Forget Greece, what happening in China

[OJsDad]

All three major US stock markets were down over 3% today.  For the DOW, that's over 500 points, on top of the over 300 it lost yesterday.  Oil dipped just below $40, though it did finish above by $0.25.  All commodities are down, and have been down.  Is this just corrections or are there real issues in the world economy?

[LongBlade]

Real issues are on the horizon.

Virtually all the major economies have exhausted the economic arrows in their quivers - interest rates are near zero for their (our) central banks. In some cases interest rates have gone negative.

The Chinese economy is sputtering to a halt. Nations holding the major currencies have been printing money like it didn't matter. The Chinese are about to enter that game. When they do it will most likely trigger a deflationary spiral.

[Boggit]

Real issues are on the horizon.

Virtually all the major economies have exhausted the economic arrows in their quivers - interest rates are near zero for their (our) central banks. In some cases interest rates have gone negative.

The Chinese economy is sputtering to a halt. Nations holding the major currencies have been printing money like it didn't matter. The Chinese are about to enter that game. When they do it will most likely trigger a deflationary spiral.

Should we be surprised that bad things happen when all the eggs are in one basket. It's time for the rest of the world to sit up and take a good look at the spread and diversity of their own economies. Overwhelmingly, the West is increasingly relying on the financial and service sectors. Manufacturing, (and agriculture too) could do with a lot more love from our own governments to end over-reliance on sector giants like China.

[GDS_Starfury]

without CHinese food my people would starve.   :(

[LongBlade]

Real issues are on the horizon.

Virtually all the major economies have exhausted the economic arrows in their quivers - interest rates are near zero for their (our) central banks. In some cases interest rates have gone negative.

The Chinese economy is sputtering to a halt. Nations holding the major currencies have been printing money like it didn't matter. The Chinese are about to enter that game. When they do it will most likely trigger a deflationary spiral.

Should we be surprised that bad things happen when all the eggs are in one basket. It's time for the rest of the world to sit up and take a good look at the spread and diversity of their own economies. Overwhelmingly, the West is increasingly relying on the financial and service sectors. Manufacturing, (and agriculture too) could do with a lot more love from our own governments to end over-reliance on sector giants like China.

I hear you.

However, the situation isn't quite as cut and dried as that.

Some Chinese manufacturing has already begun to be outsourced to cheaper places like Vietnam. Why? Wages are rising in China (as they should in an industrializing economy).

Also, some jobs are coming back to the US. Why? We're creating less labor intensive and more efficient methods to make stuff. Also, the value of the dollar fluctuates and has fallen. Companies like Toyota and BMW are now using US labor to make cars here because it's cheaper.

The "service" critique is murkier. When theory meets practice there aren't always immediate happy endings. Workers being displaced means they lose their jobs. However, that also means that instead of making buggy whips they can start to enter a new phase where different goods and services are being produced. In the past it probably looked like doom and gloom when the hand-made horse and carriage jobs were being wiped out. But what replaced them? Model Ts. Then Chevys and Lincolns and Mercedes. Something else will replace those jobs/industries. It already is: high tech, biotech, etc.

[Silent Disapproval Robot]

[endfire79]

I've seen massive Samsung plants during my last trip to Vietnam.  Likewise, clothing has also moved down to the southeast. 

Manufacturing will go to places where the labor is cheaper. The alternative is further automation, which is already happening.