A sobering new reality for U.S. consumers, Asian producers
President Obama is in China, warning among other things that Asian economies driven by U.S. consumption and ever-increasing debt will have to find a new growth model. Given high levels of personal and governmental debt, the United States will not and cannot continue to buy so much more than it sells the rest of the world.
“We cannot follow the same policies that led to such imbalanced growth,” Obama said, highlighting the severe deficits run up by the United States.
“If we do, we will continue to drift from crisis to crisis, a failed path that has already had devastating consequences for our citizens, our businesses, and our governments.”
Writing in the New York Times, historians Niall Ferguson and Moritz Schularick set the situation in context by positing the existence of “Chimerica.” It’s a bit of ingenious wordplay, combining China and America to form a word suggestive of chimera, the mythical beast created out of two types of animals.
“In its heyday, Chimerica consisted largely of the combination of Chinese development, led by exports, and American overconsumption. Thanks to the Chimerican symbiosis, China was able to quadruple its gross domestic product from 2000 to 2008, raise exports by a factor of five, import Western technology and create tens of millions of manufacturing jobs for the rural poor.
For America, Chimerica meant being able to consume more and save less even while maintaining low interest rates and a stable rate of investment. Overconsumption meant that from 2000 to 2008 the United States consistently outspent its national income. Goods imported from China accounted for about a third of that overconsumption.
For a time, Chimerica seemed not a monster but a marriage made in heaven. Global trade boomed and nearly all asset prices surged. Yet, like many another marriage between a saver and a spender, Chimerica was not destined to last. The financial crisis since 2007 has put the marriage on the rocks. Correcting the economic imbalance between the United States and China — the dissolution of Chimerica — is now indispensable if equilibrium is to be restored to the world economy.”
To the American consumer, the collapse of Chimerica would mean that we buy less and consume less, and that we pay more for what we do consume from overseas. Obama isn’t putting the change in such explicit terms, but that’s what it means.
But it’s important to note that the transition cited by Obama, Ferguson et al is not a political choice or a governmental decision. It is raw economics at work. Recent levels of consumption have been financed through debt, in good part in the form of mortgages on houses well above their real value. That way of doing things is dead and the adjustments to that new reality will be difficult, both in the minds of American consumers and in those who fed their consumption for so long.
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173 comments Add your comment
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
7:51 am
Given high levels of personal and governmental debt, the United States will not and cannot continue to buy so much more than it sells the rest of the world.
Do these clowns really believe they can control consumer spending? Really?
Oh yeah, they can run everybody out of a job, which they seem hellbent on doing.
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
7:53 am
When Obozo gets done trashing the US economy, our trade deficit with Japan will still be alive and well, imports of Sake will skyrocket form everybody drowning their misery.
Jay
November 16th, 2009
7:54 am
No, Reporter, “they” won’t control consumer spending. They’ll just stand aside and let basic economics do the job without government interference to prop it up.
stands for decibels
November 16th, 2009
7:56 am
Jay, when you post a quote from a NYTimes piece using big words that runs three Internets pages, you do realize the chance against anyone will so much as skimming the thing are somewhere around infinity to the eleventieth power : 1, right?
off to skim the piece…
FinnMcCool
November 16th, 2009
8:00 am
Buy American, fer cryin’ out loud, people!
This means Stop shopping at Wal-Mart.
FinnMcCool
November 16th, 2009
8:01 am
Illegal immigrants are not covered under any public option. Nor would they be provided with vouchers to help them pay for insurance. The Senate version of the bill even prevents them from buying insurance on public exchanges.
http://www.huffingtonpost.com/daniel-cubias/the-healthcare-bill-and-l_b_358100.html
GOP - Less IS Better
November 16th, 2009
8:02 am
Who do these clowns think they are. How dare they try to control consumer spending. Well! We don’t have to take it. We’ll just quit our jobs and shop 24/7. Just let ‘em try to stop us!
Whiner, you make funny.
kayaker 71
November 16th, 2009
8:03 am
Big debt…. borrowing from others to make our payments…. trade deficits in the bucket….. spending more than we earn….. blaming all of that on someone else and not putting the blame where it belongs (on the Congress and our last two Presidents) …. pure nonsense.
Gale
November 16th, 2009
8:04 am
Finn, no, not “Buy American” as a mantra, but DON’T buy anything unless you can pay cash. I do moderate that with an exception for things we really need. However, “things we really need” does not include 52″ plasma TVs, 4 wheel drive monster SUVs and trucks, iPhones and blackberries, etc.
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
8:04 am
I’m just interpreting the pompous statements of our current “president-”
“We cannot follow the same policies that led to such imbalanced growth,” Obozo said
Consumer spending is a “policy?”
Americans are going to acquire what they want to acquire, unless, of course, the government takes away that freedom.
Maybe that is what he’s talking about?
jt
November 16th, 2009
8:04 am
“They’ll just stand aside and let basic economics do the job without government interference to prop it up.”
Thanks for the laugh Jay.
Mrs. Godzilla
November 16th, 2009
8:05 am
can’t spend what ya’ don’t got……
TnGelding
November 16th, 2009
8:06 am
We don’t have to buy less if we start to build more once the housing crisis is behind us. But we as consumers and our government are going to have to adopt frugality and austerity as our ways of life.
They need us as much as we need them. There is a simple solution to them buying our debt and it is being addressed. The wealthy in this country have finally stepped up to the plate and have bought nearly a trillion dollars worth over the last year and need to continue to do so. The rest of us need to as well. We’re holding one bond we never plan on cashing as our meager contribution. The ability to get income tax refunds in the form of bonds is a good idea and will help a little as well. Other innovatiove ways to sell them are needed.
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
7:51 am
Will success spoil Barack Obama? Eat your heart out as the clowns revive our economy and our image worldwide!
Keep those Obamadollars circulating, folks!
Don’t hoard, get on board the Obama train to our 21st century economy!
FinnMcCool
November 16th, 2009
8:07 am
Palin/Bachmann 2012!
oh please
oh please
pretty please?
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
8:07 am
However, “things we really need” does not include 52″ plasma TVs, 4 wheel drive monster SUVs and trucks, iPhones and blackberries, etc.
How does it feel America, having some busybody psychotic direct from the Fever Swamps telling you how to live your life?
Wow, I bet our founding fathers would be impressed.
HopeandChange.duh
Donovan
November 16th, 2009
8:07 am
Here we have the classic Atlas Shrugged syndrome. After the liberal looters have methodically destroyed the economic system they cast blame on the goose that laid the golden egg. The labor movement empowered by its union system has elevated its rank and file workers to the point that production has become too expensive in the U.S. Therefore, companies have been forced to relocate to foreign countries that have cheap labor. Capitalism feeds off of profit and incentive to make profit. Labor unions kill profit through the threat of strike and make sustainable profit unrealistic. Sooner or later companies will seek to make their profit by producing goods or services elsewhere that have little or no union pressure. You will not hear from Obama any words chastising labor unions for the problem when he relies on the labor vote to stay in office.
Normal
November 16th, 2009
8:07 am
Somebody here has a glass not half empty, but a glass broken…just sayin’
Gale
November 16th, 2009
8:09 am
“Consumer spending is a “policy?” It must be. W told us to go out and shop after 9/11. The president said it, that makes it policy, right? Geez Whiner.
TnGelding
November 16th, 2009
8:09 am
FinnMcCool
November 16th, 2009
8:00 am
Amen! And amen to paying cash too, Gale. If you can’t you can’t afford it.
Normal
November 16th, 2009
8:09 am
Finn, you gotta show me where I can buy American. I think that a myth…like the Unicorn.
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
8:11 am
The libs have two choices, both of which are funnier than hell-
1) Revive the economy and watch consumer driven deficit spending resume, which apparently is some sort of horrible crime against pinkoism
2) Clamp down on consumer spending, watch the economy collapse and lose their beloved hold on power in the next several elections.
Which poison will you be choosing, dearies?
Boogers for the Children Fund
November 16th, 2009
8:11 am
If OboboCare gets thru then true, we will have less $$ to spend in order for the “will-nots ie bums, lazy’s” to have more of what they didnt earn.
Obobo is making yet another HUGE MESS!!
Redneck Convert (R--and proud of it)
November 16th, 2009
8:13 am
Well, I’ll shop at WalMart if I want to. They can’t stop me. You can’t beat the price on the white socks and underwear I need for my monthly bath. Besides, they print the labels in English. That’s right nice of the Chinese.
Have a good day everybody.
jt
November 16th, 2009
8:13 am
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
8:07 am
However, “things we really need” does not include 52″ plasma TVs, 4 wheel drive monster SUVs and trucks, iPhones and blackberries, etc.
How does it feel America, having some busybody psychotic direct from the Fever Swamps telling you how to live your life?
Wow, I bet our founding fathers would be impressed.
The nanny-statists merely nag now.
Wait until they control your healthcare.
jt says—————-”Laissez-nous faire!”
Boogers for the Children Fund
November 16th, 2009
8:14 am
“However, “things we really need” does not include 52″ plasma TVs, 4 wheel drive monster SUVs and trucks, iPhones and blackberries, etc.”
Its really not your place. If you can afford nothing then its also your problem.
TnGelding
November 16th, 2009
8:15 am
Donovan
November 16th, 2009
8:07 am
Where in the world were you during the last administration? Talk about history revision. Like the labor movement is growing in influence. What good is wealth if your government can’t provide the security and protection to manage it? Corporate America has to come home and we have to start providing a more educated and dedicated work force.
Boogers for the Children Fund
November 16th, 2009
8:18 am
The Chinese are probably talking amongst themselves…
“Dis Obobo? Who he fink he iz? He vehwee stoopit man. Him no know amehwikan cuz we make thim dee fing day wike and day buy. We mus put togeva our head and sumhow help amehwikan get Obobo not ewected again. Heem vehwee stoopit man!!?”
TnGelding
November 16th, 2009
8:19 am
jt
November 16th, 2009
8:13 am
Relax about the health care. It ain’t gonna happen.
TnGelding
November 16th, 2009
8:20 am
Boogers for the Children Fund
November 16th, 2009
8:11 am
Another huge mess after all the Bush messes?
@@
November 16th, 2009
8:23 am
A true test for liberals who say they want to share the wealth. Prosperity for WE, in the U.S. but not for THEE in developing countries!
Bringin’ it home….the greatest consumer of taxpayer’s wealth? The hucksters on the hill.
It is what it is.
jt
November 16th, 2009
8:28 am
TnGelding
You are correct that “health-care” ain’t gonna happen.
Massive taxes, loss of personal liberty,and more centralized bungling corrupt authority will.
Boogers for the Children Fund
November 16th, 2009
8:31 am
Dow Futures up 70 points!!
Less than an hour until the Dow/Naz Casino opens!!
MO MONEY MO MONEY MO MONEY!!
Mrs. Godzilla
November 16th, 2009
8:32 am
actually….healthcare IS gonna happen….
GOP - Less IS Better
November 16th, 2009
8:33 am
Me no have job but me have kidney. Can sell kidney and use proceeds to buy plasma TV and have enough left over to buy health insurance although not sure what good come from health insurance. It sound like waste of good money. Why it not legal to sell kidney. Me no need government interference in my life. I smart. I know what good for me. Me read all good things from AEI. Them good people. Them try to help me.
jt
November 16th, 2009
8:40 am
In closing for awhile, while the nanny-statists dream of their Utopian sail-cars, free kidneys for all, and solar powered green big-screen TVs,
let me leave you with a few words from the Good Doctor-
.The free market is a naturally occurring phenomenon that can’t be eliminated by governments, not even totalitarian ones like the former Soviet Union. It can be regulated, over-taxed and manipulated until it is driven underground. Lately it has been wrongly accused of doing so many things it just doesn’t do, that are really the fault of crony corporatism and convoluted government policies that brought on the crisis. Too many people equate the free market with big business doing whatever it wants, but that is not the free market. Unconstitutional taxpayer funded bailouts are what allow giant corporations to run roughshod over the economy. The free market is what puts them out of business when they misbehave.
The free market is you and your neighbors working hard to produce what you produce, and exchanging goods and services voluntarily, in mutually agreeable arrangements. The free market is about respecting property rights and contracts. It is not about building up oligarchs and monopolies and confiscatory tax theft – these are creatures of government.
We must watch out when government comes up with interventionist solutions to interventionist problems. The root of our problems lie in interventionism. Trusting the free market is the solution.
Ron Paul
I Report (-: You Whine )-: mmm, mmmm, mmmmm!
November 16th, 2009
8:40 am
Liberals sit around all day waiting for the government to shower money on them, which never happens. Frustration and anger follows. In an attempt to regain some control over their lost, pitiful dependent lives, they lash out at successful hard working people in a weak minded attempt to drag them down to their level. This comforts them, gives them a dim little ray of light to cling to.
Repeat as necessary, mmm, mmmm, mmmmm!
Bosch
November 16th, 2009
8:45 am
“After the liberal looters have methodically destroyed the economic system”
There’s your sign.
Mrs. Godzilla
November 16th, 2009
8:46 am
Sorry, can’t respond to silly posts……sitting in parking lot with buckets waiting for cash shower……
Mrs. Godzilla
November 16th, 2009
8:47 am
Morning Bosch….
When it rains cash remember to turn your umbrella upside down!
Or
Roll in elmers glue……
Bosch
November 16th, 2009
8:49 am
Mrs. G.,
Okay, turn umbrella upside down or elmer’s glue on clothes – got it!! Thanks!
Mrs. Godzilla
November 16th, 2009
8:49 am
give 100% chance of rain a whole new meaning…..
GOP - Less IS Better
November 16th, 2009
8:49 am
Liberals sit around all day waiting for the government to shower money on them, which never happens. Frustration and anger follows. In an attempt to regain some control over their lost, pitiful dependent lives, they lash out at successful hard working people in a weak minded attempt to drag them down to their level. This comforts them, gives them a dim little ray of light to cling to.
Could you repeat that.
Mrs. Godzilla
November 16th, 2009
8:49 am
Elmers glue…..shower gel for liberals?
Doggone/GA
November 16th, 2009
8:52 am
“Okay, turn umbrella upside down or elmer’s glue on clothes – got it!! ”
No, no! They’re not mutually exclusive…do both!
Bosch
November 16th, 2009
8:54 am
Mrs. G.,
Which parking lot are you in? Maybe I can come join you and we can set up a series of upside down umbrellas and cook out some brats while we wait. Bring Joe – it’ll be a party!
Bosch
November 16th, 2009
8:54 am
Doggone – please join us! You bring the sauerkraut for the brats and I’ll bring the grill. Mrs. G – you bring the brats. And I’ll also pick up some buns and brownies.
Mrs. Godzilla
November 16th, 2009
8:55 am
DoggoneGA
With ideas like that you should be Secretary Of the Treasury of Normalville……
Doggone/GA
November 16th, 2009
8:56 am
“cook out some brats”
Ok, I know what you REALLY mean here…but my mind always reads “brats” as “unruly children” first. And THAT puts me in mind of a sign near my house that cracks me up everytime I see it: “Babies and Childrens consignment sale”
stands for decibels
November 16th, 2009
8:56 am
Let’s face facts: until USinUK returns from her holiday romp, any economics-themed comments thread is going to have a room-temp IQ.
To me, the real point of the Furgeson/Schularick piece was this bit of advocacy:
renminbi revaluation would reduce the risk of potentially serious international friction over trade. The problem is that as the dollar weakens against other world currencies — notably the euro and the Japanese yen — so does the renminbi, magnifying China’s already large advantage in global export markets. The burden of post-crisis adjustment falls disproportionately outside Chimerica. Unless China’s currency is revalued, we can expect an uncoordinated wave of defensive moves by countries on the wrong side of Chimerica’s double depreciation.
Someone want to tell me if they think this is right, or wrong?
Otherwise, go on arguing over who’s trying to keep Whiner from upgrading to a bigger TeeVee. That never gets old.
david wayne osedach
November 16th, 2009
8:57 am
Within twenty to fifty years maximum China will become the No. 1 economy in the world. That (in itself) is very sobering.