Podcast: Brad Setser Explains The China Thing

At a recycling drive in Brooklyn, Chinese goods piled up.

Bob Sacha

 

Debt, to most of us, is something you pay. But to creditors, it's also something you sell. Mortgage agencies like Fannie Mae and Freddie Mac issue so-called mortgage-backed securities to investors -- including, notably, China. Roughly put, we buy tons of Chinese goods, and the Chinese loan us the money back through securities so we can buy more.

Got it?

The numbers involved here are enormous, billions mounting into trillions. Brad Setser, an economist with the Council on Foreign Relations, has spent the last years obsessively researching China's buying of American debt.

What scares him is the idea that China would stop buying the debt -- meaning it would stop financing American mortgages and our general standard of living. An extra jolt: Setser says the Chinese can't go on buying this way forever.

He explained this all to us in a way I could almost completely understand. It's so good, I'm going to listen twice (click above or download).

Laura Conaway

3:49 PM ET | 09- 8-2008 | permalink | comments (0) | e-mail post

Why Did The China Miracle Take So Long (Like, 4 Centuries Long)

The new China meets the old one.

Liu Jin/AFP/Getty Images

 

A new economics paper is getting attention and looks quite interesting.

China was a major world power and technologically advanced nation until the late 1200s. Then, its technological edge disappeared until, well, 1979.

The answer, according to this author: trade. When China was open to trade, its technology advanced. When China wasn't open to new inventions and new ideas, it retreated.

Adam Davidson

9:07 AM ET | 09- 1-2008 | permalink | comments (0) | e-mail post