What the Chinese can do is gradually wean away from the US dollar. This I
believe has been already part of the strategy. It does give the US room for
some adjustment but these are structural issues. How is the US going to
(re)industrialize is an interesting thought in sectors that it has already
phased out? I cannot think of too many example where older (disappeared)
industries have reappreared in the same location.
anthony
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Anthony P. D'Costa, Professor Currently
Comparative International Development Senior Visiting Research Fellow
University of Washington Asia Research Institute
1900 Commerce Street National University of Singapore
Tacoma, WA 98402, USA 469 A Tower Block
Phone: (253) 692-4462 Bukit Timah Road #10-01
Fax : (253) 692-5718 Singapore 259770
http://tinyurl.com/yhjzrm Ph: (65) 6516 8785
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On Thu, 9 Aug 2007, Doug Henwood wrote:
On Aug 9, 2007, at 11:09 AM, Jayson Funke wrote:
There seems to be an assumption that if the sh*t where to hit the
fan, so to say, and the Chinese were to start dumping vast amounts
of T Bills, that the US is incapable of buying them back.
Seems to me that such an event would give rise to a perfect
neoliberal ploy/excuse to enact even more severe budget cuts to
raise the required funds no? Why should we imagine that the US
ruling class would allow such an action by the Chinese (which seems
highly implausible to begin with) actually wreck the US economy?
Such arguments make it appear as though the US has no counter
tactics of its own.
The U.S. would buy them with what? The whole reason we're borrowing
so heavily from abroad is that we don't have the domestic savings,
and we're running a giant current account deficit. You'd have to have
a deep recession to close a c/a deficit that's 6-7% of GDP.
But I doubt the Chinese would dump their holdings of Treasuries.
They'd be screwed too - their $1 trillion in reserves would tank in
value, and there'd be no one to buy their exports.
Doug
