It is time for Asian countries to encourage government spending, domestic investment, domestic consumption to increase GDP. Doing so also helps stablizing the world income and economy by helping other nations' export; which in turns will ultimately raise all countries' export . United we prosper; divided we falter. China alone has 2000 billions of dollars of foreign reserve
( compared with 70 billions for the US) to do that.
Asian countries are in an advantageous economic position. Proof is below:
Economists use purchase-power-parity adjusted GDP ( Not exchange-rated GDP or nominal GDP) as one realistic indicator to compare national economies. It is simply because a Big Mac (or cost of living for that matter) could cost, for instance, 3 times in NY compared with that in Beijing in a specific currency.
To truly compare three current (2008) largest national GDP, we need to look at several indicators:
Current 2008 Purchase-power-parity adjusted GDP (top 3 countries; in trillions of dollars): US 14 / China 8 / Japan 4.5
(https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html)
PPP GDP 2013 projection (in trillions of dollars): US 17 / China 14 / Japan 5
( http://en.wikipedia.org/wiki/List_of_countries_by_future_GDP_estimates_(PPP)
Current export (in billions): US 1377 / China 1465 / Japan 777
Current external debt ( in billions): US 12300 / China 400 / Japan 1500
Current foreign reserve ( in billions): US 70/ China 2033/ Japan 954
Stock of money ( in billions): US 1374 / China 2300 / Japan 4370
Current deficit (-) or surplus (+) (in billions): US -568 / China +368 / Japan +188
If we divide by a factor of billion; a more useful comparison goes like this:
The US currently earns $14,000 (projected $17,000 in 2013) and shortfalls $568 a year; owes $12,300; and has $1,374 in the bank
China earns $8,000 (projected $14,000 in 2013) and surpluses $368 a year; owes $400; and has $2,300 in bank
Japan earns $4,500 (projected $5,000 in 2013) and surpluses $188 a year; owes $1,500; and has $4,370 in the bank
It’s Really a Global Crisis
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Consider consumer spending. The proposed remedy is the "economic stimulus" plan. On paper, this seems sensible. If government doesn't offset declines in consumer spending, housing and business investment, might not the economy spiral downward for several years? Last week, House committees considered an $825 billion package, split between $550 billion in additional spending and $275 billion in tax cuts.
The trouble is that, in practice, the program could disappoint. Parts of the House package look like a giant political slush fund, with money sprinkled to dozens of programs. There's $50 million for the National Endowment for the Arts, $200 million for the Teacher Incentive Fund and $15.6 billion for increased Pell Grants to college students. Some of these proposals, whatever their other merits, won't produce many new jobs.
Another problem: construction spending—for schools, clinics, roads—may start so slowly that there's little immediate boost for the $14 trillion economy. The Congressional Budget Office examined $356 billion in spending proposals and concluded that only 7 percent would be spent in 2009 and 31 percent in 2010.
But suppose the stimulus is a smashing success. It cushions the recession. Unemployment (now 7.2 percent) stops rising at, say, 8 percent instead of 10 percent. Still, a temporary stimulus can't fuel a permanent recovery. That requires, among other things, a strong financial system to supply the credit needs of an expanding economy. How we get that isn't clear.
The pillars of a successful financial system have crumbled: the ability to assess risk, adequate capital to absorb losses and trust among the players—banks, investors, traders. A common denominator in these ills has been the consistent underestimation of losses. Economists at Goldman Sachs now believe that worldwide losses on mortgages, bonds and consumer and business loans total $2.1 trillion, with $962 billion belonging to U.S. banks. In March, the Goldman estimate was about half that. Economist Nouriel Roubini's estimate of losses is higher than Goldman's.
All the new credit programs—the Treasury's Troubled Asset Relief Program and various Federal Reserve lending facilities—aim at counteracting these problems by providing government money and government guarantees. Probably Obama will expand these efforts, despite some obvious problems: if government oversight becomes too intrusive or punitive, it might deter much-needed infusions of private capital into banks. Again, let's assume Obama's policies surmount the obstacles. Credit flows and confidence rises.
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