US taxpayer moans ... while the Asian worker groans under the weight of US consumer debt!

There is another aspect of the deep dive that most Asian economies took in the last quarter of 2008 that is interesting. Over the years there has evolved an arrangement: Japan exports machinery and high-tech stuff to China; S-E Asia ships intermediates to China. All of this is then used to make goods for sale in the US. At each stage there is some value added and the final product on sale in a US department store is the sum of all of the value added.

However, the total of the transactions — the imports from S-E Asia and Japan into China and its exports — is much more. So when demand sank in the US, the impact on the supply chain was much larger. The freezing of the inter-bank market and the disappearance of trade credit following Lehman’s demise put each of these elements into jeopardy. The sum total of the damage was much larger than the slippage in the final aggregate demand emanating from the US consumer. (via Poisonous fallout of Q3 dislocation- Opinion-The Economic Times).

Suggestive statistics is like a bikini ...

This is interesting. It makes a mockery of ASEAN claims that,

“East Asia already trades 55% of its output within the region. India’s trade with China, Japan and ASEAN (Association of Southeast Asian Nations) is increasing. That is the structural shift which will have to happen.”

What we have now is a funny situation

The customer is a nation (USA) with outstanding debts, equaling 300% of its GNP. It's banking systems is in shambles. It insurance industry needs protection. Its mortgage institutions are bankrupt. Its manufacturing is uncompetitive. It also happens to be the world's largest economy.

On the supplier side are China and the 'Asian Tigers.' Till recently, home to some of the poorest people on earth - and colonial subjects, battered by continuous propaganda. Collectively, the US owes them, US$2.5 trillion.

US pay its debt ... Smell the coffee ...

The only way that the US will repay this debt is by devaluing the dollar - either openly and transparently, or by covert means.

One way or the other, this is a debt that will not get paid. While the US tax payer moans, how Wall Street has ripped the US, fact is, it is the poor Asian who is footing the bill of the US consumer spending.

The way out ...

China, ASEAN, Japan must wean themselves away from dollar denominated trade, reserves, and transactions. Replacing it with the Euro will obviously, not make a difference. That will benefit the effete Europeans - instead of the US. A new global reserve currency, a third currency option is the way out. The London summit is an eye wash.

Or is it a brains wash!!