Backspin's blog

Yesterday the world witnessed a new and more severe outbreak of violence in Greece.  Youths and union members clashed with police in a riot complete with tear gas, flash grenades, molotov cocktails, and tens of thousands of protestors.

What, exactly, were they rioting about?  The answer is actually quite simple.  They don't like the austerity being imposed on them by a government desperately seeking to find some sort of fiscal discipine, something to which neither the government nor the public sector workers are accustomed.

The Chinese have raised their interest rates, causing a ripple effect in markets across the globe.

So, what are the ramifications of this move?

First, we note that this is something that the US officials have been pushing for, at least in theory. The political and economic saber rattling in recent weeks has been part of the race to debase, in which the major developed nations have been eager participants. Our leaders seem to have succeeded in persuading the Chinese officials to strengthen their currency.

As the theory goes, this will be good for US exports. With a stronger currency, the Chinese people will be able to afford to buy more of our manufactured goods. This will bolster the American economy in general, and manufacturing jobs in particular. This would all be good theory if we actually made things that the Chinese buy.

But we don’t, so it isn’t.