At the start of last week, the USA democratic process managed to push through an agreement allowing it to borrow more money. Everybody seemed relieved at this so called compromise. It was interesting at the time to note two aspects. Firstly it was the way the democratic process worked between the two chambers of legislature (Senate Congress) and the executive Presidential office. It did as it was designed over 2 centuries ago by the founding fathers. Secondly it was the references in the Press to the "Tea Party" which were forcing the crisis rather than ignoring it. They were portrayed as the trouble makers.
America (USA) is now the world's biggest debtor and China the biggest creditor. Personally I would prefer the freedom of America but in pure financial terms the world is changing as is the power balance ie from debtor to creditor.
It was only!! 190 years ago that China was the world's largest economy with 32% of the world's GDP, Europe at 26% and the USA with less than 2% (Japan was 3%). Dambisa Moyo points out this interesting statistic in her book "How the West was lost". Since 1820 the Eagle soared and China declined. Now we are seeing the Eagle dip and it will eventually decline unless policy changes.
The xinhua news agency of Beijing has published an article lambasting the carefree and even careless attitude of the USA calling for reform of attitude and action of the USA. Its the most powerful political and financial statement of the week, and given only token acknowledgement in our free press. It is a wake up call recognised by only a few in the West. It demands reform. Who else will fund the never ending borrowing binge of the USA.
What is happening in the USA is also happening throughout Europe. We must borrow and consume less today but invest more in the future or we will become poorer in the long run.