Chimerica

Chimerica by Michael Cho

Chimerica is a neologism and portmanteau coined in 2006 by historian Niall Ferguson and economist Moritz Schularick describing the symbiotic relationship between China and the United States, with incidental reference to the legendary chimera. In 2010, anticipating the risk of tensions between the two nations escalating into a currency war, Ferguson published a paper forecasting that Chimerica would soon unravel.

They argue that saving by the Chinese and overspending by Americans led to an incredible period of wealth creation that contributed to the global financial crisis of 2008–2009. For years, China accumulated large currency reserves and channeled them into U.S. government securities, which kept nominal and real long-term interest rates artificially low in the United States.

Ferguson describes Chimerica as one economy which ‘accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years.’ He suggests Chimerica could end if China were to decouple from the United States bringing with it a shift in global power and allowing China ‘to explore other spheres of global influence, from the Shanghai Cooperation Organization, of which Russia is also a member, to its own informal nascent empire in commodity-rich Africa.’

The accumulation of American debt which has been estimated at over $800 billion suggests the two nations are intrinsically linked; the economic symbiosis prevalent between the two suggests the separation would harm both countries and be disastrous for the global economy. Another way to measure this integration is the trade deficit. The U.S. trade deficit with China was $295 billion in 2011, meaning the U.S. imported that much more goods and services from China than it exported to China. The ‘Economic Policy Institute’ estimated that from 2001-2011, 2.7 million U.S. jobs were lost to China.

The idea of Chimerica features prominently in Ferguson’s 2008 book and adapted television documentary ‘The Ascent of Money’ which reviews the history of money, credit, and banking.

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