The Bankwatch

Tracking the consumer evolution of financial services

No consumer driven economy in US | Geithner in China

Some important messages within Geithners speech in China today that paint a very different next few years compared to the last 10, and as the ‘G2’ move to manage a transition the American economy into one that is very different, yet stable.  And all this to be managed against the backdrop of  the fear of eventual inflation, which would devalue foreign holdings in US T-Bills, something China is acutely aware of.

These macro factors will play a large role in US banks and credit unions strategy design for the next 5 years.

  1. no consumer purchase driven economy in US – with the implication of extended higher Government spending for some time to counter
  2. US consumers save (increasing savings accounts and paying down debt)
  3. China’s manufacturing supply is sold more and more within China, not Wal-Mart

Speech by Secretary Geithner – The United States and China, Cooperating for Recovery and Growth

In the United States, saving rates will have to increase, and the purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past.

In China, as your leadership has recognized, growth that is sustainable growth will require a very substantial shift from external to domestic demand, from an investment and export intensive driven growth, to growth led by consumption. Strengthening domestic demand will also strengthen China’s ability to weather fluctuations in global supply and demand.

If we are successful on these respective paths, public and private saving in the United States will increase as recovery strengthens, and as this happens, our current account deficit will come down.  And in China, domestic demand will rise at a faster rate than overall GDP, led by a gradual shift to higher rates of consumption.

Globally, recovery will have come more from a shift by high saving economies to stronger domestic demand and less from the American consumer.

Written by Colin Henderson

June 1, 2009 at 09:11

Posted in economy, US

Tagged with , , , ,

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  1. […] blogged earlier about the changes in the economy, and while that post applied to the US context, this equally applies to all western economies, […]


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