I would like to draw attention of policy watchers to this interesting parallel - What Germany is to EU, China is to US. I have raised this point earlier as well.
- Germany is the manufacturing powerhouse primed by debt-accumulation across EU just like China is manufacturing powerhouse primed by US debt.
- Both Germany and China hold government bonds in quantities that may break the bond markets and trigger concurrent run on currencies and banks.
- Both want others to follow austerity while trying to keep interest rates low and economy primed at low unemployment.
- In effect, both will have to be architects of bailouts at substantial costs to their respective tax payers. It seems unfair but it is only reasonable way out of the current problem.