While racing through some of the morning papers and websites, I ran across this article in the London Telegraph, World Power Swings Back to America. Here's a representative sampling:
As Cleveland Fed chief Sandra Pianalto said last week, US manufacturing is "very competitive" at the current dollar exchange rate. Whether intended or not, the Fed's zero rates and $2.3 trillion printing blitz have brought matters to an abrupt head for China.
Fed actions confronted Beijing with a Morton's Fork of ugly choices: revalue the yuan, or hang onto the mercantilist dollar peg and import a US monetary policy that is far too loose for a red-hot economy at the top of the cycle. Either choice erodes China's wage advantage. The Communist Party chose inflation.
Foreign exchange effects are subtle. They take a long to time play out as old plant slowly runs down, and fresh investment goes elsewhere. Yet you can see the damage to Europe from an over-strong euro in foreign direct investment (FDI) data.
Flows into the EU collapsed by 63 [percent] from 2007 to 2010 (UNCTAD data), and fell by 77 [percent] in Italy. Flows into the US rose by 5 [percent].
The current China fixation is the "Japan, Inc." phenomenon from the 1980s all over again with a major, extended worldwide recession thrown in right now, rather than looming on the horizon. I haven't been able to watch this video (embedding of the video has been disallowed) from one of the authors of the book that serves as much of the basis for the article, The American Phoenix: And Why China and Europe Will Struggle After the Coming Slump, but I'm sure it's an interesting five minutes.
Rarely is it a good bet to wager against the United States of America. However, as the article concludes:
The switch in advantage to the US is relative. It does not imply a healthy US recovery. The global depression will grind on as much of the Western world tightens fiscal policy and slowly purges debt, and as China deflates its credit bubble.
Yet America retains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.
It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.
Europe's EMU soap opera has shown why it matters that America is a genuine nation, forged by shared language and the ancestral chords of memory over two centuries, with institutions that ultimately work and a real central bank able to back-stop the system.
The 21st Century may be American after all, just like the last.
Hubba Hubba !!!