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  1. rahul permalink
    August 17, 2011 5:02 am

    China’s pile of currency reserves represents past consumption of the United States. For China to consume this currency reserve, the United States must curb its consumption by an equivalent amount representing a zero sum game. The Chinese economy is geared towards production and exports while the US economy is based on consumption and imports. For a balance to take place, the US economy must embark on massive investment in its production sector leading to a massive cut in consumption and a massive increase in savings. Similarly China would have to let its industrial base go fallow with all the debt behind it being written down. These kind of changes can never take place except when they are forced upon us by a depression.

  2. Dennis permalink
    August 17, 2011 5:55 am

    Wouldnt China’s decision to draw down its foreign reserves and promote domestic consumption be a form of ‘bailing out’ the West? The difference between buying bonds and buying boatloads of whatever America still makes would be the order of when the government gets its cut.

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