US Debt

The United States is in a very difficult position when it comes to balancing the national budget and reducing the national debt. The government has already promised people so much in social security, Medicare, and medicaid that it will have a difficult time paying for much else. This requires a more modest expenditure on social programs and a cutting back on all other spending. But this could also lead to problems if taxes are increased or government spending that stimulates business is cut too much, which could lead to a slowdown in the economy. This could have the effect of lowering all government income as less taxes would be payed. So the US government has to find a way to cut the deficit without hurting our economy or losing the support of voters who rely on nonessential programs to our economy or national security. To add on to this challenge, Congress has to agree on all these changes while each person is appealing to their unique political districts and trying not to loose their campaign funding from lobbyists.

Contagion

It is strange how when even one currency in a very small country is threatened, the entire global economy may become threatened. It is also surprising how we still rely on making last minute loans to a country in distress as the only way to prevent this from occurring. Globalization led to so many new markets that are being invested in that everything is tied together, which can result in Contagion. Because of the focus on perceived risk and value instead of actual value, countries and markets are subject to large stampedes of investors in and out of currencies and markets. Nothing has been done to shift these markets back towards their real value instead of the perceived market shifts except for loaning a country money until the crisis is over. Most major economic crises are the result of over speculation, yet the current global economic model is based on speculating on very high risk developing economies that investment companies in rich countries focus heavily on. It seems like we should try to eliminate some of the purely speculative parts of the global market instead of loaning large amounts of money until each crisis hopefully passes.

Glogster

http://www.glogster.com/danmcd/us-china/g-6lmivfkb33bpql0mhibcda0?s=nameglog

The Letter of the Two Sorrys

The US was correct in its decision to be regretful, but not apologize for the US spy plane incident over China. The Chinese pilot had put himself in danger by trying the maneuver he tried, which was not the fault of the US. The US was spying on China, which is the reason the Chinese planes were flying close to the US plane, but when the plane crashed the Chinese stripped it of all it's components and technology that was not destroyed. This should have been the payback from the Chinese for the US spying on them, not an apology taking responsibility for the outcome of the incident.

Class Definitions

Terms

GDP- gross domestic production. Amount of profit made by products being exported. 14.59 is US and 5.93 China, in trillions.

Import- Products bought from outside of the country and taken in. US 227 billion, 122.7 billion

Export- Products shipped out of a country to buyers. US 178 billion, 149.9 billion

Tariff- a tax placed on a good being traded so the economy of the importing country remains the same.

Trade Surplus- extra good left over after a country has exported goods.

Trade Deficit- when a country does not meet the demand of another country who would like to import their products.

Treasury Bond- marketable fixed interest US govt. debt security with a maturity of more than 10 years.

Foreign Direct Investment (FDI)- investment made in a company in a foreign country. CHINA 143 billion.

Budget Deficit- spending more money than you have. US 15.5 trillion, 1.9 trillion

Foreign Currency Reserve- deposits and bonds held by central banks and monetary authorities. US 148.5 billion, China 3181 billion

Currency Exchange- exchange rate of different currency from one system to another. Money can lose value or gain value based on country you are in so money is exchanged to make it easier.

Subsidy (subsidies)- government buys a product so it can be selled at a constant price.

Reaction to Tiananmen Square

I think President Bush's reaction to the Tiananmen Square incident was reasonable because he did not want to lose China as an ally against the Soviets or as a trade partner. He also had to appease public calls for action against the Chinese because of the public attention at the time. The incident did not affect his run for reelection, so his actions served that purpose as well. Turning against the Chinese or imposing harsh sanctions would not have been effective because of their governments focus on control. The US would only be further isolating citizens in China if they tried to punish the government, which would not have appeased the call for democracy. The US could not have influenced the Chinese to be kinder to their citizens because that may undermine their power, which they would not willingly do.