The Recession's China's Fault?

Just reading an article from New York Times,  "Chinese Savings Helped Inflate American Bubble" which attempts to make the convoluted argument the reason for the current recession, which was basically based on the party of binge borrowing coming to a halt, is not because Americans borrowed so much, but because Chinese saved so much.  Thus, there was an excess of Chinese capital that was made available to banks and lending institutions and was used underwrite American consumption.

The article goes on to talk about how the  trade deficit gave China so much U.S. capital it had to plow it back into the U.S. economy in the form of purchasing debt such as Treasury bills and Fannie Mae and Freddie Mac debt.

While the article has the basics of the picture painted pretty well, I'm not sure the conclusion is correct.

The problem wasn't that the Chinese saved so much, but that American's spent so much.  Not only on items such as SUV's and large houses and 200 dollar Air Jordan's, but on things like the Iraq War etc.  The U.S. government has built a pile of debt under the current administration, and that has to be financed someplace.

An economics professor in college had a great formula which explained that the trade deficit HAS to be equal to the budget deficit. A pretty long algebraic conclusion, but nonetheless we all sat stunned as he presented it, and at the end we were like "I got it!!!"  So the last few years, since 2003 when China first started revaluing it's currency, the U.S. has been pounding on China about cheap imports and the imbalance of trade.  So, China revalued its currency,  changed its labor laws, and Chinese products became more expensive.  Did that reduce the overall amount of products imported in to the U.S.?  In itself, probably not.  Manufacturing of those products simply left Guangdong, where most of the products were being made, and went either inland, or in most cased to Viet Nam and Indonesia.  I don't think I heard of any case where the products became expensive enough out of China that production shifted to the U.S., creating American jobs, which is the whole point of duties, tariffs, and trade regulation anyway, or at least should the be the point.

In the meantime, China is starting to suffer a recession of it's own,  the Chinese government recently releasing figures that 7,148 companies closed down in Guangdong Province, which normally accounts for 33.7 percent of China’s total exports, during the first nine months of this year. Some media reported that 67,000 businesses closed after October. (figures from an article in the Korean news site Chosun.com)  And that is leading China to enact a stimulus package of it's own.

At the end of the day, the current recession in the U.S. isn't because Chinese SAVED so much, but because the U.S. SPENT too much in a drunken binge of borrowing, fueled by lenders that were eager to lend a few hundred thousand dollars to borrowers with no oversight adherence basic loan underwriting principals, such as "can we prove the borrower can pay back the loan?"  This had created, what I think was an artificially robust U.S. economy, much more robust than what would have been if American's had saved at a normal rate, borrowed much more conservatively.  Economists should be planning for the future, and looking at what the REAL growth rate of the economy would be if borrowing, savings and spending levels were at a more reasonable rate.  I think we'll find out that it's a much smaller level of consumption, quite possibly even less than in these dark times of recession, and boy, that's gonna hurt.