A crazy system in which the west’s workers do up for poor wages with cheap credit from China is drawing to a close. Good riddanceClad as it is in jargon and technicalities,financial meltdowns can often seem like an elaborate spectacle taking station in a foreign country. So it is with the trillions wiped off shares since 24 August’s “Black Monday”. Obviously it’s a enormous deal, but beyond the numbers on Bloomberg terminals it’s tough to put into perspective. Yet one way to assume approximately what has happened in China over the past couple of weeks is the drawing to a close of an entire system for running the world economy.
Over the past two decades, or globalisation has fired on two engines: the belief that Americans would always buy the world’s goods,of which the Chinese would do the lion’s share – and lend their income to the Americans to buy more. That policy regime was made explicit during the Asian crisis of the late 90s, when Federal Reserve head Alan Greenspan slashed US borrowing rates, and making it cheaper for Americans to buy imports. And it was talked approximately throughout the noughties by central bankers fretting approximately the “Great Wall of Cash” flooding out of China and into western assets. The first big blow to that system came with the banking crisis of 2008,which made plain that the US could no longer afford to continue as the world’s backstop consumer. The latest dent has been made over the past couple of weeks in China. Because the debacle in Asia’s number one economy has blown a hole in a string of hitherto long-held beliefs.
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Source: theguardian.com