The Yaun has been pegged to the dollar since the financial crisis, which has allowed China to weather the storm. This has infuriated US official who want to take advantage of the Chinese economy and export to it–to help their own economy.  In fact, recently, China posted a rare $7.24 billion trade deficit, due to imports of oil and raw materials–which will likely be used for exporting later on.

The massive injection of capital into China through foreign markets simply because of it’s size and workforce is a bubble. During the 90′s dot-com boom, everyone was buying internet stocks. It was hot and the growth seemed endless. Same thing happened with the real estate market. Foreigners even purchased a lot of American real estate, sometimes with the profits high oil prices gave them, driving the prices sky high. It happened with oil, too.

The Chinese refusal to allow the yaun to rise against the dollar is proof that the Chinese acknowledge that their economy is fragile and they simply can not sustain such rapid growth without such measures. The Chinese market is export driven.

The Indian market isn’t export driven, yet growth in India is slightly behind China. India has been virtually untouched by the financial crisis and is at better position to have longer lasting growth than China.

By the way, has anyone even been paying attention to Argentina and Chile? They were once rich countries that aren’t full of improverished citizens like most of their South American neighbors…The age of dictators and military rulers in those countries which have revershed strong economic gains have seemed to end. I think it’s time we pay attention to those countries. Especially since the United States seems to favor FTA’s with Latin American countries.

 The Chinese economy is simply growing too fast, and characterisc of economies in the past that have had rapid growth, there will be a steep decline, rather than a consistent gradual increase. In fact, the Shanghai Composite Index of stocks jumped 80 percent last year and property prices rose at the fastest pace in almost two years in February, helped by a record 9.59 trillion yuan of new loans in 2009.

China has pegged the yuan to the dollar since July 2008 in an effort to help it weather the global recession. The Chinese central bank buys dollars and sells iyaun to prevent the currency from strengthening, driving foreign-exchange reserves to a world- record $2.4 trillion as of December 2009.

Exports dropped 25% in 2009, but yet the Chinese economy continues to grow by double digits. Foreign investment in the Chinese economy has skyrocketed. The stimulus that the Chinese government was one the largest in modern history, more than three times the size of the US’s stimulus bill by GDP.

Chinese lending has been pretty liberal. As the financial crisis took many European and American banks out of the market–China has been filling the role–making all sorts of risky investments. Furthermore, Europe has been investing in Africa for hundreds of years and have not yet been successful in getting a large return on their investment. Do you think China’s spending spree in Africa will change anything? There’s also a large trade war looming between the US and China. You’ll either see a new cold war or a massive burst in the bubble. Either way, it is good for the US economy.  Enjoy your high flying Chinese stocks while it lasts!

In Europe, plans to break up banks in the United Kingdom to limit risk and promote competition were approved. But what about the United States? Isn’t this the place where all the financial turmoil started in the first place?

Thomas Hoenig, president of the Kansas City and Fed Richard Fisher, president of the Dallas Fed think so. These are two prominent members of the federal reserve system that think the “Too big to fail” banks should be broken up in the United States. These corporations receive an unfair government subsidy. Furthermore, an international agreement must be reached to allow loans to be given by banks not on American soil and to break up large too big to fail banks that pose a risk to the entire industry if one fails.

During the great recessions, one thing is sure.. Banks are what hampers recovery. Alternatively, during the severe downturns (including the Great Depression), when many small banks don’t have enough capital to make loans the government could theoreticly use their power to force the big banks to make loans and provide capital–but has that worked now?

If banks are broken up and they become more competitive between one another they will have more incentive to make loans and insolvent banks could simply go bankrupt without having to spend billions of taxpayer money. The toxic assets disappear without having to prop of a huge company that uses these risky investments for a significant portion of their profit, like AIG.

Where is the United States Government? What are they doing? President Obama has done a terrible job in mobilizing the government to prevent further economic catastrophe. His stimulus plan paid off those who got him elected and is doing little in creating jobs. The labor force is hurting, with unemployment + underemployment to be about 20% of the overall work force. Several European countries have painted bleak economic pictures.

The Republican Party apparently believes that they will win seats in 2010 if they oppose every little proposal and are banking on a bad economy to help their party’s chances. This further complicates the government’s ability to tackle the problem.

- Jobs are continuing to be lost to overseas countries as our trade liberalization policies have come too fast, as well as the value of the dollar being simply too high.

-India and China will continue to grow and countries like South Korea and Singapore will continue to reap the rewards of being heavily invested in those markets. Countries that are heavily invested in the U.S., such as the  United Kingdom, Germany, and Japan will continue to face tough times.

Growth in the U.S. economy will remain incredibly slow as high unemployment weighs on domestic spending.

They are saying that the recession is over. But it may be too early to tell. After the dramatic fall of the stock market in 2008 it is much easier for some firms to post gain in sales. The great anxiety of the great recession is almost over.

Economists will point to emerging markets and point to their rapid growth and complete recovery after the recession. Even Japan has posted some gains.  You might be jobless and at a library reading this and wondering, what about US? China, India, Brazil, S. Korea and other countries have very little debt and little risk in their financial systems. In the 1990s and early 2000′s the U.S. financial system was guaranteeing all kinda of risky investments and making a lot of money, but the system easily collapsed during a slight downturn which in turn, caused it to get much more servere.

Mature economies are debt-laden and emerging markets aren’t. They are growing fast and can take the risks to invest in their economy to boost growth (Sure, some economists in Asia are saying this is creating bubbles in emerging markets which may burst and lead to recession down the road, but thats another story).  The US financial system is clogged with so much risky, bad debt that is guaranteed by the US treasury, further complicating matters. If the system starts rapidly growing like it did in the 1990s, companies will reap profit. If not, the treasury will have even more debt and people will have less in their life savings.

Tax revenues are still in decline, so job growth from the public sector is hardly any at all. State governments are not replacing retirees and property value decreases has slashed the amount local governments can collect–causing significant hiring freezes across the country. The stimulus money is helping, but not at a pace fast enough to offset the lower revenue from taxes.

There is hope. After the value of the dollar begins to drop due to the strength of high growth economies like China, India, and Latin America, exports should rise. Furthermore, after financial firms around the glob stop hording US dollars to secure their debt that should help the dollar decrease in value. In the meantime, investment firms that hold many overseas assets like Goldman Sachs should keep posting record profits.

Economists predict the unemployment levels in the U.S. to stabilize at around 9.6-9.8% nationally in 2010. The levels of job losses has declined but the losses are continuing–and more people are dropping out of the work force (giving up finding a job) which makes the number look better than it actually is. The drop in sales tax revenue is considered to have bottomed out and stabilized.  Economic growth will be slow due to the monstrous amounts of debt (Credit card companies aren’t helping by raising rates ten fold to beat the new credit protection law that will go into affect soon!). So expect the economy to grow slowly in 2010 with positive growth in GDP and by late 2010, actual job growth should occur.