An interesting recent chart from Deutsche Bank explains why American arrogance is out of touch.
One of the primary arguments against economic warfare has been that the U.S. economy is too essential to the world. The assumption is that America has been and will remain the single most important nation on earth. It seems we take that for granted. Yet, the facts speak otherwise. We've already explained how we cannot assume that the dollar will always be the reserve currency. In fact, history demonstrates differently as we noted in a previous post:
Now, as can be seen in the Deutsche Bank chart above (courtesy of Jim Reid), having the world's largest economy is nothing to be presumptuous about either. From a September 10, 2014 Business Insider story:
"As Alexander, Rome and Britain fell from their positions of absolute global dominance, so too has the US begun to slip," Reid writes in a new note to clients. "America's global economic dominance has been declining since 1998, well before the Global Financial Crisis. A large part of this decline has actually had little to do with the actions of the US but rather with the unraveling of a century's long economic anomaly. China has begun to return to the position in the global economy it occupied for millennia before the industrial revolution."
One look at the chart and it's pretty clear that it may not be very long before we start saying the U.S. is No. 2.
"Based on current trends China's economy will overtake America's in purchasing power terms within the next few years," Reid continued. "The US is now no longer the world's sole economic superpower and indeed its share of world output (on a PPP basis) has slipped below the 20% level which we have seen was a useful sign historically of a single dominant economic superpower. In economic terms we already live in a bi-polar world. Between them the US and China today control over a third of world output (on a PPP basis)."
Reid offered this prescient quote from Napoleon Bonaparte: "Let China sleep, for when she awakes, she will shake the world."
What Reid does not include in his analysis is the global economic warfare threat and how that may impact America. We have already demonstrated that the Russians, Chinese, and others have a capability to greatly damage our economy. Hackers could wreak havoc in our financial industry, other nations could attempt to unseat the dollar, or an EMP could take us back to a pre-industrial stage. Unfortunately, we've seen evidence that all three are at various planning stages already. One very recent example is that the Russians and Chinese are continuing in their efforts to replace the Western financial system by creating an alternative to SWIFT, according to the ITAR-TASS News Agency:
BEIJING, September 10. /ITAR-TASS/. Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT, First Deputy Prime Minister Igor Shuvalov told PRIME on Wednesday after negotiations in Beijing.
"Yes, we have discussed and we have approved this idea," he said.
Russian authorities wanted to decrease the financial market's dependence on SWIFT since the introduction of the first U.S. sanctions, when international payment systems Visa and MasterCard denied services to some Russian banks owned by blacklisted individuals.
According to Shuvalov, Russia has been also discussing establishment of an independent ratings agency with China. Concrete proposals will be made by the end of 2014, he said.
As you might imagine, such activity would hasten the decline of the dollar and the United States if effective. And that is the point.
Make no mistake. This is a global economic war and other nations are in it to win it.