ECONOMY: The Chinese example?

The economic crisis we are in right now is also a global crisis. Recently, the presidents of Russia and China blamed the U.S. for the crisis and in many respects, they were correct but I will get into that a little later. Now let me talk a little about China.

China has the fastest growing economy in the world. Just look at anything that you recently bought in a store and you will see that in all probability, it was made in China and that is both good and bad for China.

The U.S. has been importing a ton of goods from China for quite a few years now and that has undoubtedly helped China’s economy. In our present economic crisis, those imports have plummeted; Americans are scared to purchase anything these days. Also, tainted toys (lead) and milk products from China have also contributed to a loss of exports for China.

If you read the Chinese news today you will read that many factories have closed and millions of workers are now unemployed. This could be a very volatile situation for China since they have such a huge population (>1.0 billion).

Chinese economists have known that their rapid growth is mainly due to exports. It appears that they have been thinking of what to do if those exports dry up. Economic fundamentals still apply here as they do in the U.S. and so a DEMAND for goods and services must arise if their economy is to get better. Since the world is not buying so much from China anymore, the demand has to come from within China.

The Chinese people are known “savers” just like the Japanese are. The Chinese hoard all their money because they do not have a good health insurance system and have to pay cash for any medical care they need or may need in the future.

So the Chinese government has just announced a massive outlay of money to form a solid national health system to care for the huge population. The Chinese people will not longer have to worry about paying for needed health care AND SO THEY CAN START SPENDING ALL THAT MONEY THEY WERE HOARDING FOR POSSIBLE HEALTH CARE EXPENSES.

I think this is a brilliant maneuver by the Chinese government. People will feel safe in buying that refrigerator they need or the washing machine or a new TV. That demand will spur domestic production and therefore employment and this will get the economic wheels to start turning again.

In the U.S., people are starting to save their money instead of spending it. Americans have never been known as savers, we just spend and spend and when we run out of money, we borrow and spend some more.

Americans are scared they will lose their jobs as many have already. Many are scared that the supply of available jobs is dwindling and so they better save every penny they earn now, just in case.

So here we are, we know we need to create DEMAND to start the economy up again - how do we do it?