by V. Kumar

Created on: June 30, 2007   Last Updated: January 08, 2008

It is not the credit cards stupid! It is the import of cheap Chinese goods and oil that is indebting US, making the biggest economy and the most prestigious nation on earth, to bend on its knees and beg these two challengers to help it. And you know what is their response? Neither of them is going to give an inch! Thus we have reached a situation that would have been unthinkable for most of the twentieth century - the solo global superpower getting derailed economically by an authoritarian regime that forces its people to subsidise its national exports by way of an undervalued foreign exchange rate of its currency.

The US international trade deficit is now over $ 800 billion, and could soon cross the trillion dollar mark. Last year, when Chinese reserves crossed the trillion dollar level, the world looked at awe, but there is hardly anything strange about it, when most of it is coming from the trade surplus with US and US runs a deficit of something close to a trillion dollar every year.

Economists the world over are worried about the health of US economy, and the politicians are worried about the war on terror. The US economy is being endangered by the cheap Chinese exports and burgeoning oil prices, while the US petro-dollars finance the terrorists who then kill US soldiers in Iraq. Chinese are halfway though in their dreams of beating the US in its own game - of economic war, largely through an extraordinary successful manipulation of their currency, the yuan, which they keep at dramatically undervalued rates, thereby making Chinese exports cheaper and Western imports extraordinarily expensive. Not only they are winning, US officials have so far has not been able to even a sniff of an idea that can be used to halt the Chinese march.

It is not the credit cards, because the credit cards transfer money within the country most of the time. That does not make US in debt, only some US citizens get indebted to some other ones, not at all dangerous compared to the future consequences of the rising international indebtedness of US that not only threats US but also the whole developed world economy. China and Middle East seem to be sharing a goal here, and the world will pay dearly if their designs succeed.

Learn more about this author, V. Kumar.
Click here to send this author comments or questions.