The economic crisis that’s happening in the US now was first started due to american bad behaviour of spending money. we must notice that china is currently the countries that have a large reserve of US dollars. This is because chinese people like to save their money on the bank whilst american don’t spend money on bank due to bank crisis that’s happening right now.
there is a situation that’s called quid pro quo that’s mean something for something, while china like to export cheap goods to the US then the american people like to buy chinese goods because it was cheap. so there is a mutual benefit happening. but not everything is as smooth as it’s plan to be.
This economic crisis was first started by the booming economic condition in china, when the chinese government had so much dollars in their reserve due to american always like to import chinese goods, they had become a creditor for many countries. Usually in the past, the US is the sole creditor nation in the world, but due to the nature of excessive spending of US citizen by way of buying chinese goods then the situation was reversed. Now china has so many US dollar currencies than the US itself, and this in turn make US want to borrow money from china in which china complied.
China lended hundreds of billions of US dollars to the US, resulting in many bank in the US has so many cash in their saving, and this make the bank willing to lend money for US citizen dreaming to buy their own houses and in return that US citizen must pay their monthly mortgage. and now the wrong things that happened is that the bank in the US were freely giving out money for people trying to buy houses but not taking into account of how those people would pay back the money they borrowed from the bank. without ever mulling of how its customer would pay up the debt, the bank in the US keep giving out cash to american. And after a few years then the bubble of consequences started to burst.
Many people failed to pay their mortgage, they lost their home and it was taken by the bank. but what make it worse is that this mishap happened in a large amounts of people failing to pay up their debt resulting in many home were taken by the bank. So in one side the bank take over people home because those people failed to pay their mortgage but on the other side the bank had difficulty in selling those houses because no wants are buying houses because many american are already broke. So this created a chain effect, in which many bank debts went default and were force to close because their money reserve had run dry. Inter-bank lending were frozen by the american government to prevent exacerbating the condition but it’s also make many bank went bankrupt because it was the only way for them to had money that is by borrowing from other bank.
And this chain effect were happening widespread in america resulting in many lost jobs and many american company such as Lehmann Brothers went bankrupt. This elusive situation had forced the american government to give out bail-out money totalling 700 billions of dollars to some of american important corporations to save them from bankcruptcy. The situation in the US economy is worsen and many people left homeless or moneyless
But the situation in china is totally different, many people in china lived in prosperity. They had saved a large amount of money in their own bank and thus in turn make their bank profitable and also due to the large US dollar reserve that they had, they were able to lend money to other countries that are in dire need of bail-out money. And this make china as the sole creditor nation in this world replacing the US role which had went into recession.
The reason china had many dollar in their reserve is because the domestic market is so strong in china, they only buy their own products and seldom import stuff and this is totally different condition in the US.
Moreover china has now been declared as the countries with the largest amount of energy spending in the world replacing the US. China had gone so powerful that it is now consumed so much energy for its industrial needs and surpassed the US in energy spending.
The only problem with this reversed situation I think is that china is not renowned for its democracy, china is a communist nation that has strict censorship rule applied in its own country. I am afraid that if china really be able to rule this world then they would be able to start a war against taiwan, tibet or any other country that they want. And I presume that this is a worst-case scenario. Let’s all hope that this economic recession will be over soon enough.