US versus China
When last we looked the United States was putting in unwanted pressure on the Chinese architecture and economy wise tightening their claws to curtail whatever money China was earning.
The reality of the truth well on the other side is that China holds such a huge population and pegging itself t the dollar at a constant value since 2008 it has not got many options to enjoy when price modulation is concerned. More or less whatever margin China gets on the goods that is sold is nothing but a meagre 2 percent. This means that in the United States if the bill is passed and the strong regulations are being applies on the Chinese economy then the exporters would be driven to the ground and the cushioning effect that the China had been downplaying since years would be devastated.
United States has a previous experience of such regulation when it has destroyed foreign economies to give boost to internal production. Something of this sort happened in 1990s around when goods that were imported from Japan were made very costly so that the simultaneous American goods can also become competitive.
As can be seen both the House Democrats and the Republicans are fixed on their point to pass the bill as according to them the curtailment of Chinese hands is an important agenda but time will tell what is bound to happen.
With the American economy completely broke and still waging war in Asia and the Middle East it becomes complicated to trust motives when things do tend to seem otherwise too and China vetoing whatever it can with the 54 African votes in the United Nation against any American imposed restrictions in Iran situation is pretty dim.
The situation however becomes even more gruesome with the sudden ascent of Chermany and not in the most positive way. Speaking of intentions some intentions have still not become clear as what the countries exactly want from the on going crisis that is pulling everyone into it.
This is the third time in a row when the fiscal tightening has forced the masses of the Greece on the streets while on the other side more sophisticated European nations are discussing how to do away with the need to sponsor a bailout for the bankrupt nations.
Germanic Intentions
Mr Schäuble, German finance minister addressed his critics by declaring Greece’s crisis had shown it was “obvious” that the 16-nation eurozone’s rules were “incomplete” and unable to deal with situations long thought “inconceivable”.
His argument comes after days of vigorous debate within Germany, and with other European Union partners, with some questioning the timing of the initiative and others the need for an alternative to the International Monetary Fund.
The Bundesbank, Germany’s national central bank, this week signalled its opposition to any proposal that might distract eurozone governments from the more immediate task of bringing Greece’s public finances under control.
Axel Weber, Bundesbank president, described as “not helpful” discussions about the “institutionalisation of emergency help”, which he said could prove “counterproductive” given that eurozone countries were currently helping Greece.
Greece even though being a paramount question need proper thought is saving it worth the cost for Germany.
If we go by the words of Mr Schäuble there can only be one thing that might come out clear and that would be that Germany is looking at options for a safe exit from Euro zone as far as the currency binding is considered while planning a bailout too.
The Boasters
Chermany as has the name been coined denoted the two of the world’s biggest exporters governing whatever the world eats. China and Germany are, of course, very different from each other. Yet, for all their differences, these countries share some characteristics: they are the largest exporters of manufactures, with China now ahead of Germany, they have massive surpluses of saving over investment; and they have huge trade surpluses.
Both also believe that their customers should keep buying, but stop irresponsible borrowing. Since their surpluses entail others’ deficits, this position is incoherent. Surplus countries have to finance those in deficit. If the stock of debt becomes too big, the debtors will default. If so, the vaunted “savings” of surplus countries will prove to have been illusory: vendor finance becomes, after the fact, open export subsidies.
China is already clawing the possibility of financing every spending of USA but considering the consumption of European Union is considered if Germany were to sponsor Greece bailout or for that matter any other bailout it would choose to leave the Union while doing that or force the weak nations to do so.
The situation is like Germany no longer wants to be associated with its weaker counterparts but seriously wants to help them. It is still playing with its cards till the time when the exact structure of European Union future would be decided for that would decide how the pegging of currencies would occur.
The time is like when financing counterparts is more like making them eat more and in doing so fuelling the market of the country itself. A kind of symbiotic foothold so that the eating and consuming cycle goes on, however this complicated cycle of Euro common currency is restraining countries as they are economically pegged to each other.
More to come.........
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