World economy breaking-up with US
As the US economy teeters on the edge of decline and a possible double dip recession, emerging economies continue to grow at a quick click.
This reveals a changing global economy in which the US is not as important as it once was, as developing nations take center stage.
Financial leaders are coming together from all over the world to figure out how to boost the global economy at the annual IMF and World Bank meeting. But many are talking about a break up.
"The world is breaking away from the US as the consumer of last resort," said analyst Edward Harrison, the founder of CreditWriteDowns.com. "You’ll see a lot more importance in China, in Russia."
In the financial world it’s not called divorce but, “de-coupling.” And everyone from a flurry of Wall Street analysts to Nobel Prize winning economist Joseph Stiglitz are using the term to describe a shift in power.
"The baton has passed from countries like the United States onto countries like China, Brazil, Russia, India and beyond," said Harrison.
And growth in the global economy will be much more dependent upon those countries than on the developed economies.
It explains how while the US economy continues to look more bleak, with analysts such as Goldman Sachs forecasting fairly to very bad scenarios of a meager one to two percent growth or a double dip recession, the so-called BRIC countries are still on the ascent. Brazil’s economy is estimated to grow 7.5 percent, and rounding out the R-I-C in that acronym, Russia, India and China are estimated to post 4.25 percent, 9.7 percent and 10.5 percent gains respectively.
China’s growth as an economic power isn't lost on American politicians, looking for a villain in attack ads.
"Ray Halls vote helped foreign companies create Chinese jobs making windmills, with skyrocketing unemployment," said one congressional attack ad.
Nor is it lost on Obama Administration.
“We believe it’s very important to see more progress by the major emerging economies to more flexible market oriented exchange rate systems," said US Treasury Secretary Timothy Geithner in a speech ahead of the IMF.
Geithner has increased complaints about China undervaluing its currency ahead of the annual meeting.
“You have to pick a reason why things aren’t going well obviously it can’t be because of you and China is an easy target," said Harrison of the political attacks.
But while politicians try to hold things together, citizens are “de-coupling” from the US economy, too. People, who once left their countries to come to the US for opportunities, are heading back home.
“The opportunities in India are much better than they are here," said Shobhit Bhagara, an Indian immigrant.
They're setting up shop in countries poised to grow, even as the US teeters on the edge of decline.Although the US economy is down, Brazil, India and some others are beginning to rise, according to Mark Weisbrot, the co-director of the Center for Economic and Policy Research in Washington, DC.
He explained that the IMF is run by the more developed economies, like Japan, the US, and those in Europe, while developing nations have almost no say at all.
“The IMF is really just run, because the United States has 17 percent of the votes and together with the high income countries, they have basically a majority. They’ve just run it as basically a rich country club for all these years,” said Weisbrot.
However, the US has lost most of its influence in South America and other individual regions, and will continue to do so over time. Proposed changes or possible changes to the IMF will have little impact on how the specifically IMF operates.
“You have maybe 5 percentage points what will shift. It’s not going to change it. Even if Europe gives up one or two seats on the executive board,” he said.
As the developing countries continue to grow international institutions like the IMF will become more and more out-dated, but will still remain powerful.The US economy is losing jobs rapidly, having only created new jobs in the domestic non-tradable services field, which include waitressing, bartending, barbers, and nurses explained Paul Craig Roberts, a former Reagan administration official.
“We were told that we were going to have a new economy based on financial services, based on innovation, research, development. We were going to come up with all the new products that the rest of the world would make. But in fact, those jobs have never appeared,” said Roberts. “The American economy is descending into a third world economy in which the only jobs available are domestic services.”
On the other side of the world, traditional third world economies like India have entered an IT boom with their own versions of Silicon Valley. Americans are traveling elsewhere for work.
“Americans have been betrayed by their government, by their economists, who are all on the take from the corporations,” Roberts added.
We are entering the beginning of new era where the jobs simply are not in America anymore. They have move to India, China and other developing markets.
“The US economy is simply disappearing and is becoming more third world by the day,” said Roberts.
While the developing nations rise, the United States slides.There is a wave of protectionism mounting in the world’s major economies. Countries are looking to target globalization, managing their national currencies and combat speculation, that’s according to investigative journalist Webster Tarpley.
“The currency wars are not new. The US and the British for the past 12 months have been trying to destroy the Euro; they’ve failed. They have also been trying to drive the Chinese currency up,” he said.
As US dollar goes down, China goes too. The Chinese economy is attached to the US dollar, explained Tarpley. This puts pressure on Japan and others who are also impacted, leading them to force the Yen down to maintain competitive in the world market.
“The Brazilians are fighting the speculators with a 4 percent tax on people who come in and buy bonds. And, it’s thought that Thailand may soon take the lead in imposing actual capital controls,” said Tarpley.
Tarpley argued that the globalization system needs to be fought. He said the world needs to return to a system of fixed parodies similar to the structure under the previous Brenton Woods system.
“Peg the Chinese to the US as an island of stability,” said Tarpley. “Restore a system of fixed parodies so you’d have some certainty what the values of currency would be down the road. And again, The US is the biggest enemy of this, and the British along with them but for other countries it would be beneficial.”
He added, “Wana be like China, do what they do. They block capital flows into China.” “Why not imitate that?”
The international community needs a new world monetary conference, a new Brenton Woods to restore stability to the system, argued Tarpley.
“The International Monetary Fund is a failure,” said Tarpley. “Globalization is a failure, let’s end it, let’s end this system.”