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Stimulated Irony

Posted by SCapozzola on November 11th, 2008

Here’s an irony: China’s booming economy is now seeing trouble signs. Apparently, the global economic crisis has resulted in layoffs throughout the People’s Republic.

In an effort to stave off a real meltdown, Beijing has announced a $586 billion stimulus package that would “ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports,” according to the Washington Post.

This stimulus plan on the part of Beijing comes at the same time the incoming Obama administration ponders public initiatives to aid stricken Americans.

What becomes clear when viewing American and Chinese stimulus packages side-by-side is the difference in funding sources. While any U.S. effort will be put forth via increased borrowing from overseas, China’s ruling regime can simply dig into their well-stocked savings account for any national assistance program. Beijing holds roughly $1.8 trillion in foreign-exchange reserves—some of it amassed from a trade surplus with the U.S. Those hefty reserves offer more than enough money to launch three new national stimulus programs across China.

That $1.8 trillion also represents the ongoing transfer of American productive capacity overseas. In 2007, the U.S. racked up a $256 billion trade deficit with China—yet another mega-billion deficit in an ongoing pattern of American factories closed and jobs lost.

And so, the double irony: China subsidizes its factories from the profits made when it undercuts American producers. That money is then plowed back into more subsidies for more Chinese manufacturers, yielding further plant closings in the U.S. Of course, this practice comes at a cost—a sinking U.S. economy. But thankfully Beijing is sitting on billions of dollars that it can loan to Uncle Sam when a stimulus package is needed.

This entry was posted on Tuesday, November 11th, 2008 at 9:17 am and is filed under Economic Security, Manufacturing in the U.S.. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

One Response to “Stimulated Irony”

Virgil Bierschwale Says:
November 11th, 2008 at 3:51 pm
Good article..

You left off one thing though.

What happens when we can no longer repay that debt ?

Virgil
http://www.KeepAmericaAtWork.com

Stimulated Irony

One Response to “Stimulated Irony”

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