For several decades, the global economic system was sustained by acceptance of American predominance. A vast tide of liquidity coupled with America's appetite for consumer goods had sent enormous amounts of dollars to China, which, in turn, China lent back to us for still more buying. Before the crisis, China sent scores of experts to the United States and invested in major American financial institutions to learn the secrets of the system that seemed to produce permanent global growth at little risk.
The economic crisis has shaken that confidence. Chinese economic leaders have seen the American financial system subject a decade of their savings to potentially catastrophic fluctuations. To protect the value of its Treasury investment and to sustain its own export-driven economy, China finds itself obliged to largely retain its Treasury holdings of nearly $1 trillion
Ambivalence in both China and the United States is the inevitable consequence. On the one hand, the two economies have grown increasingly dependent on each other. China has a major interest in a stable -- and preferably growing -- U.S. economy. But China also has a growing interest in reducing its dependence on American decisions. Since American inflation as well as deflation have become for China nightmares as grave as they are for America, the two countries face the imperative of coordinating their economic policies. As America's largest creditor, China has a degree of economic leverage unprecedented in the U.S. experience. At the same time, the quest for widening the scope of independent decision exists in ambivalent combination on both sides.
A number of Chinese moves reflect this tendency. Chinese officials feel freer than they did previously to offer public and private advice to the United States. China has begun to trade with India, Russia and Brazil in their own currencies. The proposal of the governor of China's central bank to gradually create an alternate reserve currency is another case in point. Many American economists make light of this idea. But it surfaces in so many forums, and China has such a consistent record of pursuing its projects with great patience, that it should be taken seriously. To avoid a gradual drift into adversarial policies, Chinese influence in global economic decision-making needs to be enhanced.
According to conventional wisdom, the world economy will regain its vitality once China consumes more and America consumes less. But as both countries apply that prescription, it will inevitably alter the political framework. As Chinese exports to America decline and China shifts the emphasis of its economy to greater consumption and to increased infrastructure spending, a different economic order will emerge. China will be less dependent on the American market, while the growing dependence of neighboring countries on Chinese markets will increase China's political influence. Political cooperation, in shaping a new world order, must increasingly compensate for the shift in trade patterns. Rest here...
Below are the links from my other blog post regarding Horrible Henry his links to obamageddon, tax cheat geithner the clintons, etc. and some others calling for a New World Order include the pope.