The sun was out, birds were chirping, and the recession was finally over. People walked out of their homes and stared up at the sky with a sense of wonder and relief. It was the moment after the climactic battle that the nation, and the world, could finally see an end to the catastrophic economic downturn of 2008.
After staring at the sky, some people went off to their new jobs and some went inside and flicked on the television. Sure, the news wasn’t overly optimistic, but even Fox News was having a hard time denying that things were getting better. The one thing they could do, however, was remind everyone that the economic prowess of China was ever-growing in the East: a massive engine of economic ingenuity and production that could make Henry Ford’s mouth water. China’s economy was growing rapidly, and as the mother to almost any product the United States could lay hands on, the giantess of China also held massive heaps of American debt close to her bosom, ready to call them in and bankrupt the country at a moment’s notice. Flicking the television off, many people go about their daily lives unaware that both the supposed prosperity and looming threat of China were nothing but lies.
Despite the amount of sunshine being blown through official asses and onto the sponge-like public, things became abundantly clear this Monday that all is not well in the coal mine. On Monday, markets across the world began to drop by devastating margins. Closer inspection reveals that not all officials are so naïve, some canaries actually do their job. As early as July 2014, the International Monetary Fund expressed concerns about the way China was running their economy, and moreover stressed to the entire world that we were taking risks too large for our fragile economy. In gung ho behavior reminiscent of Fanny Mae and Freddie Mac 2008 style, the world ignored sound advice and kept moving right along. Now, however, China has taken handle of the world economy and pushed the whole brakeless contraption down the rails and into the dark mining shaft we have only begun to try to comprehend.
Beginning with the fact that China’s money is backed by U.S. bonds, a phenomenon I implore you to ask an economics major about, we glimpse flashes of questionable economic policy as we fly down the rails. Over-reporting is suspected by many sources when looking at China’s GDP and is made even more suspect by the fact that while cranes may dot the landscape around China building stack after stack of skyscrapers, all of these buildings are empty. “Build it and they will come” seems to champion progress for progress’ sake and be the motto for an unrivaled housing bubble, a bubble that would do well to be put around the heads of Chinese citizens in a “Harry Potter and the Goblet of Fire” sort of way. On the outside of the bubble floats smog created by the unsustainable machine of the giantess, China. The people there would probably rather breath, but economic progress takes the cake as far as government officials are concerned.
Why the full-tilt assault on the grand nation of China? Simply to illustrate that economically, she is in trouble. The Monday stock crash began in Chinese markets due to concerns of over reported GDP, a toxic environment, and troublesome business practices. On Monday, the Shanghai index fell by an astounding 8.5 percent, which, not inconsequentially, is the fastest drop of that market since 2007 and the second largest “one-day drop” the market has ever faced. Hopefully I have made it understood the economic woe China is experiencing, even as they prop up their markets with estimated billions of dollars.
This isn’t nearly as interesting as the next part though, because China took us into the mineshaft as well, remember? It would be futile to argue that the U.S. economy is as entangled in the Chinese economy as it is in the global one. When Chinese Markets dropped, so did U.S. markets. This began on Tuesday as the NASDAQ slowly fell. Worldwide over the course of the past few days the world has lost three trillion dollars. Today, the NASDAQ ended down 0.44 percent and the S&P 500 was down 1.35 percent. These numbers have fluctuated throughout the week, and while the percentages may be down, we have only started descending into this mine shaft.
Gone are the dreams of a giantess China holding mounds of U.S. debt to her bosom, and gone are the raptured stares of a country certain that the recession is over. Make no mistake, the best and brightest financial supermen are flying around the Federal Reserve and the International Monetary Fund and hundreds of other financial institutions and governments.
I wouldn’t be surprised if the president has lost some sleep. However, while the geniuses are at work, the canaries keep singing and pointing our eyes not to the sky, but to the coal mine, where China marks the long slide of the rest of the world backwards down the tracks, and a little bit closer to how things must have looked in 2008.