"The need for rebalancing has been obvious for years, but China just kept putting off the necessary changes, instead boosting the economy by keeping the currency undervalued and flooding it with cheap credit. (Since someone is going to raise this issue: no, this bears very little resemblance to the Federal Reserve’s policies here.) These measures postponed the day of reckoning, but also ensured that this day would be even harder when it finally came. And now it has arrived."
http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=0
Krugman says it is not the same as the Federal Reserve policy, but offers no explanation as to why not.
Previously Krugman has stated that the Federal Reserve can print all that it likes because the US Dollar is the Global Reserve Currency.
This is patently absurd.
There have been 5 Global Reserve Currencies since 1500 - Portugal, Spain, France, Great Britain and now America.
Global Reserve currencies do not last for ever.
China and Russia along with the other BRICS are already working to create the next one - they know the U.S. is already in DEEP trouble from it's massive debts.
http://ian56.blogspot.co.uk/2012/02/greek-scenario-and-us.html
Paul Krugman gets a number of other things wrong in his article due to his deep level of ignorance, misunderstanding, flawed economics, or just blatant lies.
Social unrest in China is growing because :-
It cannot create enough decent paying manufacturing jobs to meet the current demand.
The steep slowdown, due to the recession in Europe and the coming recession in America is obviously going to make things worse.
Price inflation is high in China (as it is in a lot of other countries) because of the steep rises in things like the price of food and energy.
Wage increases have not kept up with real inflation - as is true in just about EVERY other country in the world.
The steep rises in the price of food and energy are overwhelmingly due to the current policies of the Federal Reserve private bank printing $1tn a year, the US government and the speculative activities of big banks like Goldman Sacs and JP Morgan.
http://ian56.blogspot.com/2013/01/the-2tn-of-excess-bank-reserves-is.html
There are fairly accurate ways to assess Chinese GDP growth figures (as Krugman says official numbers are notoriously unreliable).
If we go by the growth in energy usage, Chinese GDP growth is now around 3.0% - not the 7.5% official number.
If we go by the discrepancies between what China says it is exporting to other countries and Hong Kong; and what Hong Kong and other countries are saying they are importing from China we also get to something around 3% growth for China.
It is true that the Chinese are desperately trying to avoid a hard landing.
They can see the coming severe recessions in both Europe and America.
America also needs to go through a massive rebalancing.
It needs to rebalance the current record levels of Corporate profits with record low levels of real wages and high levels of poverty.
If people do not have money to spend - Corporate profits will also decline.
We are already seeing signs of declining Corporate revenues.
Corporate Welfare is currently running at over $2.5tn a year made up of :-
Over $1.3tn a year of direct handouts by the government to large Corporations.
Over $1.2tn a year of indirect subsidies to the big banks by the government and by the Federal Reserve private bank (which is owned by the big banks).
If the disposable income of ordinary people does not start to rise again there will never be a recovery in America.
Disposable incomes have just taken some massive hits :-
$200bn a year tax hike in the fiscal cliff deal
Large rises in the prices of food and energy
Large numbers of employers are switching to part time employment to avoid the massive coming costs of Obamacare - all sorts of employment benefits are lost when an employee loses Full Time status.
Almost all of the reported jobs growth in America so far this year has been in poorly paid part time jobs.
The number of part time jobs has increased by about 500,000, while the number of full time jobs is almost flat.
Total wages have declined since the start of the year (but nobody reports total wages - it doesn't match the narrative the government and the media want to convey).
How to rebalance America's economy and turn it around from it's current death spiral and into a virtuous circle
http://ian56.blogspot.co.uk/2013/05/how-to-fix-americas-economy-create-jobs.html
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