Tuesday, January 04, 2011

Will China be succesful where America failed?

"So what are the causes of the high debt-to-income ratios in Europe? Expensive labor. Expensive exports. Expensive currency. Small population. High levels of taxation and large social welfare systems. On the international front, European nations are having a difficult time competing with an increasingly devalued dollar (and consequently the Chinese Yuan and The Japanese Yen), and domestically, these nations are taking care of their citizens to a point that would make any red-blooded Texas Republican cringe. And of course, the wealthy classes in these countries are so heavily taxed that money is being pumped back into the country’s extensive social programs that, perhaps counter-intuitively, can affect the economy negatively.

It is important to note that few economists would make any real case for some type of financial plan as a result of this data simply because most of them will never pay back any of their debt. But also, because there are not really any solutions – if the citizens of each country were taxed in a way to pay off or consolidate their debt, there wouldn’t be much money (if any) left to spend domestically and put back into the economy. One of the benefits of being a wealthy nation, I guess! At the end of the day, if no one is coming to collect on these nations’ debts – what is the big deal, right? But, nations are not like people, and the rules of credit are not so applicable. The determinants of whether or not money will be lent between two countries are more likely to be a result of the two countries fraternal histories, or if they collaborate in military operations, etc."

The answer in Europe is certainly not a higher taxation, but a lower spending, more people and jobs in the productive system and not in the "service" system.
Less state employee and more factories.
But most of all, people who earn in Europe should spend in Europe, so that the money goes back to the ones who spend.
And if you really want to have a global market, the same money spent from Europeans for buying Chinese products, must come back into Europe as tourism, or buying products made in Europe.
But this cannot be, because the average Chinese doesn’t earn as the average European.
Because the Chinese government is not "elected" and so doesn’t have to bother to behave in a way to be reelected.
In a few words, the Chinese government doesn’t give a damn of how the average Chinese lives,( the less he consumes, the more to the ones who rule).
He is a number in a productive chain.
How long will the Europeans or the Americans be "individuals"?
China is buying European States bonds (they have enough American) and with them the power to "rule".
Since 1945 America has tried to be the strongest power on earth in terms of economy and military.
They failed on both.
Will China be succesful?

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