Monday, January 14, 2008

What the U.S. Trade Deficit with China Means for You and Me.

James Fallows tells us in his Atlantic Monthly article, "The $1.4 Trillion Question" (hat tip Brad Setser):

"In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China."

How long can this arrangement last?

"Like so many imbalances in economics, this one can’t go on indefinitely, and therefore won’t. But the way it ends—suddenly versus gradually, for predictable reasons versus during a panic—will make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere."

Read the rest.

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