天下縱橫
隨筆而已。不必當真。
正文
Steven Roach's description of China - US relationship was later being nicknamed as "Chimerica". It has been said to be important to both countries.
The interesting question is how long such relationship will last?
My prediction is that such relation build on export and recycle the trade surplus to US debts will not last very long, probably less than 3-5 years.
We have to understand the motives of each country to sustain such financial relationship.
China:
Pro:
To stable the domestic job market by sustaining the export industries.
Continue to build forex reserve.
Con:
Facing real danger of forex reserve loss when US defaults on its debt obligations.
US consumer tapped out its savings, unless China continue to lend the money to the debtors, the US consumption can not last any longer.
US:
Pro:
To borrow more in order to delay the inevitable default, hoping some thing miracle may happen that US recover before the default.
Con:
To borrow more means the debt payments increase daily that sooner the payments overwhelme the government balance sheet.
Signs when this relationship will break up:
1) Significant US dollar devaluation that China is unwilling to buy more US debts
2) Trade barrier builds in order to bring jobs back to the US
3) Export industry in China shrink significantly that its factories shut down and workers lost to other domestic stimulated industries (roads, bridges, energy, mining, algriculture, etc.)
4) Trade surplus evaporates.
5) US recession/depression deepens that consumers are unable to buy more thus imports shrink.
The consequences of such relation break up:
1) US long bond interest rate skyrockets
2) Hyperinflation eventually hits the home
3) China over-capacity bubble results in massive unemployment and foreign capital withdraw to save their domestic economy
4) Most importantly, the peg between the Yuan and USD will break as well.
Both countries will suffer from the broken Chimerica. But I bet with my money that Yuan may actually rise and USD falls.
A strong Asian Yuan and weak Amero will be result of this series events.
Financial center moves where money is predicted by Jim Rogers and believed by Steven Roach. In this centry, it will be in Asia - Shanghai, Singapore, Hong Kong or Tokyo will be among the choices.
The interesting question is how long such relationship will last?
My prediction is that such relation build on export and recycle the trade surplus to US debts will not last very long, probably less than 3-5 years.
We have to understand the motives of each country to sustain such financial relationship.
China:
Pro:
To stable the domestic job market by sustaining the export industries.
Continue to build forex reserve.
Con:
Facing real danger of forex reserve loss when US defaults on its debt obligations.
US consumer tapped out its savings, unless China continue to lend the money to the debtors, the US consumption can not last any longer.
US:
Pro:
To borrow more in order to delay the inevitable default, hoping some thing miracle may happen that US recover before the default.
Con:
To borrow more means the debt payments increase daily that sooner the payments overwhelme the government balance sheet.
Signs when this relationship will break up:
1) Significant US dollar devaluation that China is unwilling to buy more US debts
2) Trade barrier builds in order to bring jobs back to the US
3) Export industry in China shrink significantly that its factories shut down and workers lost to other domestic stimulated industries (roads, bridges, energy, mining, algriculture, etc.)
4) Trade surplus evaporates.
5) US recession/depression deepens that consumers are unable to buy more thus imports shrink.
The consequences of such relation break up:
1) US long bond interest rate skyrockets
2) Hyperinflation eventually hits the home
3) China over-capacity bubble results in massive unemployment and foreign capital withdraw to save their domestic economy
4) Most importantly, the peg between the Yuan and USD will break as well.
Both countries will suffer from the broken Chimerica. But I bet with my money that Yuan may actually rise and USD falls.
A strong Asian Yuan and weak Amero will be result of this series events.
Financial center moves where money is predicted by Jim Rogers and believed by Steven Roach. In this centry, it will be in Asia - Shanghai, Singapore, Hong Kong or Tokyo will be among the choices.
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