That’s the question posed, unwittingly, by deficit hawk knob-polisher and austerity joneser Matt Miller (courtesy of Dean Baker):
Miller apparently doesn’t know that China pegs its currency against the dollar. In order to keep the yuan from rising against the dollar, it has purchased over $1 trillion of U.S. assets over the last decade. The United States is in fact not “relying” on China to finance its current consumption. In fact, the official policy of both the Bush and Obama administrations was that we wanted China’s government to stop buying up dollars and thereby depressing the value of the yuan. [While this is the public policy, this may not be the actual policy, since many powerful interests like Wall Street banks and major retailers benefit from the over-valued dollar.]
This would allow the dollar to fall. That would make Chinese imports more expensive to U.S. consumers and U.S. exports cheaper for people in China. That would cause the U.S. trade deficit with China to fall, and possibly turn to a surplus, which is the textbook relationship between rich countries and poor countries.
In the case of Europe, the problem is that the German government and the European Central Bank (ECB) are trying to impose austerity across Europe. The ECB has all the euros it could possibly need to bail out Greece, Italy and anyone else in sight. However, rather than use its ability to print euros to save Europe’s economy, the ECB is trying to force cutbacks in social spending and protections for workers across Europe. The trip to China to seek support for a bailout was a silly diversion from the real issue.
And, just like the German austerity jonesers who don’t seem to mind that “punishing” the “sinner” nations is killing Germany’s economy as well, Miller — who like almost every other US economic writer allowed access to the pages of a major establishment newspaper, utterly failed to see, much less warn anyone about, the housing bubble of the 1990s and 2000s as it was bubbling (Krugman, as always, being the chief if not sole exception) — doesn’t see, or doesn’t care, that austerity will kill the American economy as well.