Don’t bet on Asians imitating Americans

By J Saft
March 4, 2009

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Asia’s calamity is that Americans are imitating frugal Asians a lot faster than Asians can become free-spending Americans.

The old economic model — that Asia exports to the U.S., saves its earnings and lends the money back to Americans to buy more stuff — is broken and no one can say what will arise in its place.

Americans are not willingly becoming savers, cultural change is being forced on them by the credit crunch and their own busted balance sheets.

The hope for Asia, which has seen an absolutely stunning cliff dive in its economies, is that domestic demand can grow to replace U.S. consumption. This faces huge hurdles; a social safety net that is threadbare to non-existent and a population that just doesn’t understand the risks of living closer to your means but sees frugality and the storing up of wealth as a virtue.

Asia banking on consumption at home replacing that from the U.S. is a bit like Las Vegas trying to make up for plunging gambling revenue by charging more for prime rib dinners; it might help a bit but it’s not a serious business model. In the meantime, economies across the region are seeing really stunning falls in activity and exports.

“Live by exports, die by exports,” Gabriel Stein, chief international economist at Lombard Street Research told a conference in Singapore last week.

Singapore’s own highly trade-dependent economy shrunk by more than 16 percent in the fourth quarter on an annualized, seasonally adjusted basis. Prime Minister Lee Hsien Loong said last week another 8 percent may disappear this year.

Indonesia’s January exports fell by 36 percent, the biggest annual decline in more than 22 years while factories in Korea left almost 40 percent of production idle in the same month. Korean exports fell 17.1 percent in February from the year before, having fallen by a third in January alone. In Taiwan export orders fell a record 42 percent in January. Japanese exports fell by almost half in January, down 45 percent.

China has gotten off relatively lightly in comparison, with exports falling 17.5 percent from a year ago in January.

On the positive side, the government policy response has been reasonably prompt in many places, ranging from admirably front loaded stimulus spending plans that really should make a difference this year to plans to prop up stock markets via government buying which are wasteful, unfair and probably bound to fail.

Shares across the region are falling and so too are some currencies, notably Korea’s won which touched an 11-year low on Monday before the government spent an estimated $1 billion propping it up. Competitive currency devaluations cannot be ruled out.

WHO BUYS WHAT FROM WHOM?

So should Asia just try to ride out the storm and wait for U.S. demand to pick up again?

It may be a long wait. For one thing, the U.S. population is aging, which will pinch consumption in two important ways. Firstly consumption tends to revert to core needs as people get older and secondly retirement plans that were built on high property and share prices lie more or less in ruins and will prompt higher rates of savings to try and catch up.

A recovery in U.S. consumption will come eventually, but it’s not likely to bring the kind of heady growth in consumption we saw from 2000 to 2007, when personal consumption grew at a heady 4.7 percent rate.

So either shutter a lot of those Asian factories or build up consumption at home.

All eyes inevitably turn to China, with its huge population, high savings rate, low debt and fantastic head room for growth. Independent economist Andy Xie estimates that current per capita income of $3,300 could triple within two decades through a combination of growth and currency appreciation. But two decades is a long time, and in the meantime we have to survive the next two years.

And it seems almost delusional to hope that Chinese and other Asian consumers will somehow throw off the habits of a lifetime, habits reinforced by the real risks they face if they lose their jobs and by their self-evident correlation with growing wealth to start to spend more. These consumers will be seeing the same headlines about the stock market and plunging exports that the rest of us do.

It’s also hard to imagine Asians looking across the Pacific at U.S. profligacy and seeing this as a model they want to emulate. Even now efforts at stimulus in Asia seem to focus more on keeping people in jobs rather than insuring them against income loss.

So, maybe over time consumption in Asia will grow as its economies mature, but in the meantime pouring concrete into public works plans seems a better bet for keeping the economies afloat while we wait for the next world economic order to be invented.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund)

39 comments

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I found this article to be both interesting and informative and certainly much food for thought.

Posted by Peter Schwarz | Report as abusive

Some real hindsight is needed here for the average investors everywhere. We had incredible appreciation on our 401ks and property over the past 6 years or so, and now we are seeing sanity returning enmass. Take a look at your balance sheets objectively, and you’ll see 2% appreciation over the last decade for most assets. Granted, inflation runs 3-4%, but it’s not armageddon. Now, what is in store for the future….there is 4 trillion $ on the sidelines now, and when it hits the market, look out. It may take a year or two, so try to keep your house and job until then.

Posted by Dave54 | Report as abusive

Dear Jame,

I am very impressed that you have collected statistics of external trade from national governments and intergovernmental organizations throughout its Asian countries above.

I would like to give some comments on WHO BUYS WHAT FROM WHOM?
In market economy theories, Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Let us take a closer look at the law of demand (buyer) and the law of supply (seller).

We know the fact that our America have over 300 millions people compare to China is like 1/4 of the populations.

As we have seen the down turn cycle of economic has affect dramatically in demand in recent time, not only Unite State but the whole wide world. That would affect in term of export good from China.

If we carefully examine that Unite state is just a small proportion of the population in the world, so that mean if US stop buying the good from China, then it just a small lost in demand. The truth is, it will not affect much.

However, China may consider as a strong export sectors, but only low value products. It would take years to come to catch up with high technology like Unite State. The world are currently using Chinese cheap labors to bring out more profit for their products and services. The product will not be as good as manufacture by Unite State. Nevertheless, if we look at Japanese today, their technology has already catch up with the Unite State, so the Chinese would be the same in coming years.

For those Technologies that still produce in America, if USD dollars could fall further down, there will be high demand of BUYING good from overseas and the export may help.

Kind regards,
Hoang Steven Thanh Nguyen

Being an Asian myself, this piece is dead on.

Posted by matt | Report as abusive

however, the wealthy Asians, though only few in number, do like to spend on Foreign, mostly Western products; those are like status symbols like Nike

Posted by matt | Report as abusive

The prospect of renewed Chinese investment in the U.S. is unlikely. Southeast Asian banks took a hit on investments in the financial sector. World wide trade has already contracted. Evidence of the fact is the calamitous drop in high seas shipping. George Soros is right, the financial system is on life support in the U.S.. The complete disappearance of investment banks on Wall Street that managed to survived the Great Depression is even more telling of the economic health of this nation. The EU is levying tariffs on U.S. bio-diesel. It is likely governments will impose more economic protectionist policies despite public statements to the contrary. I’m not sure all of the lessons of the Great Depression apply anymore. Maybe it is time we picked ourselves up by our own bootstraps.

Posted by Anubis | Report as abusive

The bottom of the globle finacial crisis will be known by first week of July, when second quarter results of companies are known. I feel this article to be recalled and analysed then.It will be totally different sceario. I am personly frightened.US Febury job loss is 690 000. The asian countries growth fall whatway will help US this crisis?

Posted by K.Srinivasan | Report as abusive

The current ‘aging’ US population also was influenced by the ‘more is better ‘American Cultural phenomenon, fed and fulled by the advertising industry, TV and artificial views of life that emerged after WWII; remember ‘Lassies mom’, getting dinner ready in high heels, or ‘Leave it to Beavers’ all American ideal home-how many grew up in a house like that? But it became symbolic of the entitlement of the ‘American Dream’, Was that ever ‘reality’ for previous ‘American’ culture? Nowadays some people expect to have a house like that just given to them!
I know that the depression area generation,(come on, a lot of you remember them) saved rubber bands and jars and ect. because ‘you never know….’ Their ancestors, from whatever North, Mid, Southern or Eastern European region they came from generally had vegetable gardens,kept chickens, had frugal habits and followed that old adage “use it up, wear it out make do or do without”; the ‘old’ Mexican immigrants I remember from my childhood did this also, they and the old Black neighborhoods had some of the best gardens and home made food. I am sure the same could be said for ‘old’ immigrants from any part of the world, I was just not acquainted with other groups in the Southwest.
I don’t really think that Americans are “imitating frugal Asians”, so much as they are just going back to a habits of life that were the ‘norm’ for most humans for most of history.
It is ironic that some of today’s ‘shrugging off’ of rampant materialism has been due to ‘Eastern influenced’ ideas of simplicity. But wasn’t it one of our own esteemed Statesmen who warned us of the dangers of the “military industrial complex”?

Posted by QueZen | Report as abusive

Lot’s of hand wringing here these days. When the anxiety subsides doesn’t China and the other Asian economies with huge $ reserves gradually pull back on buying U.S. Treasury debt and instead start using their stockpiles of dollas to buy U.S. physical assets (such as mining and manufacturing companies)at fire sale prices? With the dilution of the U.S. dollar now occurring by the printing of vast amounts, it becomes obvious that the dollars future as a store of value is on the wane. Or am I missing something?

Posted by Jonathan Cole | Report as abusive

It was strange to see India missing in the author’s picture, which certainly will play a vital role in the global economy. China, India and (Mexico to a large extent) have the potential to leverage their home population to stay afloat and competitive in the years ahead.
US will obviously be at the helm of the world affairs for a long time to come, but the treasury has a limit on printing Dollars. Americans would have to get more realistic (as earlier generations were) and let go the notion of living in plenty. Savings and Spending must go hand in hand and the “Living on Credit” concept needs a serious re-look.

Posted by Abhi | Report as abusive

It is not so much an issue of Americans becoming savers but rather changing how they live and dream – and the structures in place to support these expectations. In agrarian America, people got along fine with few resources. Credit cards did not exist. There was a persistent defiance to fight against our dependency on others. The world cannot shackle such a resolute nation unless it wants to be in chains. The American Dream is something invented to keep a population going down a particular path. It has been a tool to make the masses submissive and not always pragmatic. You folks should totally gamma irradiate your souls and like the Hulk hurl your prison bars at these pervasive foreign interests. You buy cheap boots so you can walk to the unemployment line. The multinationals are in hysterics.

Posted by Don | Report as abusive

Right to the point, thank you Mr Saft.

If, as you say, U.S. citizens are necessarily going to be saving more and Asians are not going to fill much of the consequent gap, then the implication is a long period of downward adjustment.
It’s not just that asset prices have to come back but that much real investment was misplaced and will lose some part of its value. Attempts by governments to reflate will fail to counterbalance this, whilst enlarging national debt.

The bottom will be reached when (a) the rebalancing has been worked through and/ or (b) asset prices and labour become irresistably cheap and available. Point (b) is often the starter for an upturn but in this case government borrow-and-spend will soak up available lending and delay downward adjustment in prices.

The alternative Keynesian view is that government can ensure capacity utilization. U.S. savers just lend to the government who will spend for them…

The Economist ran a piece not too long ago which decried the lack of consumption on the part of Asians. This echoes U.S. policy of trying to re-ignite consumption via lending/borrowing on the back of stifling job losses. I must say that I find the focus of re-building the old economic model via consumption misguided. Now Asians have savings, this is widely accepted, so if they really felt they needed more of, whatever, they are in a position to buy it, right? To argue that someone should buy just to keep an economic model functioning is crazy. The U.S. system is broken because of an excess of borrowing and leveraging, so to try to re-build the system on more borrowing is crazy.

What we should be focusing on is how do we supply people with decent standards of living, and meaningfull lives in an age of reduced consumption, since that is plain and simply what we are entering.

And how does anybody conceive everybody in China living the lifestyles of those wasteful american and european citizens? Just as we have binged on credit cards we have binged on natural resources. China at least have the decency of implementing a one child policy which should be applied or encouraged all over the world. Imagine Chinese women having IVF and having 14 children just because they felt lonely!!!
I know this is the elephant in the room and is a unpopular subject but if we don’t get population control underway we will simply all die as the planet is fairly sick of our imaginary “needs”, strange beliefs and uncontrolled urges…

Posted by EPhillips | Report as abusive

Absolutely correct analysis Mr Saft.

Much wisdom has been written in postings before mine so I won’t repeat. But a few words on coupling.

When this crisis started there was much discussions on coupling – i.e. how much of the world is coupled to America and therefore affected as much? We now know the answer – the couplings were strong and inescapable.

So what will happen to coupling? Mr Saft provides an answer of sort. Much of the world will de-couple in earnest from America. Because they have no choice. Decoupled first in trade, then in finance, finally in economics.

This means USA cannot, and will not, lead the world in recovery. America recovery will be slow and flat. Many of its big trading partners would have found their own long term solutions, and go other ways.

A new economic world order.

Posted by TomK | Report as abusive

I been traveling to Asia multiple times during these last few years, and every time I come back I realize how lavishly we live. Owing a car, dining in a fine restaurant, purchasing high end luxury goods and living in large houses. It’s definitely not the fact that we are wealthier than they are it’s just that we had more credit. Credit that allow us live in luxury. Credit that evidently killed our economy. Definitely not confident in the new admins for their frivolous overspending tactics in trying to resolve this crisis. We need to come back to the basic and manufacture products. Allowing us to create long term jobs and restore the trading gap. To the Obama’s Administration, putting billions of dollars fixing pot holes around the country is not really creating long term jobs which only benefits a small number of citizens. We need real change.

Posted by Lo | Report as abusive

Gentlemen, what the new US administration is attempting to do is build a European-style welfare state on the backs of other people’s savings… primarily Asia. Now, why would Asians want to give it to them?

Posted by JohnJ | Report as abusive

China has bought more than 2 Trillion USD in Bonds. Now they get angry, while US is printing money. So everything is supply and demand. Will China buy the debt of USA? Are they better off spending the money in their own country? It looks like. So , who will buy all the debt? What will happen to the Dollar? The debt of the US will be the next bubble?

Posted by Michael | Report as abusive

Growing up, we had one bank in our small town. Could someone please make up a chart showing the increase in financial workers in the US.

Posted by Ken | Report as abusive

Reply to Ephilips
A very small percentage of our money goes to people like that, and the people who really need it. A majority goes towards military technology no other country can touch, and the occupation/destruction.(estimates are about 85k dead to one million in Iraq) occupation of other countries for “US interests”. By US interests I mean the rich.

If you dont believe what I have to say read A Peoples History of the United States by Howard Zinn. Will give you a completly different picture of the US. There is also a few good college history teachers out there if you wont accept this.
http://en.wikipedia.org/wiki/Iraq_War

Posted by prometheus117 | Report as abusive

Asians could never be as undisciplined as the average American. Asians work extremely hard, have deep pride, and an ethical core the world would do well to emulate. They would never rip off their own families and their own people like the white euro-centric male, who would eat you alive for a couple of bucks.

Interesting. But it’s missing good points on the analysis. The immigration is one of them. It played a role before and can solve many of these issues.

Posted by Armando | Report as abusive

I found this article, at best, to be patronizing, and at worst, to be fear and hate mongering.

It is obvious that Asians never had the spending habits of Caucasians; so, why rub it in with an article like this? Caucasians are already plenty mad over the election of our President. Do we really need them to hate Asians too?

Thank you for listening.

Posted by The Engineer | Report as abusive

have read all the above and find this all REALLY scary. I, at one time had a HK Co that manufactured in China. Just about every shipment (container) had problems due to vendors in China that lied and cheated eachother; lead paint, poison candy, bugs .. there was always something. How about all the meds that have been shipped out of China with toxic ingredients??? I know, those I got too, right in my veins. It’s time for the US to STOP all the cheap manufacturing in China that has no quality control … they don’t care if they kill all of us, our kids and pets. BUY America …. Bring it home to the U.S. We all have paid dearly for all the greed, regardless of the amounts.

Posted by mars | Report as abusive

As usual James Saft, working for a corporate controlled media outlet bent on censoring real news, covers up the real problem. It is the world currency system dominated by the privately owned Federal Reserve System. The Fed, as already acknowledged by Ben Bernanke’s speach on Milton Friedman’s birthday, caused the so called Great Depression. The Great Depression just like the depression today is caused by a deliberate expansion then subsequent contraction in the money supply. This allows the owners of the federal reserve corporation (incorporated in Deleware) to buy up the real wealth in the economy with the paper money that can be produced at will. James, will you ever talk about the real cause of the economic collapse? Asian economies will prosper while the US declines because the media is covering up the crimes of these bankers. Watch the video Zeitgeist:The Federal Reserve and America Freedom to Fascism. How can you talk about the old economic model without talking about the US dollar and the demise of the fiat based money system that supports it? The Asian economies have not outsourced their money creation capacity to private banks as has the US.

Posted by jay | Report as abusive

Thanks for not posting my comment.
Is it so stupid or is it so right that you are not allowed to post it?

Posted by Michael | Report as abusive

I agreed with some of the commentators about war mentality of Americans specially their politicians, Mr.Bush & Dick Cheney are directly beneficiaries of Iraq war, their owned companies are making millions of dollars. They do not care about their peoples and their problem they just looked after their own interest which has brought America today to the ground.

When Mr.Change (Obama) took office we in the east were looking for some real change but seems he is from the same breed, therefore God bless America.

Posted by Al Baloushi | Report as abusive

I agree to the fact which the writer says that the drop in US consumption will affect Asian markets . To some extent he is correct that traditional practices of saving more for future will affect domestic consumption in economies like the one in my country India. However to be India specific the more percentage of the population is between 20 – 40 years hence their risk taking and spending/consuming habits are much different than generations before so enough consumption / demand can be generated domestically.
If and only if our governments and finance ministries get more dynamic to the Global economic situations and bargain big time in Copenhagen at the WTO meet future of Asian markets will be brighter . This will drive US economy upwards. The Asian Economies can be in a powerful situation sooner with a disclaimer that their governments are ready to jump in pool and swim. Asian Economies like China , India etc can drive their economies as well as dig US out of the hole.

Instead of patronizing or subsidizing wise world leaders should just give back what people already owned.
————
Capital Dynamics:

I have been playing with some analytical insights to figure out the underlying functioning of the global financial meltdown as follow:

Lost and Found Conceptions:
Many objects lost can be found so that institutions may have a department to handle lost objects returning them to their owners.

Money can be lost on two ways in the financial market.

1. Lost by transfer.
A person loses his wallet but somebody finding it can spend the money keeping it cycling in the economy.

2. Lost by destruction.
A person loses his wallet in a fire and the money is burned being out of circulation definitively.

Last year only in the US the stock exchange lost by destruction 7 trillion dollars that is considered out of circulation forever. This economic crisis that started in the US and spread globally may have contributed to vanish around 15 trillion dollars worldwide. UN predicted a consequence of 50 million jobs to shed due to this economic downturn.

The approved stimulus package of less than a trillion dollars may provide some sort of relief to a crisis that destroyed about 7 trillions in the US. However the amount destroyed in one year in the stock exchange takes around 5 to 10 years to be created.

Mr. Obama, when a person loses his wallet in a fire it becomes a challenge to claim any loss because there is no way to provide any information about the content lost. The Stock exchange system tracks the stocks allowing losses be reimbursed to owners. It is a good deed retuning money that was meant to pay retirement or college fees, or even charity institutions endowments.

Why to do it?
There are 50 million jobs losses to prevent ensuring a better leadership to the world. A simple smart management in the economic system could avoid such catastrophe.

Transforming stocks to fixed rate investment could give all governments a strong tool to restore destroyed capital back to previous values curbing destructive power from fears. Investors would accept a deal to transform their stock to the purchasing value plus interest rates (2% a year?) with a minimum moratorium (2 year?} for the companies to allow programmed withdrawing.

There is a very fair reasoning since the capital destroyed existed previously originating from many sound sources. Good part of healthy money can be restored to its integrity curbing a worldwide damaging financial crisis worsened by combined effect of fears.

I estimate that there was a general loss around 30% of stocks worldwide; it means that money in such stock applications should be around 50 trillion dollars which allowed about 15 trillions to be destroyed and harm the global economic system.

I believe that 50% to 70% of money lost in the stock can be recovered back as a fixed rate investment meaning 3 to 5 trillion dollars returning to the economy in the US to the purchasing values plus interest rates of the period.

Converting stocks to fixed rate investment can be a permanent tool to prevent future economic collapses and to reduce the size and importance of stock exchange in the economy. Companies would sell stock and ensure that at least fixed rates their stocks should guarantee investors in case of downturns. When a company degrades its performance, its stocks start becoming fix rate investments preventing a further degradation by fears in the free offer-demand rule.

If investors know that their money can be recovered at least at the levels of fixed rate investments, they would not become so eager to retreat from the stock market from falling stocks. In general the stock exchange should compensate at least to the level of fixed rates. This puts a tricky break on falling trends avoiding worsening situations.

What should it be called?
Stock Rescue System:
Governments will make Laws to ensuring that companies selling stocks would offer options to transform stocks to fix rates investments. This amendment would protect against spreading fears and any sort of retreat that spoil parties or overall functioning of the economy. Fixed rates could become a capital investment for withdrawing on investor interest.

There is a strong coherence in nature functioning stating that any single problem can accept or admit many sorts of solutions with variable results. Lost and Found department works pretty well on many places returning lost objects because they were not destroyed and were found. It seems that some money lost in the financial crisis can be tracked back to due owners and returned on a safe fashion to avoid further consequences to the global economy. Also, a permanent Stock Rescue Amendment should provide a way to prevent such situation take place again bringing a more stable economic functioning worldwide.

We are learning that a subtle huge destruction of capital in a short span can be very damaging to the economic system. It is not hard to assume that intelligent humans can organize better their way of handling their common issues.

Whenever wisdom is applied sound results should benefit many from a more coherent outcome
————–

Posted by Elson Silva | Report as abusive

James – what are you smoking? Who the heck is buying all of these treasuries and keeping the prices of that script sky high and the dollar floating into the stratosphere when even a child will tell you that inflation is about to go through the roof. It certainly isn’t Americans. I mean this is hilarious.

Posted by David Lawrence | Report as abusive

Of course Asians won’t imitate the American model, because Asians don’t have the colonizing/gunboat diplomacy/Mpnroe doctrine mentality whereby, when your debtors cannot service their debt, you occupy their lands.

The question of what will take its place has a multi-dimensional answer. One dimension has to do with the international trade, payments settlement/financial, and general global governance architecture. The International Financial Architecture, in particular, has to be reformed in a meaningful way to enable enforcement of debt-servicing in a legally-binding, civilized fashion worthy of the Third Millenium, without recourse to war and violence such as is becoming common in discourse in the West, notably Niall Fergusons’s writings. The international governance structure on international law and justice (the ICC and other dispute settlements mechanisms), on global warming and climate change, on nuclear weapons development/disarmament, missile defense and defense shield arrangements, on the law of the sea, on the development of newly-accessible areas for exploration and mining of fossil fuel and other resources and navigable pathways (the Arctic and Antarctic), on the development of conventions for the civilized exploitation of commercail ventures in space: on all these fronts, a willingness of the West to appraoch these issues in a fair manner will determine how Asia responds.

Then, there is the option of decoupling. AEAN+3 had already launched the Ciang Mai initiative several years ago and have recently reinforced its working. America has introduced a certain degree of “buy America” first provisions in its stimulus package. Nobody wants a pronounced degree of protectionism, but every body wnats both some flexibilty in view of recent experience, and some ‘escape route’ in case the other appraoch mentioned goes awry.

On my part, I am optimistic that a reform of the international financial and governance architecture that accommodates the legitimate aspirations of Asians, but also other emerging countries elsewhere in the world can be agreed. Byt America nd the West must show a far greater degree of understanding and humility than they have done so far.

Posted by Mohamed MALLECK | Report as abusive

Much has been made of the trillion dollars priming effort for kick starting the American economy. But where will that money be spent? And with what aim? Obama government has to be pragmatic in investing this sum. Here is a suggestion:

1. Tie up with India in a cast iron lock-up: offer to loan the money needed to buy American products for infra-structure development, to repaid by loaning Indian defence personnel to gaurd US assets worldwide, be it in US interest areas or for US controlled entities anywhere in the world. Plus use Indian software skilled labour to establish world leading technologies in the US. Assure income support to American unemployed for a couple of years when economy starts building an upword trend.

2. Use US millitary might to engage other countries whose failing governments will need to safegaurd their assets. Again use Indian personnel to do so, in combination with US supervisory staff to oversee. Charge these countries for service provided, payable in agreed resource trading at favourable terms to US.

3. Establish stronger millitary presence in African countries, offering them to establish industries in their countries using Indian/American workforce. In return ask for energy products from these countries.
Also offer them millitary hardware that they need to protect themselves.

4. Don’t allow Europeans another round of colonisation IN Africa.

5. Review the situation on an yearly basis to take stock of the outcomes achieved.

Kanwal Chopra

Posted by kanwal chopra | Report as abusive

To Kanwal Chopra,

You suggest “Tie up with India in a cast iron lock-up: offer to loan the money needed to buy American products for infra-structure development, to repaid by loaning Indian defence personnel to gaurd US assets worldwide, be it in US interest areas or for US controlled entities anywhere in the world”.

Kind of a new Blackwater, right? Sounds like Satyam boss,Ramalinga Raju and Citigroup boss, Vickram Pandit.

May I asl that you kindly give readers a background about yourself!

Posted by Mohamed MALLECK | Report as abusive

Excellent article. Dare I say that there is not really a problem with the world economy, but rather there was (in the form of an unsustainable credit and supply bubble)and now we’re all just reverting to norms. Yes we’ll overshoot and there’s going to be terrible suffering and hardship but that’s what we get for being high on leverage for too long. Sadly, all stimulus plans and bail out efforts will ultimately do nothing but delay the inevitable reversion to the mean. Buckle up.

Posted by Paul B | Report as abusive

Once again Mr. Saft has an opinion, which are likened to noses (we all have one). However Mr. Saft’s opinion is lacking in a few additional and important facts.
As an American (living in China), I can tell testify that ‘most’ Chinese do in fact love Americans. Secondly, China suffers from a similar problem as the US, in that it has an aging population, and a younger generation that doesn’t have the same ideas about things as their grandparents.
I experience this in my own household. My wife is Chinese and saves clearly 40-50% of every penny (mao) that comes to her. Her son, who is in his mid-twenties saves next to nothing, and wants to buy everything in sight (just like Americans he wants it all ‘right-now’).
Consequently, when making comparisons, Mr. Saft should be more careful…….
Respectfully,
EdgyInChina

Posted by Edgy | Report as abusive

The companies received the bailout money are using them for their ‘personal’ agenda.Nothing percolated down.
60% OF job market is with SMALL BUSINESS.By July about 75% may go out of business. Then US may importing much more than now, from Asian countries.

Posted by K.Srinivasan | Report as abusive

peak-oil may soon eventuate, and so to may we witness peak-economics. the very nature of economics is contradictory: the study of unlimited material wants as desired by society under conditions of scarcity(limited resources)

the collective conscience of the economic powerhouses is a masters degree in total disregard of consequence. one does not have to be a graduate of Harvard or Yale to comprehend the fact that if one were to keep clear-felling the Amazon that this is a beautiful, integral feature of spaceship earth forever lost, never again to be worshipped and utilised.

you lay waste the sealife off the east coast of Australia from Tasmania to New Guinea no species will ever again be able to enjoy the wonders of natures’ ocean gardens of eden. if one were to keep flushing toxic poisons and chemical fertilisers off the
sugar-cane farms,of Australias’ wet tropics, directly immersing the Great Barrier Reef, we would have wiped out one of the wonders of the world. an entity in itself never to evolve again, lost forever.

the captains of industry are far to greedy to be able to make decisions from an altruistic altitude to be entrusted with such common wealth, wealth for man, for all time…

Posted by brett kenneth sweeny | Report as abusive

When we come to a place were we stop desireing so much on other countries for our social needs, then we will come to a place of security . We has a country must redefine our wants versus our needs, and then and only then will we see this country turn back to prosperity.

Posted by Ian | Report as abusive

A good read. That’s not about stimulus policy or government spending… it’s the CULTURE. I live and work in Hong Kong and make frequent visits to mainland China for work. The entire business culture up there has been dominated by the strong desire to export cheap products to the West. I agree with Andy Xie’s estimate of China’s per-capita income will triple some day, but having said that, high income is disproportionately enjoyed by less than 10% of the population, or 5%, businessowners or corrupt officials, That precisely explains why domestic demand accounts for only 40% of China’s GDP. Without retirement protection and other safety nets, how can you ask a factory worker in Shenzhen lavish US$1,000 on a LV handbag? He or she saves up to 40% of monthly income.

Posted by Jimmy Chow | Report as abusive