US heading for abyss despite 'cliff' deal

2013-01-02 12:01

Beijing - China's official news agency warned the United States on Wednesday it was heading towards an "abyss you can never come out of" even though Congress backed a deal to avert the "fiscal cliff".

After the House of Representatives approved a bill which avoids tax rises for most Americans and delays automatic spending cuts, a commentary by Xinhua pointed to bigger fiscal challenges ahead for US lawmakers.

"As the world's sole superpower, the United States is clearly not Greece," Xinhua said. "But economics and common sense do not lie.

"People, or governments, can overspend for some time, but they simply cannot live on borrowed prosperity forever."

China, which has the world's biggest foreign exchange reserves, is a major buyer of US Treasury debt.

Kicking the can down the road

The state-run news agency identified the US public debt of nearly $16.4 trillion - more than 100% of its gross domestic product - as Washington's key challenge, calling it a "fiscal abyss" that made Europe's sovereign debt crisis seem a "mere hiccup".

"The most worrying thing about US politicians is that if they have come so close to falling off a 'cliff', they are far less likely to reach a deal to help their country climb out of an abyss," the commentary said.

"In a democracy like the United States, tax increases and spending cuts, the exact dose of medicine needed to cure its chronic debt disease, have long proved hugely unpopular among voters. So the politicians have chosen to kick the can down the road again and again.

"But as we all know, the can will never disappear," the commentary added. "Sometime and somewhere, you might trip over it and fall hard on the ground, or in the US case, into an abyss you can never come out of."

  • napolita.kio - 2013-01-02 12:22

    But guess, who's falling down with them? This news is ironic coming from China, the very country likely to suffer the most when the prediction comes true! So why you, China, are you tagging along with the USA into the abyss?

      pmbhero - 2013-01-02 13:06

      That is wrong, China has been moving away from US dollars quite subtly over the last year, look at their Gold purchases last year and their strengthened ties with emerging & commodity markets. Their self engineered/timed slowdown They dont buy all their oil with USD anymore, and that has been the case for a while. A new Global Reserve Currency will emerge and USD will be the Drachma.

      rita.phillipson.1 - 2013-01-02 13:09

      China saw this coming long ago and that is why they have been actively looking for other markets. All the small countries, like SA, plus their domestic market will take up the slack when USA falls over.

      napolita.kio - 2013-01-02 13:31

      @pmbhero @rita.phillipson.1 With regard to CHINA-USA TRADE: Here's some numbers: Chinese's exports to the USA in 2011 were $399.3 billion up 9.4 from 2010. Unless you want to claim that in 2012 China somehow found a way to bring this number down with a corresponding market to make up for the the "shortfall". If you can make the claim then provide the numbers. With regard to China-Emerging Economies: - All China wants is resources, that's it. Look at what they are doing in Zambia, Sudan, Zimbabwe, RSA (Wesizwe platinum). They literally dig the ground and take every soil back to China for processing. - China can own all the gold in the world, BUT unless other countries have gold to trade with China then China's gold is worthless, i.e. its hoard of Gold is unusable to the rest of the world in such a scenario. Of course, none of this change their conundrum with respect to the USA's problems!

      paul.nefdt - 2013-01-02 23:36

      Shame, all the lies their politicians have been peddling is finally catching up with them, sad thing is it will be the people of the middle & lower economic classes that will suffer... The economic cost's of sustaining the American dream is becoming to UN-sustainable...

  • John - 2013-01-02 12:23

    100 years of fractional reserve lending is about time for the system to collapse. Fiscal abyss seams to be the correct name for this banking SCAM!!

      napolita.kio - 2013-01-02 13:04

      On the other hand, just when it's obvious to "everyone" then it's not.

      komorison - 2013-01-03 08:31

      Nail on the head, John!

      fidelity.mcoshi - 2013-01-03 12:28

      Not only that John, but followed by another 60 years of cumulative Quantitative Easing, debasing what was supposed to be the world's reserve currency. There is a reason why the Chinese have pegged their currency against the US Pesos!

  • Eterni80 - 2013-01-02 12:28

    China has in excess of a trillion dollars, and a lot of dollar denominated assets. If they were to switch to another currency, the American economy would vanish like a fart in a tornado. I can understand China's concerns after the Yanks almost bankrupted the world in 2008/9 - and no one has taken then to task over this and all of BO's promises to regulate the banks have turned out to be typical political spin.

      lee.brand.73 - 2013-01-02 12:40

      There are no winners though - maybe the Greeks would show middle finger but we are all going down....

  • pmbhero - 2013-01-02 12:33

    I am 100% with this outlook! Everyone was going on/is going on about China slowdown/crisis, they fail to realize China's slowdown was engineered by China themselves to avert total meltdown as opposed to other meltdown in the global front which are meltdown: ie they too late. China bought over 130 metric tons of Gold last year 1st quarter/half while they were "slowing down" and Gold was Faltering. Do yourself a favour and watch Gold this year. I wouldnt mind putting my money in markets with their savvy!

      fidelity.mcoshi - 2013-01-03 12:21

      China is stalling. It needs time to develop its own middle class. Over the past two years, the Chinese government has raised wages 20%. They are slowly weaning themselves off the U.S. consumer.

  • sean.bagley.50 - 2013-01-02 12:55

    Most the George Bush era cuts were now made permanent with this deal.Eight years of George Bush turned a Bill Clinton surplus economy into a trillion dollar deficit economy. Obama from the beginning of the fiscal curve wanted $1.6trillion increase in revenue spread out over a decade,instead he had to settle for &620billion for the same deal.There is no deal currently on the US Debt Ceiling,even with Obama saying he won't fall back on the 14th Amendment should a deal on that is not reached.This doesn't give Obama much room to maneuver a deal. Productivity demands in America had been going up,whilst wages of people had been going down steadily.Fortune 500 alone for example made 16% profit increases in 2012 up from its $800billion it made the year before.WallMart,Starbucks,McDonalds all employ on average +10,000 staff members so how are they not making their fair share of record profits?

      napolita.kio - 2013-01-02 13:14

      @Sean - "Productivity demands in America had been going up,.." - Producing what? USA has become a "service economy". Other than military equipment, much of what America produces is inconsequently to their exports ! E.g. flipping burgers, sports, music, entertainment, monetizing eyeballs, marketing, etc....

      lee.brand.73 - 2013-01-02 13:26

      Agreed. Production of tangible stuff has been on the decline for years. I have alway said that WW3 has been waged and won by the Chinese. They just have to pop in to collect the title deeds and the white house keys!

      napolita.kio - 2013-01-02 13:37

      TYPO...... "produces is inconsequently to their exports" === "produces is inconsequential to their exports"

  • imam.madi.129 - 2013-01-02 13:29

    Interesting to see 'Maosts communists' advising the leaders of a free market how to be sustainable capitalists. It's like the butt teaching the face how to smile in front of cameras.

  • Raymon - 2013-01-02 13:32

    Get ready for the biggest corporate takeover of all time. Soon, Obama will be handing the rains over to his Chinese handlers.

  • dave.ducker.3 - 2013-01-02 14:48

    Essentially China could "pull the plug" on the US but it would not do them really any good. This said however China could use this to steer the US in basically any direction they want. In Rapping terms the US is basically China's bitch ;) The knock on from all this happening would be huge, this is basically why its being delayed and delayed but it will happen eventually and then the brown stuff is going to hit the global fan !

  • peter.jordaan.5 - 2013-01-02 16:09

    This USA fiscal cliff propoganda and media hype was just an exercise to demonstrate the uselessness of politicians to be financially responsible. They can't for they can't do it for themselves. Each one is feeding at the trof and stealing. Nothing is going to change until the cheque book is talent away. The markets are being forced to do this on their behalf. The consequences is chaotic and hell on earth until a new system emergers. Best dress warmly. T

      gary.landman - 2013-01-02 16:16

      What is a trof?

  • mfumbayelangabi.silwane - 2013-01-02 21:53

    A great thing is about to happen,these clever fools thought their problems were going to be solved by taking out Qadhaffi because he wanted a united Afrika that sold its oil for dinnos (pure gold)and Saddam because he wanted the Euro to be the alternative currency of trade as opposed to the USD.Sorry bab'uObama they set you up to preside over a collapsing economy, so that a black person will be blamed for the fall of a cliff-hanger(America)the so called super-power(not anymore)Be careful next time(ADVICE FROM AFRIKA BUY A BLACK BROTHER)

  • Emizen37 - 2013-01-02 23:33

    USA's debt to China in the form of bonds is worthless if USA fails to honour the futute debt repayment (akin to Greece - hence IMF intervention). USA is the main consumer of China's products but on the other hand holds most of the licences and patents to the same products it consumes. Despite China's efforts to diversify its investment portfolio, should USA's economy fall, China is going down the drain with it, so is the rest of the world economy ( without demand, supply will be worthless, be it commodities or services). War is working for USA in several ways; (1) Employment of its citizens, (2) Manipulation of the economies of annihilated country's in the form of fossil fuel - oil (USA excessive oil consumption), (3) Involvement of its companies in the rebuilding/ reconstruction of dilapidated infrastructure, (4) Security provision and consultation, e.t.c. One of the reasons USA is so impetuoulsy determined to push ahead with shale gas exploration in the USA itself and other countries (RSA - Karoo) despite the irreversible environmental damage created by waste water wells (similar to acid mine drainage) , is the quest for fuel independence, which will have a positive spin off to its economy.

  • fidelity.mcoshi - 2013-01-03 12:06

    "The state-run news agency identified the US public debt of nearly $16.4 trillion - more than 100% of its gross domestic product" The creation of jobs from thin air in a crashing capitalist economy, where its biggest player is simply printing money, not backed by anything, to try to pay its debts, is an impossibility. Remember Mao's words, "capitalists are just paper tigers".

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