Network News

X My Profile
View More Activity

Thomas Friedman is not allowed to manage my money

"A simple rule of investing that has always served me well," says Thomas Friedman. "Never short a country with $2 trillion in foreign currency reserves."

Sigh. As Felix Salmon points out, "if you decided to short only countries whose foreign exchange reserves reached some large proportion of gross world product, you’d be batting 2 for 2 right now as you started shorting China. First you would have shorted the USA in the 1920s, and then you would have shorted Japan in the 1980s." He continues:

One of the scariest aspects of the most recent financial crisis is that far from addressing the biggest and most potentially destabilizing global imbalances, it actually exacerbated them. If and when those imbalances unwind chaotically, the global effects will be highly unpredictable. But it’s far from clear that China will be any kind of safe haven.

Michael Pettis has more.

By Ezra Klein  |  February 3, 2010; 1:30 PM ET
Categories:  Financial Crisis  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Obama: If Democrats don't pass health-care reform, 'I don't know what differentiates us from the other guys'
Next: Celebrities: They're just like us, only prettier

Comments

The problems that existed in the United States in the 1920s that created the boom that led to the bust that Franklin Roosevelt diagnosed in his book "Looking Forward" are exactly those that exist in China right now.

In the 1920s, the United States was an industrial exporter nation that produced a huge surplus of goods, that it then sold to foreign nations. Those foreign nations didn't have the money to buy the goods so the United States lent the money to those nations to keep our factories producing a greater and greater surplus. Then the bust happened, credit to foreign nations dried up, and there was nobody to buy the surplus of products made in the United States. People were then laid off and the rest is history.

That is exactly what is happening in China right now. Needless to say, Friedman is again wrong and if I had big money, I would short China.

Posted by: lancediverson | February 3, 2010 2:07 PM | Report abuse

Agree with lancediverson. They need to sell us goods to keep their economy going so they lend us the money to buy it with. When they need to sell us some more stuff they have to lend us more money. The snake is eating its tail. I went short China a few weeks ago.

Posted by: greywater | February 3, 2010 3:43 PM | Report abuse

What Friedman really said was that while talking to the Mayor of Jerusalem on a golf course in Banglore it occurred to him that Chinese people are short and reserved and there are something like 2 trillion of them.

Posted by: ostap666 | February 3, 2010 3:58 PM | Report abuse

"What Friedman really said was that while talking to the Mayor of Jerusalem on a golf course in Banglore it occurred to him that Chinese people are short and reserved and there are something like 2 trillion of them."

Funniest comment I have ever read on this blog!

Posted by: lancediverson | February 3, 2010 4:09 PM | Report abuse

What a shock. Tom Friedman does not know what he is talking about.

Posted by: farrell_bill | February 3, 2010 5:03 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company