Could the financial crisis result in the United States losing its status as the world's financial superpower? Indeed it could, Germany's Finance Minister Peter Steinbrueck told MarketWatch.com.
"The United States will lose its status as the superpower of the global financial system, not abruptly, but it will erode," Steinbrueck said, MarketWatch.com reported. "The global financial system will become more multi-polar."
However, Steinbrueck clarified his statement in subsequent remarks to FT.com. "When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative," Steinbrueck told FT.com. Further, Steinbrueck repeated Germany's refusal to allocate public funds to acquire distressed/bad assets, arguing that the crisis is mainly hitting the United States.
The U.S.: a decade of descent
Economist Richard Felson concurred with Steinbrueck's analysis for the most part, but added that the U.S.'s decline, more accurately described as "a descent," is not irreversible.
"Globalization has played a role, but much of the U.S.'s descent in the past decade stems for policy mistakes, basically policies that didn't and don't work. The nation cut taxes before it went to war, creating a large budget deficit. A lack of a forward-looking energy policy helped balloon the trade deficit. And inadequate investment in infrastructure, education, and basic research is depressing economic growth below what it should be," Felson said. "The latter resulted in far fewer jobs begin created in the decade than what's required, leading to all sorts of problems, including the housing sector's implosion. The result has been a weaker U.S. economy with more structural problems, and an inability to project economic power. Meanwhile, the economic power of China, Russia, India, and Brazil has increased. I don't think that's what policy makers intended at the start of the decade, but that's been the result."
Can the new U.S. president turn the nation around and end the U.S.'s economic descent? "A daunting task. The new president is likely to start with a $500-$800 billion budget deficit, depending on the type of bailout package passed. My word, that is a big disadvantage," Felson said. "After the financial crisis has been solved, a tax increase is in the cards. It is unavoidable. After the nation cuts the budget deficit, the nation can then address structural problems in the U.S. economy, such as a catalyst to increase create jobs and corporate earnings. If it doesn't move in that direction, the descent will continue."
Economic Analysis: From its fellow G-8 nations, the U.S. can look for monetary policy [central bank] help regarding the financial crisis as it relates to the international financial system, but it can't expect foreign fiscal policy help to offset the financial crisis' impact on the U.S. economy. That's the sole domain - - and responsibility - - of U.S. lawmakers, all of which underscores the importance of the U.S. Presidential and Congressional election on Tuesday, November 4.
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Reader Comments (Page 1 of 1)
9-26-2008 @ 4:13PM
skylar36 said...
What super-power? Wake up people, this isn't Disneyland....
9-26-2008 @ 4:15PM
alan said...
I don't think there's anything surprising about that, just the speed in which it may come. I've felt that China, India would pass us one day but I figured in the next 25-50 years. To think that it could happen in the next 10 years or shows how badly this administration has fouled up the country in the last 8 years. We'll still be a player on the world stage, but not THE player on the stage just one of many.
9-26-2008 @ 4:53PM
David said...
Does anyone know of an individual, much less a country that owes everyone in the world, keeps borrowing to pay his bills, produces nothing and is called a financial superpower? Get real, this country hasn't got a pot to pee in and it can't borrow the money to buy the pot.
9-26-2008 @ 5:46PM
Lori said...
I see that the gnomes of switzerland and the so called federal reserve, which has nothing what so ever to do with our government have given the public pacification until monday/ by that time something will be hammered out and it will cost us big time. has anyone read the rise and fall of the roman empire for lately? Hail Caesar, we who are about to die salute you.
9-26-2008 @ 5:50PM
sepier said...
can't be that bad. Some mentioned not to long ago - The US is the largest Economy in the world and the guiding light for the
developed world and the developing countries I only requires a little faith in
in due time everything will be fine as long as wwe belive
9-26-2008 @ 6:32PM
Andrew said...
THOSE WHO DO NOT LEARN FROM HISTORY ARE DOOMED TO REPEAT IT. YOU ARE NOW LIVING THRU THE CURRENT FALL OF THE ROMAN EMPIRE, ONLY IT IS NOW THE UNITED STATES. THE SAME PROBLEMS THAT PLAGUED THE ROMANS ARE THE SAME PROBLEMS THAT THE U.S. FACES TODAY. LOOK AT ITALY TODAY THAT IS YOUR FUTURE AMERICA.
9-26-2008 @ 6:54PM
bmaddigan3 said...
WOE To them, ---->>> Wall St.
The sins (PRIDE & GREED) of the fathers,
Visited Upon the children (Us)
Coupled with a Lot
of 'SELF' Exalting & DECEPTIVE practices
= our Present financial, RED/Black HOLE...
9-26-2008 @ 8:03PM
ed said...
aii caramba
ayn rand was right!!!
gansters are in control of the land
where is john galt???
9-26-2008 @ 10:07PM
greed said...
The problem ? The ceo of Washington Mutual worked 17 days - had his bank taken over by the Feds and sold and he walks away with $20 million????
What is wrong with this picture ?
9-26-2008 @ 11:51PM
Huck said...
Well, Busch done it. He literally blew billions on a lie for a war. Why not freeze his assets and use it to pay America back due to his stupidity, ignorance and lack of patriotism for his own country. I wonder if he realizes just how much and by how many that he is hated. It doesn't take a college degree to figure this one out. Bring our jobs back and make it illigal for a company to use anyone outside our own country. Cut back on trade and let us manufacture our own needs. Fully comply with energy saving methods to include a replacement for fuel, wind operations to provide energy for our homes and expand the use of solar power. Get rid of the illigals and only allow them back on a work visa only to last for the duration of the crops needs. No families allowed.
Our government has denied us, deprived us and took from us the very heart of what makes us die hard patriotic Americans. For many, our loyalty has no where to go. May God redeem us.
10-04-2008 @ 4:51AM
Jack said...
that are no news for me, it was a matter of time that the yanks lose their financial superpower-status. the most important thing is that the investors and countries distrust the USA now and that was a long time overdue. what kind of country is that, that spends billions in wars they lose, and banks spending billions in credits without any check of the financial situation of the people they give it to? and the other way around, what kind of citizens are that, who pay all what they need with credit card without checking if they could possibly pay that back? the problem is not only the administration, it is the general mentality of the yanks. the dollar will be replaced by the Euro soon, there is no alternative to that!