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REMant 01/13/2010 01:23 AM Report
He clearly understands the US has been living on borrowed time and that this was the real cause of the economic crisis, as one would expect of a Volcker guy. But what difference would it make if the Chinese substituted govt insurance for savings except to create inflation? By any rational criterion any economy should save all they need to sustain consumption, even if we want to live like savages. What kind of productivity you get out of capital will dictate the optimal savings rate, but too little saving can only mean inflation. I agree that the US has China over a barrel. As Hume remarked "the public is a debtor, whom no man can oblige to pay. The only check which the creditors have upon her, is the interest of preserving credit;" In the same way we can be blamed for extorting too low prices, I suppose, but of course the current relation, like the one we had with Japan during the Cold War, has foreign policy benefits.