Chinese Savings Helped Inflate American Bubble

Posted by Kendall Harmon

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.

“This was a blinking red light,” said Kenneth S. Rogoff, a professor of economics at Harvard and a former chief economist at the International Monetary Fund. “We should have reacted to it.”

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Filed under: * Economics, PoliticsEconomyCredit MarketsHousing/Real Estate Market* International News & CommentaryAmerica/U.S.A.AsiaChina

Posted December 27, 2008 at 4:37 pm [Printer Friendly] [Print w/ comments]
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