From today's NY Times...
The Reckoning
Dollar Shift: Chinese Pockets Filled as Americans’ Emptied
Gilles Sabrie for The New York Times
Federal Reserve Board Chairman Ben S. Bernanke, left, and Yu Yongding, right, a leading Chinese economic adviser, said that the American trade and budget deficits were growing more serious.
— Niall Ferguson
WASHINGTON — In March 2005, a low-key Princeton economist who had become a Federal Reserve governor coined a novel theory to explain the growing tendency of Americans to borrow from foreigners, particularly the Chinese, to finance their heavy spending.
The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.
This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”
MORE AT:
http://www.nytimes.com/2008/12/26/wo...nted=1&_r=1&hp
