Dollars Slay the Dragon III — Whose Crisis Is This?


In the Christmas of 2008, an old friend, Dr. Z, called me as usual. We got to know each other in China in the late 1990s when he was still a mathematician in training. Later on, he moved to US and shifted his career and interests to Political Economy and International Relations. In 2008, he had become a professional scholar in a US university to study International Political Economy and Security, also Chinese Politics, Economics, and History. This time when Dr. Z called me, Financial Crisis and President Obama were the two topics everyone in US was talking about. Therefore, I couldn’t help asking him a lot of questions about these two topics.

However, I still felt not enough and inconvenient to talk on phones. Several days later, I paid a visit to his home to continue our conversation. We had a very long and interesting discussion for hours about 2008 Financial Crisis, President Obama, US society and history, and China’s international relations. He presented to me some very impressive and interesting opinions, judgments, and analysis. It was a very educative conversation although I was not totally convinced.

Two and a half years later, I visited him again three weeks ago, to consult him about my blog. We picked up some old topics in our conversations in 2008 and had another very interesting and educative conversation. Partially due to his encouragement, I resumed my blogging. Here I would like to share some of the most important points we had touched on in our two conversations. To facilitate my narration here, I would put our conversations in the form of original records, even though I didn’t make any record and just reconstruct them by my memory now.

In 2008 when I visited Dr. Z, I first asked him about the ongoing financial crisis and President Obama. I asked:

“Do you think the financial crisis can finally drag US economy into a total collapse? Can Obama quickly turn around the US economy and fundamentally reform US society? Will the world economy fall together with US? Will the current globalization crash into a stop? Will foreign owners of US debts run into a panic sell-off? Will global scale trade wars and tariff wars break out? Will this world ultimately fall into another World War?”

Dr. Z. answered:

“If you worry about the collapse of US economy, you’d better worry about the collapse of world economy first. Since the collapse of Eastern European communist camp, US economy has undoubtedly been the single leader and the strongest engine of the world economy. Europe depends on US financial machines and investments too much. Emerging markets depends on US purchasing power too much. Although it looks as if China is rising fast and could replace US as the single leading engine of the world economy, the fact is that China is the one nation that depends on US economic power most in this world. If US economy falls, Europe will lose the financial support for its bubble prosperity and therefore lose its purchasing power too. Then the emerging markets will lose their foreign consumers and investors who are the pillars of their booming economies. That’s why even though every nation is not happy with US making such a big mess for the whole world no one really wants US economy to collapse. On one hand, they are worried about if US would print a lot of money to devaluate its debts; but on the other hand, they all wish US to use whatever means to save its financial system and economy so as to save the world. Thus, you see US dollars and national debts are strong during the financial crisis. This world is not ready for a fallen US economy. Even some adversaries of US, like China and Russia, are not ready for a fallen US economy.”

continue reading here…

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This entry was posted in People's Diplomacy, Political Economy of Democracy, The Myth of Chinese Economic Wonder. Bookmark the permalink.

One Response to Dollars Slay the Dragon III — Whose Crisis Is This?

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