As luck would have it, on the same day Obama warned naysayers of his global agenda, the Wall Street Journal unveiled its worldwide economic forecast – and it ain’t pretty. But let’s start with Obama’s comments from today’s speech in Mumbai.
Speaking at a town hall meeting in Mumbai, he said, “I do think that one of the challenges that we are going face in the US, at a time when we are still recovering from the financial crisis is, how do we respond to some of the challenges of globalisation? The fact of the matter is that for most of my lifetime and I’ll turn 50 next year – the US was such an enormously dominant economic power, we were such a large market, our industry, our technology, our manufacturing was so significant that we always met the rest of the world economically on our terms. And now because of the incredible rise of India and China and Brazil and other countries, the US remains the largest economy and the largest market, but there is real competition. This will keep America on its toes. America is going to have to compete. There is going to be a tug-of-war within the US between those who see globalisation as a threat and those who accept we live in a open integrated world, which has challenges and opportunities.”
The US leader disagreed with those who saw globalisation as unmitigated evil. But while acknowledging that the Chindia factor had made the world flatter, he said protectionist impulses in US will get stronger if people don’t see trade bringing in gains for them.
While replying to a question on how Republican gains would affect US policy towards India, he switched to a larger exposition of how he saw new realities shaping geo-politics and the economy. Saying the competition from India and China was potentially a good thing, Obama suggested that the US had to face up to a changing world order.
In the context of his efforts to revive the US economy, the president clearly sees, as he wrote in an article, India and China as key drivers of economic growth.
And realizing the US is practically owned by China, there’s no need to gaze into Wall Street Journal’s crystal ball to visualize what the immediate future might hold for all of us…but we’ll do it anyway.
Number of the Week: $10.2 Trillion in Global Borrowing: The amount of money advanced-nation governments will need to borrow in 2011
(WSJ) As the debts of advanced countries rise to levels not seen since the aftermath of World War II, it’s hard to know how much is too much. But it’s easy to see that the risk of serious financial trouble is growing.
Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.
Aside from Japan, which has a huge debt hangover from decades of anemic growth, the U.S. is the most extreme case. Next year, the U.S. government will have to find $4.2 trillion. That’s 27.8% of its annual economic output, up from 26.5% this year. By comparison, crisis-addled Greece needs $69 billion, or 23.8% of its annual GDP.
[...] There’s reason to be concerned that governments’ appetite for borrowing could ultimately push up interest rates, or worse.
For one, government borrowers are tapping into smaller international capital flows. The total amount of foreign portfolio investment sloshing in across advanced countries’ borders averaged about 3.8% of global GDP in the twelve months ended June, compared to an average 9.5% in the eight years leading up to the recession.
Beyond that, the U.S. and other advanced nations are putting pressure on China to allow its currency to appreciate against the dollar. All else equal, such a move would curb demand for dollar-denominated debt from a country that is the largest foreign holder of U.S. Treasurys.
US practically owned by China – Who cares!: HERE
Obama tattles on US to the UN: HERE
China favors Euro over dollar: HERE
Clinton’s global initiative: HERE
Hat tip: Gene