3/20 I'm an ignorant engineer and I never took an econ/business/political
class. Having that said, if both US and Europe have big
deficits who loans the money and who's gaining? Switzerland?
Japan? In another word, who's the big banker?
\_ Mostly Asian countries, in particuar Japan and China. As I
understand it, China's overall share is growing rapidly. Check out
\- As I understand it, there is a bit of a difference
between what is going on in Japan and China. You can
accumulate dollars because you are selling a lot
of stuff to americans who are paying you in dollars
and that is a different matter from taking "your
own money which is not in dollars" and turning it
into dollars. China is both selling a lot of stuff
to america and gas a pretty narrow exchange rate
snake against the USD, so they need to hold fx
reserve to defend rates, sterilize flows etc.
And in china, i suppose the private/public
distinction is a little more gray ... like
where do the dollar profits of wholly/partially
state owned businesses wind up. india recently
cut the USD %age of its FX reserve by something
like 25%, if memory serves.
\_ For a bunch of commies, China seems to have
a pretty good understanding of economics.
\_ China isn't really communist any more. It's
behavior borders on aggressively capitalist.
The catch is that there's a pretty constant
back and forth between the more modern factions
in the government who talk like communists but
make policy like capitalists and the hardliners
who manage to crack down on the capitalist
advances every couple of years. If this is of
interest to you and you're still a student, I'd
highly recommend taking a class taught by
Carolyn Wakeman, a professor in the Journalism
school who focuses on Media Studies and China.
I forget the title of the class I took from her
(China and the Media?), but it was really
interesting, I learned a great deal, and it
significantly altered my perception and
understanding of modern China. -dans
\_ dict irony
Paul Krugman's editorial column in the New York Times, he talks
about this frequently. -dans
\_ URL please?
\_ http://csua.org/u/bgj
\_ The largest debtholder is Japan. Next is China. Third is Great
Britain. I think that Britain is being largely ignored, but
their economy is doing great and they have shunned the Euro.
I'd almost rather buy Pounds Sterling than Euros as a hedge.
\-If you really want a framework to think about this stuff,
first you should learn a little about the domestic case
[closed economy] and then a toy version of the open economy
[incorporating more nuanced theories of international finance
and trade gets pretty complicated since there are a lot of
not agreed up assumptions and causal relations and equillib
conditions] ... if you are an engineer, you should be able
to follow say the first 5 chapters of something like dornbusch&
fischer. It really is important to have this framework rather
than a random assortment of factoids. An important identity
in the domain of your question is:
Private Sector Public Sector
Saving - Investment = [(GovtSpend + Xfers) - Taxes] - NetExports
This tells us Net Domestic Private Sector Savings is equal to
the Budget Deficit + Trade Surplus.
So this tells us a few things: 1. budget deficits complete
with the private investment sector for savings dollars. 2. you
should not look at bilateral deficits but aggregate flows.
The Aggregate Demand for dollars, which in turn defines the
exchange rate (an exchange rate is a price ... and as we
know price is a function of supply and demand), has a number
of components and is beyond the motd.
of components and is beyond the motd. 3. the us public and private
debt competes with others to suck up international saving ...
i believe the us's demand on world saving is around $4T now.
finally, the motivation for the asian banks [i am not sure
about GB vs SKorean and Taiwan] to keep buying us dollars
is partly self-serving ... to keep the dollar from weakening
more and from interest rate going up and choking off some
consumer borrowing ... but yeah, this cant go on forever.
"who is gaining" is a toughie ... if you work for ibm and you
hold 100 shares of ibm, you arent going to be laughing at
a "chump" with 10,000shares of ibm if the stock tanks. --psb
\- if you want a very detailed breakdown of these various
categories, google("federal reserve", "flow of funds") for
the "Z.1" document. --psb
\_ The Bank of Japan (BOJ) has been lending the US Treasury
$100s of B of dollars over the last few years. I know the
official reasoning is that they are doing this to keep the
Yen down, but since Japan already runs huge budget deficits,
there is more going on here than meets the eye.
\_ Er, You dont understand what is going on.
\_ Please enlighten me.
\_ I am pretty cool Bevis, but that is beyond my power.
\_ In other words, you have no idea what you are talking
about. Why not just say that?
\_ I have no idea what I'm talking about.
\_ Too bad, I had hoped that you knew the answer to
something that has been puzzling The Economist
for a long time. |
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