China

The Asian high

In a world where consumer spending is king, you wouldn’t think that there’s such a dependency on a global scale as far as American upon Asia. But there is. And this reaches much farther than just cheap manufacturing.

Oh yes, if you take into account that approximately forty percent of global cash reserves fall in the hands of China and Japan, and the fact that China is one of the largest lenders to the United States by investing in Freddie Mac and Fannie Mae bonds, then the story becomes a lot more clear. Americans spend too much and Asians spend to little, so the flow of money goes from east to west.

And don’t get me wrong here, but that flow comes with a price. As with any loan of money. Debt never comes cheap, as they say and this one doesn’t either as it drives the national debt higher and value of the US dollar lower into the ground.

Unfortunately, even the investment into America has had a drastic effect. With the latest downturn with toxic sub-prime mortgages, Asian markets are grounded in investments that were made through these bad loans. Which is also the reason why global markets have been falling when US markets fall.

Culturally, and interesting enough, Asians have a tendency to save, save, save…. while Americans actually created the consumer culture. Overall, the US economy can make a turn for the better by spending less and increasing more exports than imports. At the same time, it also wouldn’t be bad to get Asians to buy into more American goods. Believe me. They love “stuff” just as much as the next person. But somehow or another, I doubt that most people in China own credit cards and probably cash buy most things. Meanwhile, here in the West, we’re taught by television and other mediums, to buy now and pay later.

One day, the tables will turn. But until then, we need to quit borrowing so much money from Asia. And that needs to start at the bottom of the totem pole.

Photo Credit: (webchicken)

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