5 ms·

"Be nice to the countries that lend you money"

48 points by raheemm 18y ago

jmtame 18y ago
Yeah, financial bankers are paid WAY too much (and considering how badly they make a mess of things).
netcan 18y ago
It's very interesting how there seems to be a point now that people are waiting to see if the US is going to maintain it's economic/political/military umph. This was something being discussed over the past 5 years or so. But since this credit business, it seems like outside of the US, this is what it boils down to.
gruseom 18y ago
Great piece. Fallows has been doing interesting work as a sort of articulator of China to the US. Since Gao is familiar and comfortable with the US, the conversation is fascinating. I suspect that the editing here is almost as important as the original comments, though.
tokenadult 18y ago
It will be interesting to see what China's economy looks like if importing countries are not buying from it. As bad as the lack of transparency on Wall Street is, the lack of transparency anywhere in China is worse.
- corentin 18y ago
  They will consume their own production and start spending their dollars and euros.
  - gaius 18y ago
    Are the Chinese making things that Chinese want to buy? Most of the country is still rural; they don't want trainers and consumer electronics (or rather they do, but not before the infrastructure is built out). China's foreign-currency earning economy is almost a completely different entity from its interior economy.
    - netcan 18y ago
      Local consumption is a big growth market in China. Accelerating, I believe. Exports are obviously still important, but more is produced for local production every year.
- netcan 18y ago
  I'm thinking the same thing. if something bad happens on the Chinese books, they might take 6 months to air it. They have a lot riding on constant growth. going down to 1-2% for a couple of years is politically not an option. That might be a dangerous situation.
  - tokenadult 18y ago
    http://uk.reuters.com/article/businessNews/idUKTRE4BI1OJ20081219 http://uk.reuters.com/article/businessNews/idUKTRE4BI1OJ2008... http://uk.reuters.com/article/marketsNewsUS/idUKPEK29458520081219 http://uk.reuters.com/article/marketsNewsUS/idUKPEK294585200... http://www.guardian.co.uk/business/feedarticle/8166599 http://www.guardian.co.uk/business/feedarticle/8166599
stanley 18y ago
Recently we increased our holdings in Blackstone a little bit. Now we’re increasing a little bit our holdings in Morgan Stanley, so as not to be diluted by the Japanese. Is anyone familiar with what he is hinting at? If I am interpreting this correctly, he is indicating that Japan has been increasing its stake in the US financial industry, is that correct?
- byrneseyeview 18y ago
  http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_stanley/index.htm http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_s...
jderick 18y ago
What I wonder is how long before these countries ask for repayment of their debt, and what the consequences will be. We know that by pulling out money, we’re not serving anyone’s good. Including ourselves. [This is the famous modern “balance of financial terror.” If Chinese officials started pulling assets out of the U.S. and touched off a run on the dollar, their vast remaining dollar holdings would plummet in value.] So we’re trying to help, at least by not aggravating the problem.
raheemm 18y ago
Reading this article made me curious just how much is owed to foreign countries. But what I found to be scarier is our internal debt obligations to programs such as medicare, social security, etc. "As of October 1, 2008, the total U.S. federal debt exceeded $10 trillion,[16] about $31,700 per capita. Including unfunded Medicaid, Social Security, Medicare, and similar promised obligations, the government liabilities rise to a total of $59.1 trillion, or $516,348 per household.[17]" (http://en.wikipedia.org/wiki/Economy_of_the_United_States http://en.wikipedia.org/wiki/Economy_of_the_United_States) That's 428% of our yearly GDP. The current tactic has been to use new debt and current tax witholdings to pay social security benefits - but does that not sound like one big crazy pyramid scheme? And how the hell do we get out of this?
- petercooper 18y ago
  You extract a lot of fresh wealth somehow - from finding a giant pile of gold under Kansas to producing objects the entire world wants to buy. Or.. you sell or give a lot of stuff to the people who you're indebted to. In this case, that's already begun somewhat by all of the purchases China's making in the US - factories, etc.
- biohacker42 18y ago
  Most of the (developed) world is in a big pyramid scheme with obligations to retirees. The whole deal was (usually) based on a rapidly growing population and is doomed to fail without one. But old people vote, so you can't cut their benefits. Democracy is not a good system of government it's just the least bad we have. Democracy only fixes hard issues once they reach crisis level.
kentosi 18y ago
An interesting comparison about the mirrors. I find it an interesting analogy for how these derivatives work.

48 points by raheemm 18y ago

Yeah, financial bankers are paid WAY too much (and considering how badly they make a mess of things).

It's very interesting how there seems to be a point now that people are waiting to see if the US is going to maintain it's economic/political/military umph. This was something being discussed over the past 5 years or so. But since this credit business, it seems like outside of the US, this is what it boils down to.

gruseom 18y ago

Great piece. Fallows has been doing interesting work as a sort of articulator of China to the US. Since Gao is familiar and comfortable with the US, the conversation is fascinating. I suspect that the editing here is almost as important as the original comments, though.

tokenadult 18y ago

It will be interesting to see what China's economy looks like if importing countries are not buying from it. As bad as the lack of transparency on Wall Street is, the lack of transparency anywhere in China is worse.

corentin 18y ago
They will consume their own production and start spending their dollars and euros.
- gaius 18y ago
  Are the Chinese making things that Chinese want to buy? Most of the country is still rural; they don't want trainers and consumer electronics (or rather they do, but not before the infrastructure is built out). China's foreign-currency earning economy is almost a completely different entity from its interior economy.
  - netcan 18y ago
    Local consumption is a big growth market in China. Accelerating, I believe. Exports are obviously still important, but more is produced for local production every year.
netcan 18y ago
I'm thinking the same thing. if something bad happens on the Chinese books, they might take 6 months to air it. They have a lot riding on constant growth. going down to 1-2% for a couple of years is politically not an option. That might be a dangerous situation.
- tokenadult 18y ago
  http://uk.reuters.com/article/businessNews/idUKTRE4BI1OJ20081219 http://uk.reuters.com/article/businessNews/idUKTRE4BI1OJ2008... http://uk.reuters.com/article/marketsNewsUS/idUKPEK29458520081219 http://uk.reuters.com/article/marketsNewsUS/idUKPEK294585200... http://www.guardian.co.uk/business/feedarticle/8166599 http://www.guardian.co.uk/business/feedarticle/8166599

stanley 18y ago

Recently we increased our holdings in Blackstone a little bit. Now we’re increasing a little bit our holdings in Morgan Stanley, so as not to be diluted by the Japanese. Is anyone familiar with what he is hinting at? If I am interpreting this correctly, he is indicating that Japan has been increasing its stake in the US financial industry, is that correct?

byrneseyeview 18y ago
http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_stanley/index.htm http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_s...

jderick 18y ago

What I wonder is how long before these countries ask for repayment of their debt, and what the consequences will be. We know that by pulling out money, we’re not serving anyone’s good. Including ourselves. [This is the famous modern “balance of financial terror.” If Chinese officials started pulling assets out of the U.S. and touched off a run on the dollar, their vast remaining dollar holdings would plummet in value.] So we’re trying to help, at least by not aggravating the problem.

raheemm 18y ago

Reading this article made me curious just how much is owed to foreign countries. But what I found to be scarier is our internal debt obligations to programs such as medicare, social security, etc. "As of October 1, 2008, the total U.S. federal debt exceeded $10 trillion,[16] about $31,700 per capita. Including unfunded Medicaid, Social Security, Medicare, and similar promised obligations, the government liabilities rise to a total of $59.1 trillion, or $516,348 per household.[17]" (http://en.wikipedia.org/wiki/Economy_of_the_United_States http://en.wikipedia.org/wiki/Economy_of_the_United_States) That's 428% of our yearly GDP. The current tactic has been to use new debt and current tax witholdings to pay social security benefits - but does that not sound like one big crazy pyramid scheme? And how the hell do we get out of this?

petercooper 18y ago
You extract a lot of fresh wealth somehow - from finding a giant pile of gold under Kansas to producing objects the entire world wants to buy. Or.. you sell or give a lot of stuff to the people who you're indebted to. In this case, that's already begun somewhat by all of the purchases China's making in the US - factories, etc.
biohacker42 18y ago
Most of the (developed) world is in a big pyramid scheme with obligations to retirees. The whole deal was (usually) based on a rapidly growing population and is doomed to fail without one. But old people vote, so you can't cut their benefits. Democracy is not a good system of government it's just the least bad we have. Democracy only fixes hard issues once they reach crisis level.

kentosi 18y ago

An interesting comparison about the mirrors. I find it an interesting analogy for how these derivatives work.