September 4, 2007

HE'S BEEN READING HIS OWN MAGAZINE TOO MUCH:

Western grasshoppers and Chinese ants (Spengler, 9/05/07, Asia Times)

One exceptional fact accounts for the instability in financial markets during recent weeks: the Chinese and many other Asians save about half their income, while Americans save none of their income at all. Foreigners, mainly Asians, invest US$1 trillion a year in the United States, because their home economies cannot absorb so much investment, or because the political risk attached to local investments is too great.

In the present iteration of Aesop's fable, American consumers are the grasshoppers and Chinese (and other Asian) savers are the ants. The trouble is that Asians have put their savings into the balance sheet of US consumers.


Hard to believe a guy who's normally as smart as Spengler is fell for that old asininity. The Chinese with their rather minimal disposable income buy up debt instruments on which we pay low interest rates while we buy our own houses and pump our extravagant wealth into 401k's, IRA's, etc., with the result that after paying off our debts our real net worth per capita is something like $160k, or about twenty years worth of Chinese per capita GDP. If the Chinese are ants, we're aardvarks.

Posted by Orrin Judd at September 4, 2007 9:08 AM
Comments

The Chinese are ants - but all their hard work just makes the queen fatter.

The Japanese are similar, except that the queens just put the money under the nearest rock.

Posted by: ratbert at September 4, 2007 11:31 PM

China is so wonderful? which way does the money flow? where do they put their savings? That's right, you know the answer.

Posted by: Mikey [TypeKey Profile Page] at September 5, 2007 11:28 AM
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