Swamp Fox
09-10-2005, 11:49 AM
Canada's governor of the Central Bank, David Dodge, (http://www.canada.com/national/nationalpost/financialpost/story.html?id=322231b7-d655-4877-9351-8647a5cd301b&page=1) has said that the US and, to a lesser extent, Canada, is spending too much and saving too little, and that will cause a market imbalance - North America cannot keep on spending, and, if that slows, the world economy will too. What is needed is for this continent to save, for lean times, while prosperous Asia spends, because Asian spending can keep the engine chugging along - China's investment is already doing that, and the world needs more of that.
But there is some evidence that Asians are saving less and spending more. (http://economist.com/research/articlesBySubject/displayStory.cfm?story_id=4352068&subjectid=348879&tranMode=none) I don't know what the long-term trend is, but it should be encouraged.
What's most important is that China MUST spend its current account surplus on its hinterland, to prevent social unrest - this is the best way to keeps its yuan low, because, as that surplus is used, it will suck in foreign goods and services, which would depress its currency, thus making that issue irrelevant. And the West would benefit from projects that its big engineering firms would get. At the same time, prices would rise in China, as greater aggregate demand leads to higher wages for its professionals and other workers in Shanghai and Beijing. I presume the only reason it's not doing this is corruption - some officials have reason not to spend, and I'm not sure I want to know what those reasons are.
Comments?
But there is some evidence that Asians are saving less and spending more. (http://economist.com/research/articlesBySubject/displayStory.cfm?story_id=4352068&subjectid=348879&tranMode=none) I don't know what the long-term trend is, but it should be encouraged.
What's most important is that China MUST spend its current account surplus on its hinterland, to prevent social unrest - this is the best way to keeps its yuan low, because, as that surplus is used, it will suck in foreign goods and services, which would depress its currency, thus making that issue irrelevant. And the West would benefit from projects that its big engineering firms would get. At the same time, prices would rise in China, as greater aggregate demand leads to higher wages for its professionals and other workers in Shanghai and Beijing. I presume the only reason it's not doing this is corruption - some officials have reason not to spend, and I'm not sure I want to know what those reasons are.
Comments?