The United States Continues to Lose Economic and Political Power
Is the United States as Strong and Independent as it Used to Be?
The circumstances affecting the stock market during the last week of February and beginning of March, 2007 brought much discussion among analysts and others regarding the catalyst for the rapid decline in the stock market of 3.29%. Many blamed the synonymous downward spiral of China's stock market, losing almost 9%. Where there are many other factors that caused this market "correction", both in China and in the U.S., there was much discussion faulting China's market. There were many other factors that caused the U.S. stock market correction and they are discussed in the article "Was China the Catalyst for Last Week's US Stock Market Losses?"
There is a much larger concern regarding the economic balance between China and the U.S. The United States' national debt is near 9 trillion dollars, of which 2.3 trillion is borrowed via U.S. Treasury Bills. China is the second leading purchaser of U.S. Treasury Bills at 350 billion dollars. Japan is the only country that owns more U.S. debt at 644 billion dollars (Source). This raises concern on two different fronts. The first being the economic relationship between China and the U.S. and the second being the political relationship.
Ian Williams of the Asian Times describes the economic relationship between China and the U.S as "two bubbles that are on a collision course". China prints money (Yuan) and purchases U.S. Treasury Bills, lending the United States money that in turn purchases their goods. The trade deficit with China reached more than 200 billion dollars. That is more than 25% of the United States' total trade deficit. Partially to blame is the "pegging" of the Yuan. Currently around 8 Yuan to the U.S. Dollar, this artificial value makes Chinese products cheaper for Americans to purchase and makes U.S. products too expensive for the Chinese to buy. As long as we keep borrowing money from China to purchase their goods with an inflated dollar, the trade deficit will continue to widen, and America will continue to give up economic strength.
The United States' political influence is dramatically affected by owing China so much. Senator Evan Bayh (D-Ind), told ABC news, "In addition to its negative impact on trade, the U.S. indebtedness to China has a harmful impact on the administration's ability to "talk through" with China about foreign policy issues." Senator Bayh also stated in a speech, "It is not a sign of strength, it is not a sign of independence, it is not a sign of security when something as fundamental as the value of our money can be undermined...that is not the sign of a great nation, it is the sign of dependency, of weakness."
It is worrisome to have a United States Senator use words such as "dependent" and "weak" to describe the United States. It is appalling that the citizens of the United States have let the governments and themselves accumulate this kind of national debt and trade deficit. Instead of boycotting China, Americans should demand that the government begin the economic healing process with China.
The solution is not to boycott Chinese products or Wal-Mart as many have suggested. If we were to stop buying Chinese products, China would not have the money to lend us, therefore disrupting both economies. As long as both economies are dependent upon each other for this balancing act, both are at risk of an economic meltdown. The balance between the Yuan and Dollar cannot artificial. An increase in import taxes would increase the price of Chinese goods to Americans, yet could be the income the country needs to reduce its national debt. These actions would begin the healing process for both economies by decreasing the trade deficit imbalance and America's national debt.
Sources:
Davis, T. (2006). Debt weakens U.S. hand on China. http://abcnews.go.com/Politics/International/story?id=1867118&page=1
United States Treasury Department (2007). http://www.treasury.gov/tic/mfh.txt
Williams, I. (2004). China-US: Double bubbles in danger of colliding.http://www.atimes.com/atimes/Global_Economy/FA23Dj01.html
Published by L.E. Duncan
A writer, photographer, traveler and investor. I have been writing internet content for six years. If you are interested in specific content, don't hesitate to contact me! View profile
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4 Comments
Post a CommentThe US is pretty much done, but many Americans are still too arrogant to see it, so obsessed with being 'the best', (which they're not anymore, in so many areas). China will be controlling the US in the near future, because of this debt. The rest of the world is getting wealthier (Thailand, where I am, is booming, we'll have 10% growth this year) and they are also buying Chinese goods - billions of them. So, as they buy more, the US and its ability to buy becomes less and less important to China. I don't think there's any way out for the US, which is why many of my friends are leaving and moving to Asia or S America. The US lost too much money in their illegal invasions of Iraq and Afghanistan and that's what's bankrupting America.
Yes, we do need to do something about it. Like steer towards our roots and independent attitudes our forefathers had. This country once thrived on industry and farming which is the foundation that our goverment has been chipping away for years. When someone mentions the mere fact that you can't buy American made products anymore...those words become a tired and irritating cliche. Why is that? Small dairy farmers have been driven out of business by by a goverment that wishes to control the milk surplus in our country. The dairy farms that survive are large goverment regulated farms. Do you not see a something wrong with that? Am I the only one that sees this pattern? A self-sustaining nation who leads in industry, farming, education, and techology will thrive on top forever. We can begin to repay our shameful debt to these foreign countries by placing an import tax on all goods being shipped to this one. That tax should be sizeable enough to deter greedy corporate pigs from
Is this the United States fall? Anyway, in the history of the world no nation stayed on top forever. I wonder if all the people that immigrated to US are going to consider another side of the world, like the European Community?
Well written. I agree that it is a big problem. How can we possibly be a world leader when we are so far in debt? We need to wake up as a nation and start doing something about it.