Every American Family Owes Money to a Chinese Family 

The current financial crisis is speeding China’s position as an economic and political superpower.

Lately, we’ve been hearing analyses and explanations as to the reasons that have led to the current economic crisis.

Some have suggested that the economic crisis is the result of, and they may be right, financial leveraging, packing different financial products in a safe way, debt structures that changed hands creating the wrong degree of risk for bonds and securities, managerial neglect, and more.

Though all of these explanations are already well known, it’s important to take note of an additional factor that was and continues to bear on the growth of the western economy. We refer to the transfer of huge amounts of money and influence from the U.S. and the west in general, to the east, and to China in particular.

Whereas western countries have been focused on increasing their financial leverage, their personal consumption, which in turn has increased its deficit; in the east, they worked hard, saved money and lent this money to the west. This situation is well summarized in the following expression: “today, every American family owes money to a Chinese family”. The structure of the American government encouraged this deficit and consumption, which has subsequently put the eastern countries and China in particular, in the lead. In effect, the Chinese have become the largest lender, holding huge dollar balances. In an under the radar process that was less visible to the eye, the power base declined in the west and overall power began to transfer from the west to the east, especially to China. It is hard to build strong towers on a weak economic base. Growth and prosperity depend on a power base that attracts talent, money and influence; when the base is weak, it is only a matter of time until the tower will fall.

The power transfer to the east is also visible in political matters exemplified by the many country representatives approaching China, a deeper cooperation with the same, especially with African and South American countries. This new situation has created a side effect, an immigration of brains and talent to China. The trend, that for many years was unidirectional from the east to the west, has changed course. Quality immigrants are moving to the east, expediting the advance of the human construction and in turn, economic construction. Many senior people who were fired on Wall Street are now being pursued by Chinese companies; movement has already started. The money markets in the east will progress and advance a level in the spirit of the western experience and will become important growing engines for eastern economies.