[Op-Ed] The Tragedy of ‘Chimerica’

Imagine if an extravagant man (or woman) and a frugal woman (or man) could get along with each other. Is it possible for them to live happily? University of Michigan professor Scott Rick says yes. Surprisingly, such people are attracted to each other. Since chronic spenders usually hate their habit of wasting money, they are touched by the frugality of compulsive savers. There is a problem, however: their love does not last long. A study conducted by a University of Michigan’s research team showed that couples are happier when spouses have similar consumption patterns. Indeed, money matters account for a large part of marital conflict.

Sino-American relations can be compared to the ties between a pinchpenny and a spendaholic. Harvard University economic historian Niall Ferguson coined the term “Chimerica,” a term combining the words “China” and “America.” He said the Asian savings glut helped create the U.S. subprime mortgage crisis with an influx of easy money. China and the U.S. are mutually dependent and complementary. For example, the U.S. imports products from China and spends more with the money borrowed from China. Bilateral relations enabled the U.S. to enjoy the “Goldilocks economy,” in which it had easy access to money despite skyrocketing oil prices and stable inflation in the wake of rapid economic growth. The good times lasted until the global financial turmoil hit the world, which was caused by the collapse of the U.S. housing bubble.

In a recent Newsweek article, Ferguson said Chimerica is headed for divorce. China is worried over lax U.S. fiscal policies since Beijing does not want the value of its international reserves of 2.1 trillion U.S. dollars fall. China looks like a spouse disgusted with the wasteful habits of its partner. The Chimerica marriage will really be over five to 10 years later when China will feel ready to promote its currency yuan as the world standard.

In an interview with the Huffington Post, Ferguson said, “We called it ‘Chimerica’ because we thought that such an unbalanced relationship would eventually prove to be a chimera (ill-defined monster in Greek mythology).” For Korea, it must strive to raise domestic consumption to prevent being seriously affected by external factors. A couple consisting of a compulsive saver and a chronic spender should adjust their consumption patterns if they do not want to end up like a chimera. Different kinds of relationships are being tested by the global financial crisis.

Editorial Writer Kim Sun-deok (yuri@donga.com)