While doing laundry and surfing the web today (I don’t normally work on Fridays) I came across an article that likens the US – China financial relationship to the Ponzi scheme perpetrated by fraudster Bernie Madoff, who was recently sentenced to 150 years in prison.
What’s so Ponzi about the Chinese-U.S. relationship? Basically everything. Look at it this way:After a currency debacle in 1998 left its economy in tatters, Beijing decided to radically restructure its financial relationship with the West. Policymakers pegged the value of China’s currency to the dollar, which had the effect of keeping it artificially low.
Over the past decade, Americans were able to outspend their incomes by easily rolling their debts forward through serial home refinancing. The situation was never ideal, but it worked as long as the value of their collateral — their homes — kept rising.