My how times have changed…
Only 10 years ago, if a European country were to get into financial trouble, the first “help” phone call would have gone to the West; to America, to Washington.
Fast forward just a few years, and France President Nicolas Sarkozy is publicly seeking help; not from the United States, but from China. The Europeans are turning to Beijing.
Here’s what’s happened in 10 years’ time:
According to the Bureau of Economic Research, the gross domestic product (GDP) of the U.S. was about $14.7 trillion in 2010—that’s a 46% increase in our GDP since 2001.
The GDP of China was $5.9 trillion in 2010—a 353% increase in China’s $1.3 trillion GDP of 2001.
Now, here’s where it gets really interesting…
Back in 2001, the economy of the U.S. was 7.8 times bigger than China’s economy if we look at the GDP of both countries that year. Last year, the U.S. economy was only 1.7 times bigger than China’s economy, again according to GDP numbers. Our economy is simply growing slower as China’s economy grows faster.
But it gets worse.
Our national debt is equal to about 100% of our annual GDP. China’s national debt equals only 17.5% of its annual GDP.
While the U.S. spent the past 10 years invading Afghanistan and Iraq, bailing out homeowners who took out loans they never should have qualified for in the first place because government oversight was lax, bailing out Wall Street and big banks that made loans they should have never made, again due to lack of government oversight, China’s has been busy either buying or financing strategic world assets.
Be it the precious metals, infrastructure, or strategic non-Chinese companies—the Chinese have been busying either buying them or financing them, as the country remains focused on bringing its $1.3 billion people into either the working class or middle class.
In the end, I believe China will become the “white knight” of Europe. With $3.2 trillion in reserves, who else has the money to become lender of last resort for Europe anyway? (Also see: Understanding the European Crisis: Greece Is Not the Problem.)
Michael’s Personal Notes:
Last month’s job numbers disappointed again. But it’s worse than what the job numbers tell us.
According to the U.S. Labor Department, only 80,000 jobs were created in October, bringing the unemployment rate in the U.S. to nine percent. But we need to look at the underemployment rate, not the unemployment rate, to get a real picture of what is happening in America.
The underemployment rate includes people who can only get part-time work who want full-time work and people who have given…
