America's economic power on the Global Stage Waning - by Mallory Factor
The global stage may appear complex, but there are really just two kinds of players: creditor nations and debtor nations. Today, autocratic oil-rich Islamic states such as Saudi Arabia and Kuwait and resource-rich states such as China and Russia are developing huge holdings in Western currency, debt, and industries, while democratic Western governments slip deeper and deeper into debt. Though these countries are not richer than the United States or other Western nations, they are now the creditors of those nations. The power is shifting. A new relationship is emerging, one that no longer favors the West. The West’s poor fiscal discipline and failed economic policies have allowed this shift to happen. The economic power of these rising nations began with their central banks purchasing excess reserves of dollars and duros and, later, U.S. and European debt. More recently, many countries have established new financial vehicles called Sovereign Wealth Funds to make direct investments in global companies and industries, thereby extending their nation’s financial influence. Guided by the best and brightest from Wall Street and making more and more sophisticated investments in our economy, these foreign governments are aiming for greater returns, both economic and political, from their investments.
Given their growing economic might, the new “creditor nations” will have the power to further their geopolitical ambitions by using a weapon of international diplomacy and warfare that hasn’t been seen in centuries: economic statecraft. In the emerging world order, global dominance will not be decided only by armies and aircraft, but by greenbacks and euros, rubles and renminbi as well. And the US can no longer simply impose their views on the world. Creditor nations are now projecting power with their economic might — and in new and innovative ways.
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