Friday, December 26, 2008

Defining the wealth disparity in Sino-American relations

The leadoff line in a fascinating NYTimes piece by Mark Landler:

“Usually it’s the rich country lending to the poor. This time, it’s the poor country lending to the rich.”

- Niall Ferguson


My question - while the article is about Sino-American relations, how does one define rich? Or how does one define poor?

If one defines rich as possessing vast amounts of material goods, then America is rich. But if one defines rich as possessing the deed to vast amounts of material good, then maybe China is rich.

As I mentioned on September 6, China has already begun flexing its muscles over US policy.

If America is the "rich" country, then why would Hank Paulson take marching orders from China?

Tim White

4 comments:

Anonymous said...

Tim,

The debtor nation would be considered poor. The creditor nation would be considered rich.

The creditor nation calls the shots.

Of course if the debtor nation has the world's reserve currency, and a powerful military then matters must be handled gingerly. Regardless, it is Paulson who travels to China and not vice versa.

Regards,

Mike Ulicki
Cheshire

Anonymous said...

The transfer of wealth has been massive and is largely irreversible.

Our elected officials should have debated this years ago, but they never did. I actually find it ironic when Obama gets hammered for "spreading the wealth," while the much bigger (and rarely discussed) redistribution of wealth from "developed" to "developing" nations is so much bigger. And now with Bernanke effectively bragging about selling American gold... not only has America's "P&L" been moved overseas in large part, our "balance sheet" has gone too.

I think America has the potential for a very bright future. But getting there will be painful.

Anonymous said...

Regardless, it is Paulson who travels to China and not vice versa

And that says it all.

Anonymous said...

And the money follows Paulon back. China's currancy travels electronically.

If you've been paying attention you are well aware of the burgioning threat of unemployment in the Peoples Republic. The money is coming here so China can secure a marketplace that is much needed so it can stifle civil unrest at home.

As for the central bank and the gold standard and all the other good stuff from the good old days you should be reminded that there were "panics", recessions as well as "eras of good feeling" then as now. Good old Herbert Hoover let the market solve a problem but the impacts were too big to ignore (Mellon was in charge then) and the result was FDR who brought more to the table than some of us would have liked. Market excesses had done their dirty deed and the only direction was down and the only out was some government intervention. It was an imperfect solution that was ultimately rescued by the outbreak of World War II but the folks believed it was the new deal.

Both historical perspectives of the gold/dollar standard, central bank/decentralized banks have offered less than perfect outcomes. The economy is like climate change...another cycle few if anyone has any power over, everyone has an opinion about but somehow everything runs its course.

Things are not as dire nor are they great. I say move forward not backward and government has a role to play but ultimately it will be on the backs of we the people.

TPS