(no subject)

[gunslnger.livejournal.com]

The US-China Ponzi scheme

Imagine becoming so successful at your job that you stack up $2 trillion in income, which you conservatively place in short-term U.S. Treasury bonds for safekeeping.

Now imagine that when you try to cash in those bonds to buy a few things for your kids, the clerk at the bank abruptly shuts her window and tells you to go away.

That is essentially the situation faced by China these days as it wonders whether its plan to manufacture goods for U.S. consumers over the past two decades in exchange for a pile of credit slips was really such a hot idea.

It really should be blatantly obvious that deficit spending can not continue indefinitely, any more than you can build a perpetual motion machine. Maybe it's the same mentality that makes people keep trying though. Well, people are likely to learn the hard way, or maybe more likely, not learn and keep bashing their head against the wall.

Comments

[koneko-desu.livejournal.com]

It's not like China depends solely on cashing in on the US foreign reserves it holds for its economic development -__- That is completely not the situation faced by China these days considering that many factors contribute to its growing economy, not just some bonds invested through a single bank, in this case the US as the metaphorical scenario would suggest.

[kunaifusu.livejournal.com]

Imagine you had a factory overseas making, say, iPhones.
Now imagine that in order to manage that factory you established a corporation in China.
When the taxman comes he only goes after your US assets, namely retail while your Chinese corp enjoys low corporate tax and other fees in the People's Republic.
So you make your US retail branch buy the iPhones from your Chinese branch at inflated price and sell them at loss. When the money runs out your Chinese branch will lend to your US branch so the clueless journalists and the taxman only see mounting debt and loss instead of profit.

This is essentially the situation faced by China these days as it counts all the money it's getting from the US companies forced out by crazy taxes.

[chessdev.livejournal.com]

The US companies are not being "forced out" by crazy taxes -- since they are enjoying the US market, infrastructure, and regulations to protect their main business which is funding the China corporation.

What you describe are US companies committing tax fraud by playing number games on the books -- not a problem with taxes per se.

[kunaifusu.livejournal.com]

You first sentence does not make any sense, it supposed to be "they are not being forced out because..." and some coherent explanation instead of another statement. Are you high or something?

Your second sentence is just idiotic, you can just as well say that all the companies around the world, who are not paying US taxes are committing tax fraud.

[chessdev.livejournal.com]

My bad. I assumed you were intelligent and spoke to you as such.
I won't make that mistake again.

My first sentence makes perfect sense: The US companies are not being "forced out" since it is the American Business environment where they are making their sales and bringing in their money.

The second sentence also makes perfect sense to someone who isn't a moron who realized that I'm NOT talking about every company in the world, but to those that are BASED in the U.S. and playing games with U.S. tax laws.

Stop being an idiot. If you're going to be insulting, at least use analogies that don't make you sound like your drag your knuckles on the ground.

[kunaifusu.livejournal.com]

you are a fool too

[sgiffy.livejournal.com]

Treasury debt is not a demand note. Its not redeemable at will. Its also not like the put them in treasury debt for the shit of it, it was really the only place they could. Essentially they built up reserves to back their currency. They did this because the big problem for them is inflation.

This whole system has allowed them to grow rapidly while keeping inflation in check. Any decoupling from the dollar would rather quickly lead to massive, massive inflation. Given they are somewhat walking a knife edge as it in terms of keeping their population happy through expanding jobs, that could be country destroying bad.

They are rapidly trying to build a domestic economy that can absorb their rapid growth, but that is going to take time. Remember the vast majority of their population are still essentially rural peasants.

If they fuck this up take what the US went through in 20's and 30's and multiply it tenfold.

And this Because most money generated over the past decade was spent on consumption rather than investment

In hindsight was a very very very good thing. Had it been spent on investment, really massive over-investment we would be facing a substantially larger catastrophe then we are. In fact, this, more than anything is why we did not see massive inflation.

[star-white.livejournal.com]

Can't help but think Adam Smith was on to something in Wealth of Nations when he said:

The man who employs his capital in land has it more under his view and command, and his fortune is much less liable to accidents than that of the trader, who is obliged frequently to commit it, not only to the winds and the waves, but to the more uncertain elements of human folly and injustice, by giving great credits in distant countries to men with whose character and situation

Oh for pity's sake ...!

[ed-rex.livejournal.com]

It really should be blatantly obvious that deficit spending can not continue indefinitely...

What's your point? Seriously, what's your point?

Is there anyone (even in the blogosphere?) who is passionately arguing that deficit spending should "continue indefinitely"?

If you want to argue that the particular plans now being implemented are bad ideas, be my guest. If you want to suggest improvements, even better.

But for god's sake, don't quote three paragraphs you don't understand, then post one paragraph refuting the three you quoted didn't say.

Re: Oh for pity's sake ...!

[gunslnger.livejournal.com]

No one is doing anything about it nor is anyone in government saying that they want to change, therefore it will continue indefinitely, regardless of whether anyone is saying it should or not.

But for god's sake, don't quote three paragraphs you don't understand, then post one paragraph refuting the three you quoted didn't say.

One, I do understand, and two, my statement is in line with the article. The selected quote is merely that, it is not part of any argument. I assume that people read the entire article, the quote is only a teaser quote.

Re: Oh for pity's sake ...!

[tridus.livejournal.com]

There's actually been several commenters in this community who like to go on about how it's not really a problem whenever someone brings it up. Though they seem to be quieting down lately.