Forces of Nature

Let me lay down a few loose quotes

A] America is world's Economic power house.
B] It is world's biggest market.
C] It is world's most stable economy.

One or all of the above statements can be contested. They are true or false relative to where you stand in world economic space. I will revisit the above statements, i took liberty to quote.

Now assume that you are a shopkeeper X. You have a customer called Mr.Y. Now Mr.Y is not necessarily rich, but he is a Spendrift with a capital "S".

X is vested in Y's spending habit. As long as Y keeps spending, X and his business is healthy. Just by his habit of spending Y is dominating this relation. There may come a point when X will actually finance Y's spending. X will keep giving Y credit so that he does not loose him as his customer.

There is a term for this kind of a shop keeper. The "Shopkeeper financier". A Shopkeeper that is so dependent on his customer he actually finances his own customer to buy stuff from him. He keeps spoiling the customer so that his fuel is burning.

circa- Real World. America is China's biggest customer. America's trade deficit with China is in trillions. So much so that if China refuses to give America any more credit, American economy will be severely damaged. But China also knows one thing- if American economy collapses, it won't help Chinese either. So until China finds an alternative market that is as big as America or as lucrative as it is, it would keep America happy. This it does by doing two things. By giving credit to USA for the goods it sells, and, by re-investing in US bonds and securities thus fueling the American economy.

This shopkeeper-customer (X-Y) relationship between China and America is one the most intriguing features of today's global economy.

But if anything is too good to be be true, it generally is. And at some point in this relationship, someone will blink. The symbiosis will break. The day China realizes, Europe or even India gives it a better bargain, it will dump USA. The winning weapon for USA so far is, that the USA is that spendrift customer of China. It's, i.e USA's middle class spends first and pays later. The entire country's economy works on one word and one word only. Credit. If people of USA start behaving like Japanese (which by the way in real technical sense much more stable and safer economy than the US) , it will loose its most potent weapon - Spending habit.

This article sums up beautifully. "The world works hard so that the US can spend."

Indirectly we (as in world's shopkeepers) are not only producing but also financing our biggest Elephant customer - the USA.

But forces of nature and forces of free markets can strike in ways we cannot anticipate. A time may come when this will reach a critical mass. And balance will tilt away from that spending customer.I am not suggesting that America will just collapse. No it won't. But it's prime position in world's economy will not be perpetual. In a sense it will loose it's economic power house status. It won't be world's biggest market and it was never most stable economy any ways. { see i told i would revisit :) }

And once it looses its prime position on economic front will it be able to maintain it's lead in other areas? Probably not. That loss will have a domino effect. Loss of confidence would be the first and rest will follow.

But that's not to say America "should" collapse. I am not anti-American. In fact i am pretty pro-American and between China and America, i would always choose a Democracy. And more importantly America has been good for me personally. This is a theory i am basing on past patterns of history. A seemingly powerful Empire starts showing cracks.

The last century was famously called an "American Century" but this one may not be the American Century. Like other great empires previously, American Empire will slowly but surely start slipping into the RED. Not next year, not next decade but at some point of time in near future.

There is a reason why Empires become successful. Some forces work in tandem to bring about the success. But after a while, after the Empire has seen it's Golden phase, things unravel and before we know the seemingly almighty, powerful empire becomes a sad shadow of itself. Again some forces come together and work in tandem to ensure it's downfall.
A good example is Great Britain. There was a time when sun did not set on British Empire. The British Fort seemed impregnable. But today Britain is like any other European nation.

I don't buy on face value that this is a Chinese century either. It may or may not be. I am not a big fan of China and if i had to vote i would prefer America over china any day.And for several reasons. But if forces work in favor of China, the Chinese dragon will ultimately rule over the world. And if that happens during my lifetime, i may be able to see a new world order. An order where the poles have shifted away from NATO and others. This time it would be America+Japan+India vs Russia+China+Latin America. Who knows? That is a theory again.

The point of this is, that all Major Empires have seen downfall. A series of events trigger this. It's not one day collapse. Like Rome was not built in a day, it did not collapse in a day too. A series of events, bad decisions, betrayal etc combined as forces of nature and brought about it's downfall. But during it's hey days, it was the King of all Empires. Same with Mauryan and Mongols and Greeks. I have heard there are lot of similarities between Roman and American empires. Their rise their fall etc. Although America has not fallen. But who can tell when it will.

i am still fond of America and at some point, when i am about to leave it, i will be writing a rich tribute to America. With all it's supposedly "ill doings" i still consider it one of the greatest experiments of Humans that got successful. Also it is my principled stand and considered view that I should not speak ill about a nation who has fueled my domestic economy and to some extent fuels my nation's economy. I have a professional unwritten agreement with America. I bring to it my skills, it pays me for it. Period. Myself and America are in an "at will" relationship. Neither of us are forcing each other onto ourselves.

The day we don't agree to each other we part. Beyond that i am not required or entitled to Judge it. That is not me. In a way, if some one comes to India and works on "my" soil, i would expect to have that person be good to India. If s/he is not i have the right to say FO on his/her face.

My theory is more generic and if it applies to USA today, it will apply to China and who knows some day to India. The rise and fall of the mighty is a great study of pattern and it's not without glaring historic evidence.

And we may just be too close to history of a certain great Empire to realize how things ultimately unraveled.