Friday, May 25, 2012

Coming Soon to Your Neighborhood Theater – Chinese Movies – Chinese Company to by AMC Cinema

America Continues to Sell Assets to Finance Trade Deficit – What’s Next?

When an individual gets into financial difficulty, defined  as spending more than the person is receiving as income, the process goes through several defined steps.  The first step is to borrow money, usually from the seller who wants to continue to sell to the spender even though the spender can no longer afford the goods and services.

When the ability to borrow money is exhausted, the borrower starts to liquidate assets, using the proceeds from the sale of items to pay the interest and principal on the debt, or in some cases to establish higher credit so they can borrow more and spend more.  The process stops only when the person runs out of assets.

A nation goes through a similar process.  The United States has for years purchased more from China then it sells to China, and so has had to borrow money from China to finance those purchases.  Far from being reluctant to lend, China has been eager to finance America’s trade and budget deficits, as it results in increased purchases from China and stimulates their economy.  But even China has a limit on how far it will go with this scheme.

The result is that China is now using the dollars that it accumulated from its trade surplus with the United States to buy U. S. assets.  The latest purchase is the movie chain, AMC.

If approved by U.S. and Chinese regulators, the $2.6 billion acquisition will create the world's largest theater group, the companies said. The move, China's biggest corporate takeover to date in the USA, highlights the rising financial strength of its top firms.

This purchase is just one of many, as China is using its financial muscle and accumulation of foreign currencies to buy assets all over the world.  It is the new world conquest model; you don’t send armies across borders, you send dollars and euro’s and pounds and the rest. 

As for the United States, what do you do when you run out of movie theaters to sell?

No comments:

Post a Comment