EVieira wrote:
|BFC|Icenflame wrote:
granted Kmarion
both your economies would take a huge knock but ask yourself the question which one would come out best in the end?
The whole world economy is interwined with the US. We live in the times of globalization, when the NYSE takes a big hit all other major stock exchanges dive too. Imagine what would happen if the US were to crash altogether...
One thing pulls another: US crashes, pulls china and japan with it. China is the major oil, steel and soy consumer in the world. Economies with those major exports suffer: Brazil, Venezuela, Russia, etc. Those countries bring down those dependent on them, and so forth.
Its a domino effect, but when the first domino is the largest economy in the world, its more like a tsunami.
It's true if the American economy were to crash, the whole world would slide into a huge crisis. We don't know what the outcome might be, so it's in nobody's interest that this occours. It's also true that unfortunatley the US has a huge deficite, already the American standard of living is finaced by the rest of the world. Japan and China both hold gigantic devices (foreign currency- not sure about the translation) and with good reasons. They are practically giving out loans to the US and in the process they are backing the Dollar, so they can keep selling their products to America. If they wouldn't do that the Dollar would take a dive destabilizing economies all over the globe. Especially countries that have their currency interlinked to the Dollar. Since everybody knows that, the whole world is working together to prevent something like that from happening, like it was done before (I believe in the 70's the world stopped the dollar from taking a devestating dive).
That said, you also see capital beeing pulled out of the US slowly but surely. Countries like China and Japan are buying more and more Euro devices, since the Euro is much more solid. The EU zone got a positive deficite.
Afterall it looks like nobody wants an American crash which would mean a world crash, but the US is getting alot of competion and probably will be overtaken whitin the next 50 years. Thats not bad for Americans but in the process they'll cease to be sole superpower. Although it would be in Americas interest to finance it's peoples living standard by itself because the more important other regions of the world become the less important the US.
Here's an example. Germany is an export nation. 10 years ago, most of the money was made in America. A dive of the dollar would mean German products become more expensive to American customers, they would buy less, therefoe huring the German economy which depends on these exports.
Today most of the German exports go to Eastern Europe and Russia, China is becoming a larger market every year. The value of Dollar has lost quite a bit compared to the Euro over the last year, which would have usually hurt the German export economy but since we are exporting so much into other parts of the world now the effect wasn't at all felt anymore, this is a dramatic change.
American economists know the problem as well and will hopefully take steps so there economy won't fall apart.
PS: To make it easier to understand: The practice of American the average people spending more than they earn only works as long as the Dollar is the dominate currencey. If this changes there will be trouble.
Last edited by RingPirate (2007-01-11 08:50:02)