the opinionist

You’ve got to love Chris Matthews - the weekday host of MSNBC’s Hardball. Wednesday (February 28th), the day after the hideous 4% drop in the Dow Jones Industrial - triggered by a 10% sell off in China - Chris Matthews asked the questions seemingly neglected by the masses.

“Why did a sell-off in Shanghai cause a drop in U.S. stocks? Is the new global economy putting the American economy at risk? Is this the way life is going to be for the rest of our lives, the Chinese dictate our economic performance? Can we continue to run a trade deficit with the Chinese? Are we now under the reign of the Chinese? Do they dictate our economic future?”

Chris’s guests on the show - Robert Reich, Pat Buchanan, Allan Hubbard and Jim Cramer (CNBC) - spun mercurial responses about over-valued markets, trade deficits, and China’s debt holdings but they didn’t cut to the chase. The world has changed and the United States needs to wake up quickly and rationalize a business plan to deal with it.

The United States has one of the largest economies in the world. It also has the largest debt in the world - but as a percentage of its Gross Domestic Product (GBP - the size of the economy) the nation’s debt is favorably only the 35th largest in the world. Good news right?

Unfortunately no. The world’s largest economy is the European Union, closely followed by the U.S., with China in third place. This is according to the International Monetary Fund (IMF). The U.S. economy continues to grow at little over 3.5% annually where as the explosive Chinese economy is expected to grow by at least 9% in the coming years. China has become the manufacturing sector for the United States, and the world, which means it is flush with cash from the steady one way flow of products flooding the U.S. marketplace. Very soon the United States will slip to second or third place in the economic league of world producers and China will take top spot by an increasingly envious margin.

China has a population of 1.3 billion people. It’s economic engine has barely started and it has a seemingly limitless supply of resources, people and cash. The U.S. has an aging population, a shrinking working population, an ensuing medicare and social security crisis and its Government is spending like its 1999. That was America’s century. This is China’s.

Posted on March 2nd, 2007 under China, EU, IMF, OECD, SSE 180, Shanghai Stock Exchange, U.S., debt •  Email This Post • RSS 2.0 feed • Leave a response, or trackback