Monday, September 24, 2007

Goldilocks

Larry Elliott has a good overview of the recent bumps in the global economy and how they came to be. A sample:
Let me tell you the story of the Goldilocks economy. Once upon a time there were two countries separated by an ocean. One was called China and its people worked long hours to produce cheap goods.

The other was known as the United States. Once its people had worked hard and it was the workshop of the world. But recently, the US had not worked so hard and for every $100 of goods and services produced in its factories and offices, $106 was spent in its shopping malls. Instead of producing its own goods, the US bought them from China.

For many years, this arrangement worked nicely. The Chinese people kindly spent the money they made exporting their TVs and toys to the US by buying shares in American companies and the bills issued by the US treasury to pay for its debts.

The whole thing doesn't take long to read and is a good overview of the crisis.

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