More Navel Gazing About China
My major thought on this issue is how much can the Chinese, even with their high rate of savings, possibly lend the Americans before the Chinese run out of capital to loan? The USA is enormously richer than China - especially on a per capita basis - and I would bet that the American consumer will be able to outspend the Chinese central bank's capacity to loan. There are a lot of other related issues here, like the common Asian interest in keeping American monetary policy loose and the Greenback cheap, as well as China's US$700 billion worth of foreign reserves and the Chinese pool of savings. At the end of the day, I'm not pretending to know the answer to the question. Hopefully someone more well versed in this kind of economics will weigh in. How much longer can the Chinese keep doling out cheap loans to the American government?