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Saturday, January 29

American global dominance could end in 15 years

Finally someone gets it.

The trends should already be apparent to anyone who reads a newspaper. Not a day goes by without another story about how we're mortgaging our future to the central banks of China and Japan. The U.S. budget deficit, approaching a half-trillion dollars, is financed by their purchase of Treasury notes. The U.S. trade deficit—much of it amassed by the purchase of Chinese-made goods—now exceeds $3 trillion. Meanwhile, China is displacing the United States all across Asia—in trade, investment, education, culture, and tourism. It's also cutting into the trade markets of Latin America. (China is now Chile's No. 1 export market and Brazil's No. 2 trade partner.) Asian engineering students who might once have gone to MIT or Cal Tech are now going to universities in Beijing.

Meanwhile, as the European Union becomes a coherent entity, the dollar's value against the euro has fallen by one-third in the past two years (one-eighth just since September). As the dollar's rate of return declines, currency investors—including those who have been financing our deficit—begin to diversify their holdings. In China, Japan, Russia, and the Middle East, central bankers have been unloading dollars in favor of euros. The Bush policies that have deepened our debt have endangered the dollar's status as the world's reserve currency.


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