China to America: No More Money For You
It seems America’s days of free lunches are drawing to a close.
Today the news came out that Chinese banks have been given a directive from the CBRC (China Banking Regulatory Commission) to stop lending to American banks while the crises is still going on.
Also comes news that China may be trying to make a deal where all foreign central bank agree to not dump their US debt.
Maybe the bigger bailout going through congress is making them nervous.
Or it could have been President Bush’s switch from “the economy is strong” to “the entire economy is in [mortal] danger”.
Perhaps it was listening to this guy tell the truth:
Someone important might even have stumbled upon Peter Schiff’s analogy below from Crash Proof
Let’s suppose six castaways are stranded on a desert island, five Asians and one American. Their problem is hunger.
So they sit down and divide labor as follows: One Asian will do the hunting, another will fish, the third will scrounge for vegetation, the fourth will cook dinner, and the fifth will gather firewood and tend the fire. The sixth, the American, is given the job of eating.
So five Asians work all day to feed one American, who spends his day sunning himself on the beach. The American is employed in the equivalent of the service sector, operating a tanning salon that has one customer: himself. At the end of the day, the five Asians present a painstakingly prepared feast to the American, who sits at the head of a special table built by the Asians specifically for this purpose.
Now the American is practical enough to know that if the Asians are going to continue providing banquets they must also be fed, so he allows them just enough scraps from his table to sustain them for the following day’s labor.
Modern-day economists would have you look at the situation just described and believe that the American is the lone engine of growth driving the island’s economy; that without the American and his ravenous appetite, the Asians on the island would all be unemployed.The reality, of course, is that the American is not the engine of growth, but the caboose, and the best thing the Asians could do would be to vote the American off the island—decoupling the caboose from the gravy train. Without the American to consume most of their food, they’d have a lot more to eat themselves. Then the Asians could spend less time working on food-related tasks and devote more time to leisure or to satisfying other needs that now go unfulfilled because so many of their scarce resources are devoted to feeding the American.
Ah, you say, but that analogy is flawed because in the real world the United States does pay for its “food” and Asians do receive value in exchange for their effort.
Okay, then let’s assume the American on the island pays for his food the same way real-world Americans pay, by issuing IOUs. At the end of each meal, the Asians present the American with a bill, which he pays by issuing IOUs claiming to represent future payments of food.
The castaways all know that the IOUs can never be collected, since the American not only produces no food to back them up, but also lacks the means and the intention of ever providing any. But the Asians accept them anyway, each day adding to the accumulation of worthless IOUs. Are the Asians any better off as a result of this accumulation? Are they any less hungry? Of course not.
Whatever the reason, China’s going to be eating better than they would if they keep pouring gas into America’s sputtering economy.
If China’s central bank were really smart, they’d be the first to blink.
Really like that Peter Schiff excerpt. Unfortunately it seems government stupidity has gone global, no one is safe.
America-too many years of buying things they dont need with money they dont have. Hopefully a new age of living within one’s means follows.
Austrian economic theory was right
Hey Rod – a new age of living within one’s means will have to follow.
The only question is how soon. And that hinges on how much further intervention there is from the Federal Reserve and other central banks.
Honestly can’t say I agree with the crap in the Schiff excerpt, but yeah, Americans will have to start saving more and relying less on credit.
Hi Zuoai – Schiff’s main point is that in exchange for paper scrips that won’t hold their value (can’t hold their value based on our debt, future obligations, and current money creation), China and other countries exchange real goods.
What part of that is crap?
A) Americans produce more tangibly valuable things than Chinese – by far every year. The Chinese are less willing to buy.
B) CHINA STEALS EXTRAORDINARY AMOUNTS OF IT. Chinese have no respect for Intellectual Property – which is the engine of every future economy. By definition, the Chinese can only ever play ‘catch up’ this way. They can NEVER GET AHEAD because they will never invest in any real R&D whatsoever (because the investors can’t protect what they invent).
The whole Chinese economic thing is totally overblown. CHINA IS A NATION OF CHEAP LABOR. THAT’S IT. If Americans stop buying, China starves. In fact, they already are – the only thing keeping the Chinese economy afloat right now is government spending.
americans dont produce anything tangibly valuable, thats why trolls like james are in here complaining about another country getting ahead. china steals, but MUCH less than america does. the difference is when america steals, 1 million iraqis coincidentally die in the process. with another 4 million refugees. countries do business with china voluntarily, whereas america has to use the cia to force other countries to do business with them. if a country doesnt want to cooperate with america, the cia stages coups, and assassinates any leader that is seen as anti american. this of course while claiming to be pro democratic. the chinese economic thing is overblown, so stop going on the internet, looking for chinese websites to troll in. USA IS A NATION OF CHEAP INTIMIDATION, THAT’S IT. nobody wants to do business with the usa, so stop pointing your guns at countries and forcing them.
to James
以其人之道还治其人之身罢了
你说的都是事实，但是为什么中国要这么做，这都是被你们逼出来的。
历史证明美国为了达到自己的目的任何事都干的出来。用合同杀不了人就改用枪炮。中国如果继续闭关锁国只能面临你们无尽的烦扰，为了我们的人民只能不惜一切手段迎头赶上。
可惜美国还是太年轻气盛 不懂得现在这样的野蛮从事其实是给自己国家的未来埋下祸根。 历史上这样的例子太多太多了……
Schiff illustration is really clear and to the point as how ridiculous our system has been setup. Its just too bad we don’t have enough good ppl like Ron Paul to get together and make some major changes. At least more and more people are waking up. Hope there’s still time to do the right thing..