Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold’s Honest Discipline Revisited
July 5th, 2011Michael Pettis at China Financial Markets gets to the heart of the trade imbalance issue in his email update today: “The Trade Imbalance Dilemma and Soaring Chinese Debt”.
Over the past two years we have become pretty used to the spectacle of Chinese government officials warning the US about its responsibility to maintain the value of the huge amount of US treasury bonds the PBoC has accumulated. More recently we have been hearing complaints in Germany about the possibility that defaults in peripheral Europe will lead to losses among the many German banks that hold Greek, Portuguese, Irish, Spanish and other European government obligations.In both cases (and many others) there seems to be an aggrieved sense on the part of creditors that after providing so much helpful funding to undisciplined debtors, the creditors are going to be left with losses. There is, they claim, something terribly unfair about the whole thing. To me this whole argument is pretty surreal. Not only have the creditors totally mixed up the causality of the process, and confused discretionary foreign lending with domestic employment policies, but an erosion in the value of the liabilities owed to them is an almost certain consequence of their own continuing domestic policies.
Tags: Dilemma, Imbalance Dilemma, Trade Imbalance, Trade Imbalance Dilemma
The shares of Kansas City Southern’s (KSU), which I first discussed here on July 29, 2009, at a price of $19.66, have broken through major, psychological resistance at $50. Now may be a good time to consider taking some profits, if you’re in near $20. 
