Twofish's Blog

September 16, 2007

Two posts on the Chinese savings glut

Filed under: academia, china, economics, globalization — twofish @ 1:41 pm

http://piaohaoreport.sampasite.com/blog/China-and-the-savings-glut-1.htm

The trouble with “blaming” anyone is that anything that happens in political and economic systems is usually the result of lots of people making lots of unconnected decisions which interact in unexpected ways.

One interesting point is that age structure has a huge impact on economics, and countries benefit from having lots of working age people to support old people (Ireland and China-today) and the get hurt by having an aging workforce and fewer working age people (Japan-today and China twenty years from now). It’s interesting to see why the United States has escaped this problem.

Immigration…….

The United States is not only the sink for the world’s capital, it’s also the sink for the world’s labor. Without continuous immigration the United States would be faced with a negative population growth and an aging population and would end up with the same sorts of problems as Japan.

Also the fact that China’s population is aging is why I think that the idea that China is “saving too much” is incorrect, and why I think that the trade deficit isn’t just a bad thing. What the big problem is right now is that there is too much saving in China for the domestic capital markets to deal with, and that calls for loosening up restrictions on capital outflow overseas.

One final thing. People have been predicting the downfall of the United States for decades, and people have consistently gotten this wrong. One very, very wise decision that the Chinese leadership has made was *not* to bet against the United States, or to make a rising China dependent on a falling United States.

http://piaohaoreport.sampasite.com/blog/China-and-the-savings-glut-2.htm

http://piaohaoreport.sampasite.com/blog/Did-US-corporations-cause-the-US.htm

The trouble with “blaming” anyone is that anything that happens in political and economic systems is usually the result of lots of people making lots of unconnected decisions which interact in unexpected ways.

One interesting point is that age structure has a huge impact on economics, and countries benefit from having lots of working age people to support old people (Ireland and China-today) and the get hurt by having an aging workforce and fewer working age people (Japan-today and China twenty years from now). It’s interesting to see why the United States has escaped this problem.

Immigration…….

The United States is not only the sink for the world’s capital, it’s also the sink for the world’s labor. Without continuous immigration the United States would be faced with a negative population growth and an aging population and would end up with the same sorts of problems as Japan.

Also the fact that China’s population is aging is why I think that the idea that China is “saving too much” is incorrect, and why I think that the trade deficit isn’t just a bad thing. What the big problem is right now is that there is too much saving in China for the domestic capital markets to deal with, and that calls for loosening up restrictions on capital outflow overseas.

One final thing. People have been predicting the downfall of the United States for decades, and people have consistently gotten this wrong. One very, very wise decision that the Chinese leadership has made was *not* to bet against the United States, or to make a rising China dependent on a falling United States.

——

One other point.  They aren’t really “American corporations” they are “multi-national corporations headquartered in the United States” (and in some cases they aren’t even headquartered in the United States).  The modern multi-national corporation has so many different activities occurring in so many different places, that it usually doesn’t make any sense to think of themselves as belonging to one country, and the another wise decision that the Chinese leadership has made is not to fight the multinationals but to buy into them.  The United States does well in this environment because it is itself a “multinational nation.”

I’m moderately worried about things like the Chinese savings glut, but what really has me worried is something else.  At this point, the people who really want to challenge the global economic system are really on the margins.  What worries me is something like the assassination of Archduke Ferdindad in Saerejvo in 1914.  Some seemingly minor incident that spins rapidly out of control and which destroys the system.

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