Monday, December 27, 2010

The unbalance that must be balanced

China’s economy relies too much on investment and too little on consumers spending, while America and Europe rely too much on consumers spending and too little on investment.
Rebalancing the two would mean higher salaries for the Chinese’s and lower spending for Americans and Europeans.
Letting wages rise at the expense of the profits would mean the trade with China would be smaller in quantity, but the local American and European companies would see the advantage to produce again in their own countries.
That would also mean inflation and not deflation.
In spite of the lowering of prices, people in the West buy less because the available money is less (unemployment grew a lot since China came into the game).
China needs consumers, the West needs workers.
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