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Thursday, January 29, 2009

Introducing: A new world order

9:36:00 AM Posted by Oscar Berg No comments
5 593 billion yuan. 

819 billion dollars. 

More than half the GDP of Mexico. More than twice the GDP of Sweden.

That is how much the stimulus package for the US economy is expected to cost. That is also the sum that Obama and the US government is going to ask to borrow from China. 

China has huge foreign-exchange reserves amounting to 2 000 billion dollars. But China has also problems of its own. I addition, the US will also have to stand in line together with a lot of other countries which also need to borrow money from China. 

So how much is China willing to lend to other countries? Are they willing to lend the US almost half of all their savings? And if so, under what conditions? Bear in mind that People's Republic of China is a socialist republic ruled by the Communist Party of China under a single-party system. They might have (and probably have) a hidden agenda.

Obamas plan B - if China for some reason decides not to lend US all the money US needs for the stimulus package - will likely be to ask Federal Reserve to start printing new dollar bills (This is of course a figure of speech, since increasing the supply of money in an economy can nowadays be done electronically).

The point here is that even if the stimulus package will stop the US economy from collapsing, and thereby also prevent the world economy from hitting rock bottom, this crisis marks the end of the existing world order and the start of a new.

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