm


ASIAN ABILITY TO PRODUCE OUTSTRIPS WESTERN ABILITY TO CONSUME



Capitalism has a basic weakness. No, it is not greed. It periodically causes production to outstrip consumption. That is what happened during the great depression and this is what is happening now. There are two possible solutions to the conundrum. The World War II one: Redirect production to weapons and then to rebuilding of what the weapons destroyed. The second - increase the number of consumers.

The United States has not caused this global meltdown. China and other export oriented countries did. It is their refusal to develop a domestic market willing and able to digest a large portion of their own increased production that led them to flood the world with their excess (cheap) currency and created the American housing bubble. Creating a new global currency will not solve the problem though it would enable the US to weaken the dollar and ease its debt burden.

At the moment, the Obama administration is trying to keep the global economy afloat by spending the money that the world is pouring into what it considers the American safe haven as fast as it can on a long wish list. But this policy cannot be sustained and the Chinese government knows it.

So why badmouth the US which is sacrificing its economic well being on behalf of the rest of the world? I suspect that the Chinese autocrats are afraid that a truly prosperous Chinese nation will get rid of them and they are doing what tyrants always do. They seek to redirecting their citizen anger from their own incompetence towards that of the American"foreign devil." In other words, if China does not change course, we may be sooner of later find ourselves in another destructive war which may make W.W.II. look like a picnic.



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