Chinese Students Laugh at Obamanomics (1 Viewer)

Bjerknes

"Top Economist"
Mar 16, 2004
101,532
#1
Earlier this week when he was in China to "explain" the Obama Administration’s position on the US long term debt position; on the Administration’s current position thereafter the audience laughed.

The difficult notion for those of us in the US to understand is that the American press did not cover the laughter. Other than for a very cursory, one sentence, statement by The NY Times, that Mr. Geithner’s comments "elicit[ed] some laughter," little was made of the inordinately poor reception Mr. Geithner received there in Beijing. However, the international media was and is having a field day with the response he was given. The Financial Times earlier this week said that

In response to a question after his speech, Mr. Geithner told the student audience that ‘Chinese assets are very safe,’ drawing loud laughter from his student audience—a reflection of skepticism among many Chinese about the wisdom of building up large foreign reserves.

The Telegraph in London was even more severe when it said, tersely, that "US Treasury Secretary Tim Geithner was laughed at by an audience of Chinese students after insisting that China’s US assets are safe…. The comment provoked loud laughter from the audience…"

But the US media avoided any reporting of the laughter that greeted Mr. Geithner’s speech. None of the US television stories reported laughter; none of the US newspapers reported the laughter; none of the US magazines covering the trip reported the laughter… but the laughter was loud; it was palpable and it was very, very real. Simply put, the US fiscal circumstance has become a laughingstock, and we do not say that lightly. It is, however, true.

The utter and harsh reality of the US present fiscal circumstance is that the world is laughing at the Obama Administration’s handling of it. Mr. Geithner is the global vicar of the US fiscal policy, and never, ever in our lifetime have we seen or heard of a US Treasury Secretary being laughed at… until now. It is one thing to be derided; it is entirely another to be laughed at, and the US is now being laughed at.

The laughter, we are certain, did not come easily, for the world wanted the Obama Administration to succeed. After eight years of the Bush Administration which the world, for any number of reasons… few of which we agree with… took issue with the US, the world wanted Obama’s government to succeed and take the lead on global economic and political issues. It was prepared to give this Administration the benefit of the doubt on almost any issue; indeed, it was prepared to give this Administration the benefit of many doubts before losing its faith. That faith is now gone.

Audiences do not laugh at Treasury Secretaries readily nor easily. They are laughing readily and uneasily at the Obama Administration now, and we cannot imagine anything sadder and more disconcerting than this.

Le Metropole Cafe

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I don't blame them for laughing. It's laughable what we're doing because Keynesian economics never works. China will try and is trying to free itself from the US Dollar and government debt stranglehold, and once they do, we're in big trouble. Unfortunately, even after months of it being completely obvious, the Chinese are finally realizing US economic policy is faulty.

Our media is pathetic.
 

Nenz

Senior Member
Apr 17, 2008
10,054
#2
By saying that Keynesian economics never works, are you asserting that economies shouldn't be primarily demand driven? I agree with a lot of his theories including the "multiplier effect" which justifies government economic stimulus.

Anyway, what is the current U.S economic policy and why are its 'flaws' so comical?
 

Sadomin

Senior Member
Apr 5, 2005
7,011
#3
I don't blame them for laughing. It's laughable what we're doing because Keynesian economics never works. China will try and is trying to free itself from the US Dollar and government debt stranglehold, and once they do, we're in big trouble. Unfortunately, even after months of it being completely obvious, the Chinese are finally realizing US economic policy is faulty.

Our media is pathetic.
Never is a strong word. They do work when there are world wars going on.

You can prevent a crisis with Keynesian economics, but it's too late for that. Now is the time to rebuild - from scratch.
 
OP
OP
Bjerknes

Bjerknes

"Top Economist"
Mar 16, 2004
101,532
#5
By saying that Keynesian economics never works, are you asserting that economies shouldn't be primarily demand driven? I agree with a lot of his theories including the "multiplier effect" which justifies government economic stimulus.

Anyway, what is the current U.S economic policy and why are its 'flaws' so comical?
By saying that Keynesian economics does not work, I mean that government intervention should not come into play, meaning that government borrowing and spending is detrimental in the long run. This policy means that we borrow even more from other countries, and allow for quantitative easing, which means that while people are trying to save, we inflate the money supply which drives up inflation. Essentially, we penalize people for saving. This is absurd.

The fact of the matter is, the United States keeps printing out money to stimulate the economy while they're trying to sell the rest of the world our government debt. We are at the point in our current account (basically trade balances) where we are in the brink of no return. To finance all of these actions by our government, we need to either borrow or print, which in the long run causes inflatiom due to the overwhelming amount of US dollars in the system.

The fact of the matter is, Keynes theories don't work because it causes inflation, which is detrimental to economies as it leads to higher prices for consumers. I will leave you with this: Keynesian economics failed in Germany where hyperinflation occurred due to government printing, they failed in Japan by giving the market billions which caused the "Lost Decade" of zombie banks and lackluster economic growth, and Greenspan caused the housing bubble with low interest rates after 9/11 allowing cheap money to hit the market, causing this mess.

This cheap money policy is continuing. What we should be doing, as a student of Austrian economics, is raising interest rates and pull back the ability to borrow and spend, because you can't fight fire with fire. It only worsens the problem.

Check out this video from Kato.


Never is a strong word. They do work when there are world wars going on.

You can prevent a crisis with Keynesian economics, but it's too late for that. Now is the time to rebuild - from scratch.
Well of course it works when there is a war in the horizon. Why? Because the country and allies alike need to produce the weaponry for the war, which means a mass overload of buying by other countries to defend themselves.

But we don't want that, trust me. I know people are thinking about a WIII to get us out of this mess, but please, don't. It will be hell on earth.
 
OP
OP
Bjerknes

Bjerknes

"Top Economist"
Mar 16, 2004
101,532
#6
All that needs to be said is look at these two charts.

The following chart is that of the US Dollar. Over the past six months, the Feds have been printing like crazy, and now people are becoming anxious about the USD.

http://www.finviz.com/chart.ashx?t=UUP&ta=1&p=d&s=l

Now the following chart is S&P 500 over the past few months.

http://www.finviz.com/chart.ashx?t=SPY&ta=1&p=d&s=l

As one can see, the drop in the value of the US dollar has correlated with the rise in the US stock market. All this means is that traders are going on the reflation trade, meaning that there are too much US Dollars in the system to cause US stocks to go lower. There is very little confidence in the USD right now, hence the Chinese laughter, and hence why commodity prices have risen 40% in the last month.

This is what it comes down to. Sure, Keynes can print all his money to stimulate the economy, but all that leads to is higher commodity prices, higher prices for daily goods we all need, so it starts to hinder the average consumer in the developed nations.

You can't print money and expect traders to think the USD is sound, even in a debt deflationary environment. It really doesn't matter whether or not the dollars reach their destination or not. All that matters is market perception. And the market, China included, thinks my country cannot repay the debt.

That spells doom for us. Thanks a lot, QE. Thanks a lot, government.
 

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