A deep and long lasting recession. Unlike the US, which, even if it goes into a recession, will be a mild and short lived one. Europe can't export much either, extremely high wages, lazy workers, and constant strikes make Europe too uncompetitive. High interest rates discourage consumer spending and business investment.
Only thing low rates and high consumer spending do in the US is get people to send more $$$ to China and elsewhere further devaluing their own currency to shit. The Euro is strong for some reason.
'Europe can't export much either, extremely high wages, lazy workers, and constant strikes make Europe too uncompetitive.' These are the observations of the 80s and 90s. EU is much more efficient machine now.
At the end of the day America will prevail. Why is it so hard to understand the concept behind China's trade policies. We put ink on paper, call it a bond, and exchange it with real goods and services from China. Even if China were to sell the bonds it has, who's gonna buy? China gets to grow it's economy and might as well burn USD for heating because they'll never get to use any of it anyway. America gets stuff for free. There can't be inflation because China can supply an endless amount of goods for all 300 million of Us. Illegal immigration?? Free services that can't be preformed overseas. Just don't look at scarcity resources i.e. Oil, Food and there is no reason why this relationship cannot continue indefinetly. As long as a USD can be exchanged for some good, service or something else of value (stocks, gold) The game can continue. There is too much USD in circulation in the rest of the world that were echanged for real stuff that those persons in poession will never give it up.
'As long as a USD can be exchanged for some good, service or something else of value (stocks, gold) The game can continue.' Most Excellent point! It seems Chinese should start demanding B787s for each $100M of t-shirts and toys they send to the US. It will also prop up US economy without putting the red ink of debt on Balance sheet. No debt is No Interest, so spending goes down. Am not an economist but would like inputs on this barter scenario. Good thoughts Kin!!
.."As long as a USD can be exchanged for some good, service or something else of value (stocks, gold) The game can continue. There is too much USD in circulation in the rest of the world that were echanged for real stuff that those persons in poession will never give it up."... So when Oil is at $150, Gold at $1600. What this will mean is that the world expects USA to work just as hard to buy oil at $150 just as when oil was at $50. The only thing holding the $USD up are Arabs states that are pegged to the dollar. And there inflation is 7% and higher, soon the will be forced to bail on $USD and fight inflation buy rising interest rates and pegging the currency to a basket of European currencies. Arab states and the Hong Kong are pegged to the $USD there interest rates are the same as USA. The Arab states forex reserves jumps $1 Trillion to $2 Trillon $USD dollars in 12 months on OIL Sales, with $USD falling they will BUY gold and EURO. So watch out $USD and USA....the world is not married to the $USD.
'So watch out $USD and USA....the world is not married to the $USD' US will not default on its debt notes, even if it has to devalue US$ further. Since 2002 the dollar has already devalued by roughly 50%. Chinese and Arabs stand to be conned, all the while knowing about the mechanisms of currency and financial markets.
That's why the Arabs and Chinese are buying up American companies and assets with those dollar holdings, look at the US banks selling off chunks of themselves to the highest foreign bidder just to stay afloat. The US and to a much lesser extent Europe, are slowly selling themselves to the rest of the developing world, they have no choice but to do so. Just look at Britain's Gordon Brown courting the Chinese SWF last week to set up in London and buy into the economy whilst European leaders hold out with protectionist views delaying the inevitable. China's also buying up all the commodity assets in Africa, they're gonna run the show. America has none of the economic or political clout it once had or ever will again, it's an inevitable power change like the demise of all empires before. If China wanted to cripple America for political gain they just need to stop buying debt, no need to sell anything, such a simple way to put America in check for any reason. This would lead to more cap in hand approaches to sovereign wealth funds to help prop up American enterprises. The likes of Schumer going to China and telling them to move their currency in some authoritative manner, he's actually begging them to because he holds no bargaining power whatsoever and deep down knows it -sanctions?! please! China and India will become the most influencial economies in the world whilst us in the western world will see wages plummet and be left to supply the service industry to the new superpowers. The generation after the baby boomers are already on average facing a lower buying power lifestyle than their parents. It's sad but true, the Western world rule is ending and the opportunities for individuals rely on seizing the initiative and setting up shop in these places whilst the transition is occurring. Don't leave all your eggs on the sinking ship!
The US doesn't need to default, as a sustained devaluation of the $ could have the same impact of the perception of the $ amongst the OPEC members. If they choose to sell their oil in any currency other than the $, then there's really no reason for other contries to hold any dollars...
'If China wanted to cripple America for political gain they just need to stop buying debt, no need to sell anything, such a simple way to put America in check for any reason.' In this process the US$ will surely plumett. Wonder how much of $9 Trillion of US debt is held by the Chinese. Fire sale of assets is an alternative to payoff the debt but Chinese/Arabs are not using Notes Paybles to buy the companies, they are giving hard dollars. May be down the road, notes payables will come into picture. Scary to think efficiently run US companies in the hands of Commies and Fanatics!