It's the Chinese Economy, Stupid!
While the United States is pouring its lives and riches into the sands of Iraq, combatting a make-believe "global network of terror", the real threat to America's way of life comes from another quarter -- the galloping Chinese economy.
China's annual growth slowed a little in the third quarter to 10.4 percent, but the world's fourth-largest economy is still firmly on course to log a fourth consecutive year of double-digit expansionOf course China is starting from a much lower base than the US economy, but double digit growth compounded over five or six years will make up a lot of ground very quickly. And the US economy is basically standing still, with three or four per cent growth once every fifteen or sixteen quarters considered a major achievement.
The slowdown, from 11.3 percent in the second quarter, followed a concerted campaign by Beijing to prevent a credit-fuelled investment boom from turning into a bust that could saddle the nation's banks with fresh bad loans.
The "concerted campaign" mentioned above is an interest rate squeeze designed to slow down "fixed asset investment", which has been "the main engine of China's growth." the U.S. hasn't had that problem in a long time, as its economy is now largely consumption-led, not producer led.
Here are some numbers that make the issue plain as day:
Other data showed investment in the first nine months of 2006 in urban areas in flats, factories and other fixed assets expanded 28.2 percent from a year earlier, slowing from growth of 29.1 percent in the January-August period."Fixed assets" means, among other things, new factory openings, which grew at a rate of 28% in China last year. US factories may have closed at that rate last year!
Industrial output growth in the year to September rebounded to 16.1 percent after a surprisingly steep drop to a 15.7 percent rate in August. Retail sales in September grew 13.9 percent from a year earlier, up from 13.8 percent in August.
Of course the Bush administration is aware of all this. They are trying to head off the Chinese challenge by cornering the global supply of oil. Now that that foolish attempt has failed, wouldn't it have been better to put some of the trillion dollars we'll spend on the war into an effort to make our own economy sound?
After all, we live on bread, not bombs.