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Tuesday, September 30, 2008

The fall of a Super Power - Part 2

A fortnight ago, the world awoke to a financial crisis that started in the United States and has been unseen in more than 70 years. The question is: What is the cause of this crisis? The United States is, after all, the world’s largest economy as well as one of the wealthiest in terms of per capita income, well above $43,000.

How, then, is it that a nation that already enjoys prosperity unrivalled in human history can live in constant and ever increasing debt? The answers are not hard to find. “The real disease is the American addiction to borrowing,” reported the San Diego Union Tribune newspaper on Sunday, September 21, “For the past decade, the nation has been floating in a deepening sea of borrowed money. The U.S. financial sector had $16 trillion worth of debt on its books at the end of June; households had debts of $14 trillion; and non-financial businesses owed $11 trillion… Debt has become the American way…”

This reckless spending is rooted in a deep spiritual emptiness that runs through western society. Much of the western world, since the 1960s, has descended into an abyss in which there are no absolutes, no religion, ethics only as the individual determines them for himself and a materialistic self-centredness that leaves the individual lonely and often neurotic. Unfortunately, a “middle class” is emerging in Africa, especially in Kenya, Black South Africa, Nigeria, Zambia, Uganda, and Ghana, that seeks to rather pathetically imitate the absurd lifestyle of America and Britain, as seen and advertised on TV. A trail of personal debt has inevitably followed in their wake.

A 2005 book, Affluenza: When too much is never enough, by Australian authors Clive Hamilton and Richard Denniss, examined this crisis in which affluence has brought with it a form of illness, an influenza (hence “affluenza”). “The Western world is in the grip of a consumerism that is unique in human history. We overwork, we spend huge amounts on things we never use… We’ve got more money to spend, yet we’re further in debt than ever before… We aspire to the lifestyles of the rich and famous at the cost of family, friends and personal fulfillment. Rates of stress, depression and obesity are up as we wrestle with the emptiness and endless disappointments of the consumer life,” observed Hamilton and Denniss.

It is that self-indulgence and insatiable quest for more and more material goods by Americans that explains the national credit card and household debt totalling 14 trillion dollars. The financial news website SeekingAlpha.com delivered this revelation on September 22, 2008: “If you think it [the US national debt] is high now, then you haven’t seen anything yet. National debt will be a problem for years, if not generations, to come. One of the reasons the Treasury had to make moves now [to bail out the beleaguered Wall Street firms with $700 billion on September 22] was pressure from foreign banks in China, Korea and Japan who own a significant amount of MBS [mortgage-backed securities]. When foreign governments and banks can start putting pressure on the U.S. because of the growing amount we owe them, we are slowly but surely losing control of our own economic future.”

Indeed. In fact, the Canadian newspaper The Globe and Mail carried a headline on September 24 that read “The tables have turned on Wall Street as China takes the lead.” America is now at the mercy of the determined and disciplined people of East Asia: China, South Korea and Japan.

London’s Observer newspaper stated on Sunday, September 21 that, “Communist China, the new superpower of the East, is coming to the rescue of capitalist America…China has accumulated billions in foreign reserves while America has effectively bankrupted itself.”

Americans’ rate of personal savings stands at only 3.8 per cent of their income. By contrast, wrote Ted C. Fishman in his 2005 book; China Inc: The relentless rise of the next great superpower, “The Chinese…have the highest rate of savings in the world, stocking away, on average, 40 per cent of their income.” (Page 77).

Soon, the American green card citizenship papers valued by immigrants from all over the world shall become worthless as Uncle Sam steps down from world power and Aunt Xiang replaces him.

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