Zakaria bazooka

[GregLee]

I just heard on CNN a very interesting and dramatic proposal from Fareed Zakaria on solving the European debt crisis. I looked for a link on CNN.com but didn't see one. In a nutshell: (1) the crisis is very bad, (2) Greece is inconsequential because its economy is quite small -- it's Italy that is the problem, (3) not only is Italy to big to fail, but it's also "too big to bail", at least given the resources of the other European nations, (4) referring back to Paulson's description of what was needed to fix the US financial crisis as a "bazooka", Zakaria proposes that there is only one place in the world to find a big enough bazooka for the crisis in Europe, and that is China, (5) to give China a motive to help solve Europe's debt problem, the nations of the world will need to put their finances in the hands of the Chinese, essentially. So, is it necessary? Could it work? Will Zakaria be our next Secretary of the Treasury?

 

[Leonidas]

Didn't see the story, but I don't agree that Greece is inconsequential. It is a small economy, but how many Euro banks are going to get murdered on their Greek holdings? IMHO Greece won't be the thing that tumbles Europe off into something we don't want to think about, but it will/could be what puts it all in motion. I'm thinking along the lines of a bunch of Dominoes. I hope I'm wrong.

China might be motivated to do something - what good does it do to be making tons of goodies if all your customers are broke? China's internal consumer demand is not going to keep its economy going at current levels, much less drive the growth that they need. Again it's just my opinion, but what keeps the Chinese people disinterested in overthrowing their rulers is that they are believers in their economic future being better.

But the question is does China really have that big of a bazooka or are there a lot of smoke and mirrors in play?

 

[NYEXPAT]

It has already been baked into the cake! The question is at what price for Europe and the rest of the developed world?

 

[MichaelB]

Is this the show?

Fareed's Take: Only China can save Europe – Global Public Square - CNN.com Blogs

If that's it, well, much as I like his program and his analyses, in this case it's not gonna work. China can buy every country's bonds, and the problem doesn't change. A "China solution" would be China buying stuff from the rest of the world, and then they (debtor countries) would have the money to pay their loans.

As long as China produces so much more than it consumes the world economy will be out of balance.

 

[GregLee]

But the question is does China really have that big of a bazooka or are there a lot of smoke and mirrors in play?

Concerning bazooka size:

China has the means to buy a few bonds here and there; their reported reserves at the end of June were $3.197 trillion, more than 30% of the world’s total.
Why China's Buying Of Euro Debt Makes Sense | Markets | Minyanville.com

 

[calmloki]

Is it totally xenophobic of me to believe that China has a pure and focused self interest? A self interest perhaps more focused than our own?

 

[Ed_The_Gypsy]

Is it totally xenophobic of me to believe that China has a pure and focused self interest? A self interest perhaps more focused than our own?

Our (USA) self-interests are broad and liberal. Unfortunately, also diluted by altruism and stupidity.

China does not have these character flaws.