ChinaFubar

Just reading an article from New York Times,  “Chinese Savings Helped Inflate American Bubble” which attempts to make the convoluted argument the reason for the current recession, which was basically based on the party of binge borrowing coming to a halt, is not because Americans borrowed so much, but because Chinese saved so much.  Thus, there was an excess of Chinese capital that was made available to banks and lending institutions and was used underwrite American consumption.

The article goes on to talk about how the  trade deficit gave China so much U.S. capital it had to plow it back into the U.S. economy in the form of purchasing debt such as Treasury bills and Fannie Mae and Freddie Mac debt.

While the article has the basics of the picture painted pretty well, I’m not sure the conclusion is correct.

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