Image source: bbc.co.uk
Read an excellent piece this morning on one of my favourite topics; the future of US hegemony. Basically, the article paints a very grim picture for the US on account of the fiscal recklessness of successive governments (none more so than the Bush administration) and how this has ensured that China has the US by the short and curlies. China effectively finances the US budget deficit, and while the US has typically displayed a very sanguine attitude to this, it has now reached a point (about USD900 billion to be precise) where the stability of the US economy is now utterly dependent upon the whims of the Chinese. It could – as it has been hinted by leading Communist Party officials – dump its holding of US government bonds, not only placing a constraint on future US government spending, but also impacting upon US domestic interest rates and the forex value of the greenback. Thankfully, it is not in the interests of the Chinese to engage in such sabotage because its fortunes rest on a stable world economy. However, it is pure folly on the part of Washington if it thinks it can impose trade sanctions on China to force a yuan revaluation. One thing is for sure, the US is suffering from a chronic case of imperial overreach. It is in tatters militarily, its deficits are getting bigger, and its moral authority is at an all time low.