Beijing is diversifying away from US treasuries is a long time coming. If I were China holding on to that much paper, I would be thinking of ways too. Saying that, the bulk of these purchases are to stimulate internal demand through things like more urbanization. The Chinese are facing a big problem, and that is they have too much capacity which brings about the specter of deflation. At the same time, they are also coming off an asset bubble of sorts. I've written how there are really many economics rolled up into one in China.

I still don't see how we'll all be Chinese one day reading this. The Chinese have other priorities than wanting to annex the US. I remember the same talk, same words, almost same everything, only it was the Chinese, it was the Japanese. Anyone remembered the shaking hands and the uproar when they purchased that golf course or when Mitsubishi purchased Rockefeller Center? Saying this, it wouldn't hurt you to know Mandarin.

But remember this, we live in this thing called globalization, and one of it's main pillars is cost arbitrage. China grows because they can make it cheaper and export it for a profit, the underpinning of this is near-slave waged labor and lax regulations. But this is a game that really anyone can play so long as they are willing to pay the price, that being the discarding of paying relatively high wages (or living standards?). There is nothing to stop India from copying China in this regard, and in fact they are already starting. India has or will have more people than China, and a relatively younger one at that. The folks both in Beijing and New Delhi knows this, and they know that the folks that open up factories and services firms know this. China neglected fostering a real domestic consumer like we neglected our infrastructure.

But does this make us future slaves of China? You know, ironically enough today I was talking to a friend about this very subject. She's a history professor, mainly Latin American, and she feared that China will do to us one day what France did to Mexico when it stopped paying interest on debt it owed to Napoleon's regime. "You know" she goes" if we default, they'll take Alaska!"

There isn't to say we won't default, it is within the realm of possibilities. But grabbing land won't jive these days, the costs would be too high. The Chinese, like I said previously, really have other priorities at this point. We're 'down here' their list, while keeping the regime in power is 'up here'. But let me ask you all this, would it really be that bad in the long term, if China stopped buying our debt? Wouldn't this force us to finally do what was needed? Yes the pain would be great, in fact in the short-to-medium term I would say things would be horrible in this country. But we need to break this financial heroin addiction that we have.

It's why I've not done much on DK (well not much in general...but that's cause of my health and other things at the moment), the 'Kos site is just too partisan. While I like to think I hold some liberal views, I know I don't have all my issues angled the same way. When you don't hold the same views on every issue, I've noticed on some sites, you're virtually nailed to the cross. That's why I like this place, I may not agree 100% on everything, but you don't have people calling you a troll or what have you.

to have a former Treasury Secretary sitting on the board either

It has always been about class warfare.

I think it's simply too soon to tell.

IF unemployment stops with under 20%, sure, we'll hit that L or V.

If not, we may yet see 40% deflation in wages- once companies realize that they can cut costs by laying people off and rehiring from the starving worker pool.

We may yet see a return of "will code HTML for food" signs yet.

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Executive compensation is inversely proportional to morality and ethics.

You and Rob are asking similar questions, so I'll put my reply here. I don't think the "downward slope" Rob mentions, which goes to ~+2.5%/year (iirc) is that significant. During the Great Depression, for example, wages fell 40%! So a +2.5% reading in a major downturn isn't nearly the same.

To some extent, businesses have a choice of downsizing by layoffs, cutting hours, or cutting wages (or some combination thereof). So far, it appears the huge majority are choosing layoffs. While that is bad for the laid off workers, it means that the 90%+ survivors in the economy have the same, or higher, purchasing power -- which is a better base from which a recovery might occur.

I think we are at the bottom of a "ratcheting down" of the economy. We probably either go sideways ("L" shaped) or a very slow increase (Verizon "V" shaped) from here.

I don't know NDD, that sudden downward slope in the graph ...
on the 1929-1934 wage deflation, exactly how badly did that lag other economic indicators? i.e. what's the gap?

I think you're right but I'm also wondering about changes in data reporting on wages as well. I don't think back then there was this revolving "hire/fire" door that is so common now. I mean I know there were layoffs, but not this massive permatemp employment base and being outright fired, I believe you had to have done something actually wrong...

so all of that I don't think is calculated into wages, these extraneous income reduction techniques.

really great analysis. I figured you were going to cover this but not so quickly after the numbers were out!

is being hidden behind massively growing unemployment?
In other words, what if instead of depressing wages of those still working, we're putting other people out of work?
Eventually, that will come back around to a depression of wages, this summer when we run out of the first 6 months of unemployment.
But until then, unemployment compensation might be hiding the "other side" of the deflationary death spiral.
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Executive compensation is inversely proportional to morality and ethics.

Robert Oak.......... I agree 1000% with what you say!

I swear that many of the blogs are either:

A. Filled with kids
B: Filled with people that act like bullies

There are a lot of blogs that people move and thing more like a herd of sheep than people that want to debate ideas.

I make my own decisions and more often than not, those decisions can not be button holed into a certain group. It makes me an odd animal. If a Dem or Rep President makes what I consider a good decision I will give kudos to them. If they make a bad decision I will say it was wrong.
It often gets me painted as a troll because I don't follow any one party line.

Hey, you can express whatever your views are and problems you see on EP, as long as we're in some sort of reality and on topic.

That's one of the things that drives me nuts on some blogs, where you must participate in group think or be damned to eternity for being a troll, when it's simply a well thought out different view.

The SEIU has had some well broadcast fights trying to wipe out local nurses union in CA and I read the complaints and it sure seemed the SEIU wasn't interested in the real labor issues.

I don't know what the answer is, maybe more of a guild type of organization. There are professional societies but very often, they also do not represent the labor interests of members.

A fundamental problem seems to be the power structure in these things. They are not democratized enough.