Wednesday, June 30, 2010

The Great American Dilemma !!

Ever since the recession started with the break-out of Lehman Brothers in September 2008, Chinese have been teasing the superpower in one way or the other. USA doomed by it's financial instability has been caught off guard by the Chinese, who are leaving no stone unturned to harass the Americans. Chinese has been manipulating their currency right since the beginning, but it is only now that it is causing tremors in the American and European economies. They have deliberately regulated their currency to keep it at a lower level in order to boost it's exports. As a result of which the demand for cheap Chinese products have increased astronomically, and that of the costlier domestic goods has declined drastically. Dead are many american manufacturing industries because of this. Europe is also reeling under pressure created due to excessive demand for Chinese exports which are much much cheaper than their own. This has in turn raised the unemployment level to an all time high.
On one hand US government is criticized for adopting protectionist policy and at the same time, this ploy by the Chinese is their game plan to overtake the US economy. One would say that lowering of prices is good for the consumers, but the question to be asked is How long an economy can survive the negative output growth due to reduced demand for domestic products. Ultimately consumers are also producers. They earn through producing and consume using their disposable income. If all the goods we consume are from other countries, what will be the source of income for our men. If it's only USA which is expected to consume the Chinese products and Indian services, what would our men do? Developing countries on the other hand encourage their citizens to save and also provide considerable incentives for that matter. Is the whole world contemplating to overcome recession only through US spending?. President Barack Obama has got a lot of work to do to keep the American expectations alive. He needs to handle the matter diplomatically and try to put international pressure on Chinese to remove unwarranted regulations on their currency to make the playing field leveled for everybody.

1 comment:

  1. All the time countries like china and india and to a lesser extent other developing nations are advancing rapidly while the united states is still stuck in this pre cold war period time warp.