Wednesday, June 15, 2011

The Decline of American Influence?

The Financial Times:
Harold Macmillan, the prime minister who watched US power rise as the British empire crumbled, used to say that Britain would play ancient Greece to America’s Rome.

These days it looks as if Rome is declining too. The US finds it increasingly hard to drive forward its vision of international trade and economics over the objections of big emerging-market countries.


Even those trade officials most hermetically sealed in bureaucratic bubbles are finally accepting that the so-called “Doha round” of trade negotiations, which the US pushed to the launch pad 10 years ago, is expiring. New Delhi and Beijing have shown they are perfectly willing to collapse the talks rather than accede to demands from Washington.

China, with covering fire from other governments, has repulsed much of the US’s charge to force Beijing to liberalise its currency. Assuming that Christine Lagarde, the French finance minister, takes over the managing directorship of the International Monetary Fund, she will inherit a process of mutual economic assessment at the behest of the G20 to encourage global economic rebalancing. But recent history suggests it will do little to make China hasten the rise of the renminbi.
If the Tea Party GOP continues to hold American fiscal solvency hostage though their strategy of economic terrorism,  the dollar might diminish as the global default currency.  We're already hearing from various places that investment firms are looking for new safe harbors for their money.

The next logical choice for global currency would be the Euro.  But the Euro is struggling as well.  In the event that the Eurozone cannot clean up it's PIGS problem, we may see a worst-case-scenario unfold with the renminbi as the only global currency left standing with enough clout to assume the mantle of default global money.  Then we would be well and truly fucked.

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